Case Studies

Southern District of New York

t3 Technologies (t3) alleged IBM misused intellectual property rights and tied operating systems licenses to hardware, thereby maintaining its monopoly over mainframe hardware. applEcon, working in close coordination with t3’s lawyers, provided evidence and analyses that were key to getting both the European Commission and the U.S. Department of Justice to open investigations into IBM’s behavior. The civil case settled while on appeal before the 2^nd Circuit.

This case is the latest addition to applEcon’s long history of providing economic analysis in cases at the nexus of antitrust and intellectual property law. applEcon provided expert economic testimony several precedential cases: Data General v Grumman, [1] Image Technical Services v Kodak, [2] Creative Copier Services v Xerox [3] and Integraph v Intel. [4]

According to t3’s complaint, t3 sold Liberty servers that used Platform Solutions Inc. (PSI) technology and x86-based tServers that used emulation technology from Flex Systems. Both types of servers could run mainframe software – IBM operating systems, IBM or third-party middleware and IBM, third-party or customer applications – unchanged. The t3 systems provided competitive alternatives for users of IBM mainframes, an alternative they had been lacking since the exit of Amdahl and Hitachi at the turn of the century. As both the capability of these systems and t3’s success in attracting IBM’s hardware customers grew, IBM moved to foreclose t3’s technology partners. After PSI sued IBM for anticompetitive actions, IBM purchased PSI, foreclosing one competing technology. IBM also stopped an established course of dealing with Flex Systems, eliminating another source of technology used for making hardware compatible with IBM’s mainframe operating systems. t3’s complaint further alleged that IBM’s refusal to license its mainframe operating system to users of non-IBM mainframe hardware was an illegal tie that further protected IBM’s monopoly over mainframe hardware.

applEcon supported Professor Kai-Uwe Kühn’s expert economic analysis and testimony regarding market definition, market power and harm to competition. The testimony also addressed the current state of economic research regarding monopoly and innovation.

t3 also pursued a regulatory approach with the European Commission and the Department of Justice. applEcon and Professor Kühn worked closely with the legal team from the earliest stages of the case. applEcon’s approach, combining unbiased economic analysis with thorough research into the technologies, markets and facts of the case, added depth and credibility to t3’s meetings with antitrust regulators in Europe and the United States.

In addition to assisting with briefing papers and meetings, applEcon provided key back-office support. applEcon’s command of the factual evidence ensured the case had strong evidentiary underpinnings. And applEcon’s operational efficiencies dramatically reduced the legal team’s burden at key junctures: with submission deadlines looming, applEcon produced a compilation of supporting documents in just a few hours that the legal team had anticipated needing a week to produce. This gave the team crucial additional days to refine the content.

[1] Data Gen. Corp. v. Grumman Sys. Supp. Corp., 36 F.3d 1147 (1st Cir. 1994)

[2] Image Technical Servs. v. Eastman Kodak Co., 125 F.3d 1195, 44 USPQ2d 1065 (9th Cir. 1996)

[3] In re Indep. Serv. Org. Antitrust Litig. (Xerox), 203 F.3d 1322 (Fed. Cir. 2000).

[4] Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1362, 52 USPQ2d 1641, 1652 (Fed. Cir. 1999)