isham research
CAUTION - think before pressing PRINT. On most printers this document runs to around 130 pages.
This page contains the text from the scanned-in PDFs filed with the Court. The originals are here:
There is also a motion from T3 Technologies before the Court that should be heard in mid-January 2008, and PSI has filed a complaint with the European Union's Competition Directorate.
In the meantime, it looks like there may be something behind Platform Solutions' 9th amended counterclaim. Early documentation of the proposed PSI system specified a Hewlett-Packard platform, but the latest Platform Solutions pictures seem to show a NEC Express5800/1000 system. There aren't that many Itanium vendors - the choice is limited. Moving from HP to NEC cannot have been voluntary - NEC's support network is a pale shadow of HP's. If Hewlett-Packard got cold feet, who's funding the legal eagles? Perhaps the answer came in the third funding round:
"We believe Platform Solutions, Inc. is uniquely positioned to bridge the gap between legacy mainframe computing and 21st century server technology in today's enterprise environment. We've decided to join the current round of investment funding and enter into a collaborative sales and marketing agreement with PSI because of the benefits we believe PSI offers to enterprise customers trying to manage data in mixed mainframe and server environments." - Microsoft
About 140 lines in IBM's Amended Complaint are blanked out - redacted - but it is usually possible to get some idea of the missing content from the text of PSI's response. Most seem to concern issues with Amdahl's TIDA and TILA agreements with IBM.
IBM's original complaint against PSI was a trifle vague and generalized. The process of discovery seems to have given IBM a little more ammunition, with the focus perhaps shifting to potential abuse of TIDA and TILA agreements between IBM and Amdahl.
This could take several forms - not limited simply to the original documents transferred by IBM. At Amdahl, these documents were maintained in a closed facility with only a handful of people ever authorized to access them. The rules provided for hand-written notes only and an IBM right of inspection at any time. But such information had to be used in different ways, e.g., to construct diagnostic programs for use in the field and to produce architectural validation workloads to test that functions had been correctly implemented. Any product, e.g., PSI's emulator or the Hercules emulator tested against such a validator could be regarded as containing TIDA or TILA information.
The implications of some arguments in this case, if they should be accepted by the Court, are horrendous and far exceed the scope of any action against such a minor player. Platform Solutions has almost no route to market and a product with only derisory support for the IBM mainframe environment - no z/VM, z/VSE or coupling, for instance - and could never have been a major player.
IBM's eighth claim is the most extraordinary and has already had an impact on the software industry. Essentially, IBM is seeking to outlaw emulation using an enormously stretched interpretation of the IBM Customer Agreement Clause 4.1 (page 17, foot). IBM's quite perverse argument is that emulation is translation within the terms of this clause - a clause that was never intended for any such purpose and is here egregiously misapplied. To support this bizarre contention, IBM has had to cause the removal of all quite legal and properly licensed emulations from the market - including Fundamental Software's FLEX-ES and its own Partnerworld system.
Emulation has been an established technique throughout the IT age. IBM itself used emulation to develop System/360 and its customers used 1401 emulation on that platform for many years, as well as System/36 emulation on AS/400. Emulation has reached third levels - PalmPilots emulating HP-12Cs have themselves been emulated under Windows, etc. More recently, IBM has even provided the tools to do this itself - and specifically for its mainframe environment - in the IBM xSeries 430 Enabled for System/390 and granted its customers licenses to run its software this way. How can ICA 4.1 forbid this now when it didn't then? The text has not been changed.
And IBM may well be making a rod for its own back. It has in the past produced emulation of other vendor's architectures, such as ICL's 1900 systems. Closing the door on, e.g., emulation of Windows on future IBM products seems ill-advised.
IBM's fourth claim is also extraordinary. The word "necessarily" in the claim is crucial. In essence IBM is stating quite flatly that it is impossible to run z/OS without licensing one or more IBM patents. But the language IBM uses is telling: ' .. to work as PSI claims, necessarily infringe IBM patents.' [Emphasis added] Note - it doesn't say ".. require an agreement to use IBM patents". The implication of this formulation is that IBM will always refuse to license these patents - a clear and obvious abuse of the intent of patent law. This is essentially counter to many countries' legal positions on software patents, but quite possibly true until this challenge is met. Not previously a problem because IBM has always been willing to license patents for reasonable fees - but it has now changed its long-established policy in support of this suit. Around 21 February 2006 IBM took down the web page (multiply archived - including the day before) that promised it.
Another change prompted by discovery is that the list of patents IBM claims may have been infringed is now slightly different.
The silence from Fundamental Software continues to be complete and therefore deafening, even to the point that their web site hasn't been touched for a year. Since it's obvious from its filings that IBM has not bought the company, this silence must have been obtained in some other way. Funsoft has an impressive patent portfolio - one way to slip this through would be for IBM to license Funsoft's patents on generous terms with a draconian non-disclosure provision and hide the payments in its general R&D expense. It's also of note that very, very few Flex-ES users have gone on record - and those that have have done so from a techie and not suit level. Another deafening silence.
As with the previous tabulation, these are the claims and counterclaims by paragraph, interspersed with a number of comments. IBM's traditional house colour is blue, and PSI claims some descent from Amdahl whose house colour was red (actually a Pantone orange, but let's not quibble) - so these colours are used in each case. In later documents, green is used for T3.
Plaintiff International Business Machines Corporation ("IBM"), by and through its attorneys, Quinn Emanuel Urquhart Oliver & Hedges, LLP, as and for its Amended Complaint against defendant Platform Solutions, Inc. ("PSI"), states as follows:
PSI's response contains a lengthy introduction before the detailed numbered point responses:
Defendant and counterclaimant Platform Solutions, Inc. ("PSI") hereby answers the Amended Complaint of Plaintiff International Business Machines Corporation ("Plaintiff") or "IBM"), admitting, denying, and alleging as follows:
In a spurious effort to call attention away from its own abusive and predatory behaviour by denigrating PSI's reputation, IBM, in its Amended Complaint, has made the sweeping assertion that PSI's business is built on a theft of IBM intellectual property. PSI rejects this assertion and denies IBM's allegations that it has infringed any valid IBM patent, misappropriated any trade secrets, violated any copyright, or breached any contract through the conduct alleged in the Amended Complaint, and denies that IBM is entitled to any of the relief claimed in its Amended Complaint. For the past several decades, IBM has taken a distinct approach to competition law in the mainframe industry. After its monopolistic behaviour drew the scrutiny of antitrust authorities in the 1950s and 1960s, it adopted a position of openness and free competition, inducing programmers, competitors, developers, and customers to adopt IBM's unique architectural platform. By representing that it would license its intellectual property relating to its mainframe products on reasonable and non-discriminatory terms, and by providing customers, business partners, application developers, and competitors - such as Amdahl and Hitachi - with the interoperability information and licenses needed to develop compatible products on a reasonable and non-discriminatory basis for decades, IBM caused the mainframe industry to standardize on the IBM mainframe architecture. Then, when regulatory attention moved elsewhere and IBM acquired an even larger base of customers locked in to IBM's architectural platform, it changed course: retracting promises to license technical information on the same terms as before; delaying requests for formal positions; renouncing a publicly-touted policy of reasonable, non-discriminatory patent licensing; and resuming its policies of tying and bundling that were so unequivocally denounced decades ago.
PSI - which is now marketing the first open architecture mainframe computer, capable of running IBM's mainframe operating systems and other operating systems such as Linux, Unix and Microosoft Windows and stands as the only viable threat to IBM's mainframe monopoly - is the target of IBM's current campaign to eliminate competitions in the world wide market for mainframe computers. Consumers want PSI's product. Trade publications have touted it. Organizations ranging from local governments to large, multi-national companies have either implemented it or are considering its implementation. IBM itself has projected that [One line redacted.] Rather than competing on the merits against PSI by offering better products, better service or lower prices, however, IBM has sought to extinguish the threat posed by PSI by, inter alia: (a) conditioning the license of its mainframe operating systems on the purchase or continued use of an IBM mainframe, (b) taking the novel position that any computer capable of running IBM's operating systems necessarily infringes IBM patents, and (c)attempting to enforce patents that purport to read on architectural standards for making IBM-compatible mainframe products after representing throughout the development of those standards that it would engage in reasonable and non-discriminatory licensing of interoperability information and allegedly applicable patents.
There is no pro-competitive justification for IBM's conduct; it is purely designed to eliminate competition and suppress customer choice. By its Amended Counterclaims, PSI seeks to recover damages based on the harm that IBM's conduct has caused and is causing to PSI's business. Further, PSI seeks the injunctive relief that is necessary to restore free and fair competition in the world wide market for computers and applications running on IBM's architectural platform - a platform that IBM's now-discarded licensing policies made the industry standard.
The bait and switch tactics that IBM is now using to maintain its mainframe monopoly are no only anti-competitive, but hypocritical. Consistent with its long-standing practice of providing customers, business partners, application developers and competitors with reasonable and non-discriminatory access to interoperability information in the mainframe industry, IBM to this day champions open standards when they suit its business interests. As recently as July 2006, an IBM-backed trade group filed a complaint before the European Commission claiming that another dominant firm - Microsoft - had violated the antitrust laws by refusing to supply to IBM the interoperability information necessary to make competitive compatible products "in a timely and adequate manner and thus discriminat[ing] in the supply of such information against third parties and in favour of its own products." IBM cannot have it both ways; it must live by the same principles that it invokes to its own advantage against dominant firms in other markets.
PSI now responds to IBM's individual allegations using the same paragraph numbers that appear in the Amended Complaint. All factual allegations not expressly admitted below are denied.
1.
PSI's entire business model is built on PSI's theft of IBM's intellectual property. Even the limited discovery produced in this case to date confirms that PSI has been engaged in the long-term, systematic theft of IBM's trade secrets, IBM's confidential documents, IBM's copyrighted software, and IBM's patented intellectual property, which continues to this day.
Denied.
2.
PSI has developed and is offering for sale emulators that seek to imitate IBM's computers. PSI sells its emulators to consumers by telling them expressly that their PSI emulator will run IBM's operating systems and other copyrighted IBM software and will act as if it is an IBM machine. Not surprisingly, in order to create emulators that mimic IBM's computer systems, PSI has relied on the wholesale theft of IBM's intellectual property. Without IBM's intellectual property, PSI's emulators could simply not exist.
PSI admits that it has developed and is bringing to market and offering for sale computer systems that are compatible with and will run IBM's copyrighted operating systems, other software programs written for IBM's operating systems, and other operating systems and software programs, and that it has informed customers and potential customers of this compatibility. PSI denies that its products are "emulator systems" that merely seek to "imitate" IBM's computers; PSI's products are open mainframe servers that are compatible with the broadest set of datacenter environments and operating systems, including IBM z/OS, Linux, Windows and HP-UX. PSI developed its products to provide mainframe computer customers with choice in the mainframe computer and operating systems markets in which IBM wields monopoly power. PSI denies the remaining allegations of paragraph 2.
The idea of a single system that can run multiple diverse operating systems is unsurprisingly not new. Both Amdahl and Hitachi Data Systems presented the concept to their "customer councils" in the 1990s. The response was never more than lukewarm because of hardware price/performance differences - customers would not pay mainframe-like prices to run small platform OSes. Sequent, IBM and Fundamental Software's partners all sold systems that would run IBM mainframe workloads and either UNIX or Linux workloads at very little if any additional cost - but no one bothered.
3.
IBM has invested billions of dollars of time, effort, know-how, creativity and money to develop its computers, the architectures for those computers, and the operating systems and other software programs that are compatible with and run on those architectures. IBM has developed combinations of computer hardware and software specifically tailored to meet the most demanding customer requirements. As a result of IBM's massive and multi-decade investment, IBM's computer systems provide unparalleled performance, reliability, availability, serviceability, and security and are widely used where accuracy, data integrity, and reliability are critically important. PSI now seeks to usurp the value of IBM's investment by stealing and misusing IBM's intellectual property.
PSI admits that IBM's efforts have included the development of computer hardware and software products tailored to meet demanding customer requirements, but denies that all of IBM's efforts were directed to those goals and denies the remaining allegations of the second sentence of paragraph 3. PSI admits the allegations of the third sentence of paragraph 3 except that PSI denies that IBM's computer systems provide "unparalleled performance, reliability, availability, serviceability, and security," and further denies that customer acceptance of IBM's computer systems and programs has resulted solely from IBM's investments. PSI denies the remaining allegations of paragraph 3.
4.
PSI's emulators, to work as PSI claims, necessarily infringe IBM patents - a fact that has been confirmed by IBM's analysis of a PSI emulator, the source code for the PSI emulators, and other materials produced by PSI in this litigation. As predicted in IBM's original Complaint, analysis of PSI's technology has confirmed broad and systematic infringement of important IBM patents, including patents covering significant aspects of IBM's computer architectures and the very emulation techniques that PSI has used to mimic those architectures.
Denied.
5.
The documents produced also show that PSI knew it needed a patent license from IBM for its emulators to work, yet when IBM refused to license its patents to PSI, PSI knowingly and willfully chose to use the IBM patents it needs without IBM's consent.
PSI admits that it expected IBM to grant PSI a patent license based on its publicly-advertised policy of reasonable, non-discriminatory patent licensing and its express statements to PSI. PSI denies the remaining allegations of paragraph 5.
6.
Discovery has also revealed that - contrary to PSI's flat-out denials over a number of years and continuing until today - PSI has misappropriated and used IBM trade secrets that it admitted it was not authorized to have. PSI simply took those trade secrets without IBM's consent and used them to design and test its emulators in an effort to make them compatible with IBM's architectures.
Denied.
7.
In addition, PSI has actually produced back to IBM in discovery IBM's own confidential and proprietary documents, dated as recently as 2007 and labeled "This document is classified IBM Confidential Information and is for the exclusive use of IBM sales personnel and authorized IBM Business Partners sales personnel. Any other use or distribution is prohibited." Ignoring IBM's requests, PSI and its counsel have refused to explain how PSI obtained IBM's confidential documents, how many other such documents are in its possession, or to return or certify destruction of all copies in its possession.
PSI admits that after the commencement of this litigation one of its officers received, unsolicited, documents labeled "IBM Confidential Materials" from a source outside of PSI, that these materials were promptly turned over to trial counsel, and that PSI has produced those documents in discovery to IBM. PSI admits that its counsel is unwilling to engage in informal discovery by answering requests for information not made through the discovery process. PSI denies that these documents were ever circulated within PSI, that they were used in any way, that they are of any value to PSI, and PSI denies the remaining allegations of paragraph 7.
This happens all the time. The IBM mainframe market is small with a limited number of players, and often such materials arrive unsolicited. IBM insists that such materials should be either destroyed immediately or returned to it, but this is often not a rewarding practice. In early 2004 thirteen instances of this were notified to various contact points within IBM, and the ultimate response was an insulting and threatening letter. There are almost 6,000 hits for the quoted string "IBM Confidential" on Google.
8.
The IBM intellectual property at issue here also includes IBM's copyrighted operating system and other software. PSI's emulators "translate" that software to enable it to run on computers that do nt implement IBM's proprietary architectures. By making such translations, PSI has breached its contracts with IBM and has encouraged its customers to do the same. PSI PSI has also violated the copyright laws by copying, or participated int he copying of, copyrighted IBM software.
PSI admits that IBM's intellectual property includes copyrighted materials. PSI admits that its firmware enables its products to execute instructions written for IBM's ESA/390 Architecture and z/Architecture. PSI denies that this enablement constitutes "translating" within the meaning of ICA. PSI denies the remaining allegations of paragraph 8.
This is pure pedantry. Would this claim have been made if either party has used "convert" instead of "translate"?
9.
By this action, IBM seeks, among other things, (a) an injunction precluding PSI from making, using, offering for sale, and selling emulators that infringe IBM's patents; (b) further injunctions to prevent ongoing irreparable harm to IBM from PSI's misappropriation of IBM's trade secrets, tortious interference with IBM's contracts, and copyright infringement; (c) damages; and (d) a declaration that IBM is authorized to terminate PSI's software licenses based on PSI's breach of contract and PSI's active encouragement of similar breaches by its customers.
PSI admits that IBM seeks the remedies set forth in paragraph 9, but denies that it is entitled to any of them.
10.
IBM also seeks declaratory relief from threatened antitrust claims. At the same time PSI was infringing IBM's patents and copyrights, misappropriating IBM's trade secrets, tortiously interfering with contracts relating to those trade secrets, and breaching IBM's software license agreements, PSI insisted that IBM agree to license (a) PSI to use IBM's patents and (b) PSI and third parties to use IBM's copyrighted operating systems and other software on PSI's emulators. When IBM declined to grant the requested licenses because, among other reasons, PSI was infringing IBM's patents, PSI responded by threatening baseless antitrust litigation seeking substantial alleged damages. And PSI has now filed antitrust Counterclaims in this action. IBM therefore seeks a declaration that its refusal to license IBM's patents to PSI and IBM's copyrighted operating systems and other software for use on PSI's emulators does not violate the antitrust laws - a declaration for which IBM relies, in part, on the same evidence of patent infringement that forms the basis for IBM's claims for affirmative relief under the patent laws.
PSI admits that IBM seeks declaratory relief set forth in paragraph 10. PSI admits that it requested, out of an abundance of caution, that IBM license any patents that might arguably be necessary for PSI to develop and market its products. PSI admits that it has demanded that IBM not tie its mainframe computers to its operating systems, and license its operating systems to PSI and to its customers. PSI admits that prior to this suit it notified IBM that its conduct violates the antitrust laws, and that PSI has filed antitrust counterclaims in this action. PSI admits that IBM has raised its patent rights as a post hoc justification for its anti-competitive conduct, but denies that its allegations justify its conduct. PSI denies the remaining allegation of paragraph 10.
11.
Plaintiff IBM is a corporation organized and existing under the laws of New York, having its principal place of business at New Orchard Road, Armonk, New York 10504. IBM's business activities, including research and development, manufacturing, marketing, and service are primarily in the field of information processing products and services. IBM develops, manufactures, markets and services computers, computer equipment, and software on a worldwide basis in competition with a large number of firms both inside and outside of the United States.
PSI denies the allegation that IBM faces competition from a large number of firms both inside and outside the United States with respect to the mainframe computer systems and operating systems at issue in this action, and admits the remaining allegations of paragraph 11.
12.
Defendant PSI is a corporation organized and existing under the laws of Californis, having its principal place of business at 501 Macara Avenue, Suite 101, Sunnyvale, California 94085.
Admitted.
13.
IBM's claims arise under the patent, antitrust, and copyright laws of the United States, 35 U.S.C §§ 1 et seq., 15 U.S.C §§ 1 et seq., 17 U.S.C §§ 101 et seq. This court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C §§ 1331 and 1338(a).
Admitted.
14.
This court has jurisdiction over IBM's claims for misappropriation of trade secrets, tortious interference with contract, and breach of contract pursuant to 28 U.S.C §§ 1332 and 1367. There is complete diversity of citizenship, and the amount in controversy exceeds $75,000, exclusive of interest and costs.
Admitted.
15.
This court has authority to grant declaratory relief pursuant to the Declaratory Judgement Act, 28 U.S.C. §§ 2201 et seq.
Admitted.
16.
PSI has admitted in its Answer to IBM's original Complaint in this action that this Court has personal jurisdiction over PSI.
Admitted.
17.
Venue is proper in this judicial district pursuant to 28 U.S.C §§ 1391(b), 1391(c), and 1400(b). PSI has admitted in its Answer to IBM's original Complaint in this Action that venue is proper in this District.
Admitted.
18.
For over forty years, IBM has invested massive amounts of time, effort, know-how, and creativity, and money, in developing its computer architectures and the computer systems that implement those architectures.
PSI denies that IBM has invested the time, effort, money, know-how, and creativity that it would have under competitive conditions, and avers that "massive" is too vague an adjective to permit a response and therefore denies that allegation. PSI otherwise admits the allegations of paragraph 18.
19.
As a result of its investments over time, IBM has developed System z. System z is the brand name for IBM's current mainframe computer systems. System z evolved from IBM computer systems dating back to 1964. Its predecessors include IBM's System/390® ("S/390®"), which was introduced in 1990. System z is an umbrella term for: IBM zSeries® servers (introduced in 2000), IBM System z9 servers (introduced in 2005), and IBM operating systems and other IBM software that run on zSeries® or z9 servers.
PSI admits that System z is the brand name that IBM uses for its current mainframe computers, mainframe operating systems, and software applications for mainframe computers, and that System z is an umbrella term IBM uses for those products. PSI further admits that IBM's current mainframe computers and operating systems evolved from products dating back to 1964, and that the S/390, introduced in 1990, is among the predecessors to IBM's current mainframe computers. PSI admits that the System z products include zSeries servers and z9 servers and IBM mainframe operating systems and products that run on those computers or other IBM-compatible mainframe computers. PSI denies that he development of System z or the System z products resulted solely from IBM's investments, and denies any remaining allegations of paragraph 19.
20.
zSeries® servers and their predecessors have been the backbone of commercial computing for decades - renowned for their reliability, scalability, availability, serviceability and other industrial-strength attributes. The zSeries® server and z/OS® were designed for environments requiring very high performance, reliability, accuracy, and security. many z/OS customers have business requirements for continuous system availability. System down time or unplanned outages, even of short duration, can cause millions of dollars in lost revenue or other significant business impact. IBM has a strong interest in ensuring the excellent and well-deserved reputation of its System z.
Admitted, except that PSI denies the allegation of the first sentence of paragraphh 20 that zSeries servers and their predecessors have been the backbone of commercial computing for decades on the ground that he allegation is too vague to permit a response. To the extent the allegation is meant to suggest that IBM mainframes are the only mainframe computers that have been renowned for their reliability, scalability, availability, serviceability and industrial-strength attributes, PSI denies the allegation; to the extent that IBM has a dominant position in the market for mainframe computers, PSI admits this allegation.
At least IBM managed to avoid the dreaded "synergy" word - but the rest is fatuous nonsense worthy of a 1970s hardware salesman. The fact is that z/OS is indeed one of the world's most reliable and secure operating systems - if not indeed the very best overall - but IBM's zSeries hardware platforms are quite ordinary in terms of current technology. The first hardware platform to run MVS uninterrupted for a calendar year (in 1978) was a Hitachi processor - the S6 installed at Eternit in Berlin. Perhaps PSI will seek to subpoena IBM's own records, especially the power-on resets caused by mandatory microcode patches to the early z900s? There are many other examples, and very, very few examples of outages to IBM's own xSeries running Fundamental Software's Flex-ES emulation. Perhaps even none. An even simpler question - today, right now - how many MCMs in IBM mainframes world wide are "maxed out" having used all available on-board spare processors? That number might frighten a few big users.
21.
A computer's architecture defines the logical structure and functional operations of the computer. System z computers implement IBM's current 64-bit z/Architecture®. IBM's z/Architecture® evolved over time from predecessor architectures, including IBM's 31-bit Enterprise Systems Architecture/390® ("ESA/390"), Enterprise Systems Architecture/370 ("ESA/370"), and several earlier architectures.
Admitted.
22.
Operating systems comprise the fundamental software that controls the execution of programs on the computer and provides [sic] basic services such as resource allocation, scheduling, input/output control, and data management. IBM's operating systems, like its architectures and computer systems, are the product of massive investments over time.
PSI admits the first sentence of paragraph 22. PSI denies the second sentence inasmuch as the word "massive" is too vague to permit a response.
23.
Particular operating systems are designed to run on computers that implement a particular architecture on the features and characteristics of that architecture. IBM's copyrighted OS/390®, for example, was designed to run on IBM's S/390® computers, which implement IBM's ESA/390 Architecture. IBM's copyrighted z/OS® is the successor operating system to OS/390® and is designed to run on IBM's System z computers, which implement IBM's z/Architecture®. The relationship between IBM's computer architectures and the operating systems designed to run on those architectures is one of the important factors contributing to the accuracy and reliability of IBM's computer systems, to customer acceptance of those systems for mission-critical applications, and to the ability of IBM's computer system to compete with alternative computer systems offers by IBM's many competitors.
PSI admits that particular operating systems are designed to capitalize on the features and characteristics of compatible architectures, that IBM's OS/390 operating system is compatible with its S/390 computers, that its z/OS operating is compatible with its Series Z computers, and that the compatibility between IBM's operating systems and the architectures of its mainframe computer systems is an important factor contributing to the accuracy and reliabilityy of those systems for mission-critical applications. PSI denies the remaining allegations of paragraph 23.
24.
In addition to mainframe operating systems, architectures, and computers that implement those architectures, IBM has invested huge amounts of time, effort, creativity, and money in developing other software programs that work in conjunction with those operating systems and computers. Examples of such other IBM software programs include IBM's Customer Information Control System ("CICS®") and IBM's Database 2 ("DB2®"). Like IBM's operating systems, these programs are designed to operate in conjunction with IBM's computer architectures and to capitalize on the features and characteristics of IBM's architectures.
PSI admits the allegations of the first two sentences of paragraph 24. With respect to the third sentence of paragraph 24 PSI admits that the software programs referenced in the second sentence of paragraph 24 will operate in conjunction with IBM computer architectures, but notes that such programs also will operate in conjunction with IBM-compatible architectures such as those previously marketed by Amdahl and Hitachi and now marketed by PSI.
25.
IBM holds a large portfolio of patents relating to System z and predecessor computer systems. IBM's patents are directed, among other things, to aspects of its z/Architecture® and its predecessor ESA/390 Architecture, and to emulation technology, including the very technology that PSI is using to mimic IBM's architectures. IBM has further sought to protect its investment in computer intellectual property by maintaining certain aspects of its z/Architecture®, ESA/390 Architecture, and predecessor architectures as IBM trade secrets, by copyrighting its mainframe operating systems and other software, and by imposing reasonable contractual restrictions on the manner in which customers may use those IBM computer programs.
PSI is without information or knowledge sufficient to form a belief as to the allegations regarding IBM's patent portfolio, and therefore denies those allegations. PSI admits that that IBM has sought to copyright its mainframe operating system and other software products, but denies that all its intellectual property is copyrighted and denies that IBM's contractual restrictions are reasonable. The statement that IBM has maintained "certain aspects of its z/Architecture®, ESA/390 Architecture, and predecessor architectures as IBM trade secrets" is too vague to permit a response, and PSI is further without information or knowledge sufficient to form a belief as to this allegation. PSI denies the remaining allegations of paragraph 25.
26.
Recognizing the value of IBM's intellectual property, PSI has developed and is now implementing a business model that seeks to usurp IBM's massive long-term investment for PSI's own benefit.
Denied.
27.
PSI is free-riding on IBM's efforts by stealing and misusing IBM's intellectual property to develop, make and sell emulator systems that mimic IBM's computer architectures. An emulator is a combination of software, firmware and/or hardware added to a computer that implements one architecture (e.g., the Itanium® Architecture developed by PSI's investor and business partner Intel Corporation ("Intel") for the purpose of translating computer programs written for a different architecture (e.g., the IBM z/Architecture®) and enabling those programs to be run on the computer to which the emulator has been added. An emulator is intended to allow the computer to which it has been added to accept the same data and the same instructions, run the same programs. and achieve the same results as does the computer whose architecture is being emulated. According to PSI, PSI's emulator systems accomplish this by translating IBM's copyrighted software into a set of instructions that can be executed by an Intel processor that is not capable of executing the original IBM software instructions.
PSI admits that PSI's products run on Intel Itanium chips and are capable of executing the instructions of IBM's OS/390 and z/OS operating systems and other IBM computer programs that run in conjunction with those operating systems, such as IBM's CICS and DB2. PSI admits that Intel is an investor in and business partner of PSI. PSI otherwise denies the allegations of paragraph 27.
28.
The PSI emulator systems run on servers supplied by PSI's business partner Hewlett-Packard Corporation ("H-P"), which use Itanium® microprocessors supplied by PSI's investor and business partner Intel. Acording to PSI, its emulator systems are capable of running IBM's OS/390® and z/OS® and other IBM computer programs that run on those operating systems, such as IBM's CICS® and DB2®.
PSI admits that its products run on Intel Itanium-based servers, admits that its products are compatible with certain standards and specifications of IBM's ESA/390 architecture and z/Architecture computer systems, admits they are capable of running IBM's OS/390 and z/OS operating systemms and other IBM programs that run in conjunction with those operating systems, such as IBM's CICS and DB2. PSI further admits that certain Hewlett Packard servers use Itanium chips, and that certain of PSI's products incorporate Hewlett Packard servers. PSI denied the remaining allegations of paragraph 28.
29.
As PSI's public statements acknowledge, a complete emulator of an IBM computer architecture must, by definition, fully and exactly mimic the relevant IBM architecture. IBM's z/Architecture is defined, in part, in an approximately 1000-page Principles of Operation ("PoP"), the sixth edition of which was published in April 2007. If the PoP indicates that a facility is present or if a required facility is present in the architecture despite lack of definition in the PoP), and PSI's emulator does not exactly mimic it, software that attempts to make use of the facility will not work properly. To be a viable emulator, PSI's emulator systems would have to be able to accurately run z/OS® and at least any additional System z software required by the customers that PSI is targeting.
PSI admits the allegations of the second sentence of paragraph 29, admits that compatibility with any particular facility supported by IBM's z/Architecture requires the ability to support that facility, and admits that the viability of PSI's IBM-compatible products depends in part on the ability to run z/OS and other System Z software required of licensed by its customers. PSI denies the remaining allegations of paragraph 29.
30.
PSI has asserted that its emulator systems are in fact able to execute "the 1200+ instructions from the z/OS and S/390 instruction set," and that its emulator systems are compatible with - i.e., capable of running - IBM's OS/390® and z/OS®, other software intended to run on OS/390® and z/OS®, and vendor and customer application software that runs on those operating systems. PSI (through one of its licensees and marketing partners) has elaborated on this statement, asserting that PSI's emulator systems will run IBM's "latest" z/OS® operating system. PSI has further asserted that z/OS® workloads will run "identically" on PSI's emulator systems as on IBM mainframe computers.
PSI admits that it has stated that its products are designed to execute the instructions in the z/Architecture and S/390 instruction sets required by its intended customers and that its products are compatible with the OS/390 and z/OS operating systems and other IBM, vendor and customer application software that runs on those operating systems. PSI further admits that it has confirmed that its products will run IBM's latest version of its z/OS operating system and will perform many z/OS workloads as if they were operating on an IBM mainframe. PSI denies the remaining allegations of paragraph 30.
31.
PSI has repeatedly sought to trace its roots to Amdahl Corporation ("Amdahl"), a company that formerly made IBM-compatible computers. PSI has built its business using emulation software, diagnostic tools, and other information obtained from Amdahl around the time of PSI's formation. [Five redacted lines.] By so doing, PSI has wrongfully misappropriated IBM's trade secrets.
PSI admits that it was founded by employees of Amdahl, admits that it acquired rights to use Amdahl-created software and diagnostics; and admits that IBM had entered into certain agreements with Amdahl under which IBM disclosed technical information to it. PSI otherwise denies the allegations of paragraph 31.
32.
Amdahl licensed from IBM, and used with IBM's consent, (a) IBM patents and (b) IBM trade secrets relating to important non-public aspects of IBM's computer architectures.
PSI admits the allegations of paragraph 32, but further states that IBM licensed the basic interoperability information to Amdahl only after it was threatened with antitrust enforcement proceedings and in order to avoid such proceedings.
33.
Certain aspects of the IBM architectures are not published in the PoP and are instead maintained by IBM as trade secrets. For this reason, Amdahl entered into various agreements with IBM byy which it requested and received IBM trade secrets relating to various non-public aspects of IBM's OS/390® and predecessor architectures.
PSI admits that certain aspects of the IBM architectures are not published in the public PoP and that Amdahl received information regarding some of these aspects pursuant to certain agreements with IBM. PSI otherwise denies the allegations of paragraph 33.
34.
In 1986, IBM entered into an IBM Technical Information Disclosure Agreement (the "TIDA") with Amdahl. In 1996, IBM entered into an IBM Technical Information License Agreement (the "TILA") with Amdahl. The TIDA and TILA set forth terms and conditions governing Amdahl's treatment and use of the trade secrets ("Technical Information") that IBM chose to license to Amdahl in specific negotiated transactions in response to Amdahl's requests for information to be used by Amdahl as permitted by the TIDA and TILA.
PSI admits that IBM and Amdahl entered into the TIDA agreement in 1986, and subsequently entered into the TILA agreement in 1996, and that those agreements were specifically negotiated and set forth terms and conditions governing technical information that IBM provided to Amdahl pursuant to those agreements, and avers that the TIDA agreement was entered into pursuant to IBM's commitment to the European antitrust authorities to make interoperability information available to competing undertakings, such as Amdahl, on a timely basis. PSI denies that all the technical information disclosed to Amdahl then constituted or now constitute "trade secrets", and avers that much of it is available from multiple sources, including, inter alia, Hercules' open source emulation program and IBM's United States and foreign patent applications. PSI denies the remaining allegations of paragraph 34.
And now that z/Linux contains no OCO modules, it may be that some information is published there.
35.
The TIDA and TILA required Amdahl to hold in confidence all IBM Technical Information and not to disclose, publish, or disseminate it without IBM's written consent. The TIDA and TILA also strictly limited the uses to which Amdahl could put technology that Amdahl developed with the aid of IBM Technical Information. Specifically, Amdahl was permitted to use, sell, transfer, or license such technology only in and/or with an Amdahl product. The TIDA and TILA did not permit Amdahl to use or disclose IBM Technical Information to develop materials, tools, or products that could then be used to develop or manufacture a non-Amdahl product, such as PSI emulator systems.
PSI admits that the TIDA/TILA agreements prohibited Admahl from disclosing, publishing or disseminating TIDA/TILA information except as provided by the TILA/TIDA agreement. PSI denies the remaining allegations of paragraph 35.
It was reasonably obvious that such a prohibition must exist. Now it has been stated unequivocally by IBM and confirmed by PSI. Hercules, UMX and PSI are or were of course not Amdahl products.
36.
IBM also entered into TIDA and TILA agreements with Fujitsu Computer Systems Corporation ("Fujitsu"), which at relevant times had a substantial ownership interest in Amdahl and completed the acquisition of Amdahl in 1998. The Fujitsu TIDA and TILA were in all material respects identical to the Amdahl TIDA and TILA, except that Fujitsu - rather than Amdahl- was the designated "Licensee" of IBM Technical Information. References to Amdahl in this Amended Complaint are intended to include both Amdahl and Fujitsu.
Admitted, except that PSI is without knowledge sufficient to admit or deny that the Amdahl and Fujitsu TILAs and TIDAs were in all respects identical.
37.
IBM licensed important IBM trade secrets to Amdahl under the TIDA and TILA. The IBM Technical Information licensed to Amdahl defined certain non-public aspects of IBM's ESA/390 Architecture (and predecessor IBM architectures).
PSI admits that the technical information disclosed to Amdahl and Fujitsu defined certain standards and specifications for IBM's ESA/390 and predecessor architectures that were not disclosed in the publicly-available PoP at the time. PSI otherwise denies the allegations of paragraph 37.
38.
Amdahl used IBM Technical Information licensed to it under the TIDA and TILA in various ways, [Five redacted lines.].
PSI admits that technical information provided to Amdahl under the TILA and TIDA was used in Amdahl's development of diagnostic tools, but denies that such tools were based entirely or principally on such information and avers that the tools were based principally and substantially on Amdahl's own innovatios and publicly available information, and denies that the principal use of the TILA and TIDA information was in the creation of diagnostic tools rather than the development of Amdahl's IBM-compatible processors. PSI further admits that Amdahl diagnostic tools were used to test whether Amdahl processors were compatible with IBM's architectures and would produce the same results as IBM processors. PSI further admits that Amdahl's diagnostic tools can be used to assist in the testing of S/390 compatible processors, including an Intel Itanium processor overlaid with PSI-developed firmware and microcode. PSI otherwise denies the allegations of paragraph 38.
39.
[Two lines redacted.]
PSI admits that IBM technical information was used by Amdahl in developing diagnostic tools, including DIRT, HOT, ALPHA and 8E7, as well as various "bring up programs" or "BUPs". PSI denies that those Amdahl diagnostic tools were based entirely or principally on IBM technical information, and on information and belief avers that substantially less than 10% of the code in those programs was based on any IBM technical information disclosed under the TIDA or TILA agreements, and the development of those programs was based on Amdahl's own innovative efforts.
40.
[Two lines redacted.]
Admitted.
41.
[Two lines redacted.]
PSI admits that some of Amdahl's diagnostic tools contains code derived from IBM technical information, but denies that any of the tools were laced with such information or based principally on such information. On information and belief PSI avers that far less than 10% of the code contained in Amdahl's diagnostic tools was derived from IBM technical information that IBM claimed was confidential, and much of that information has subsequently become publicly available and thus non-confidential.
42.
The development of what became PSI's emulator systems originated at Amdahl in or about 1995. According to PSI, this emulator development program continued at Amdahl until 1999, during which time Amdahl spent hundreds of millions of dollars and developed several versions of S/390*® emulation software called "Manta," "Merlin," and "Stingray."
Admitted.
43.
In the latter part of the 1990s, Amdahl and its parent, Fujitsu, determined that they did not wish to make further investments in developing IBM-compatible computers because their analysis of "trends in the industry" led them to conclude that "S/390 [was] in a declining market" and that "[c]ustomers are choosing to migrate to open systems and open source platforms."
PSI admits that Amdahl decided to stop marketing IBM-compatible computers around 1999. PSI denies the remaining allegations of paragraph 43.
44.
At that point, Ronald N. Hilton, then an Amdahl employee who was heavily involved in Amdahl's emulator development program, formed PSI as a separate corporation and arranged for PSI to license various materials from Amdahl. [Three lines redacted.]
Admitted, except PSI avers that it was the understanding of both parties that the emulation software, diagnostic tools and related materials would not contain IBM confidential information or materials from which such information could be readily discerned.
45.
Mr. Hilton is now the Chief Technology Officer of PSI, and in that capacity is responsible for the overall design of PSI's emulator systems. On information and belief, Amdahl's interests in the negotiations concerning the PSI/Amdahl License were represented by Gregory Handschuh, who later joined PSI's Board of Directors and became its Vice President and General Counsel. Messrs. Hilton and Handschuh were fully aware of the terms of the TIDA and TILA.
PSI admits the first two sentences of paragraph 45, except that it avers that Amdahl's interests in the negotiations were negotiated by a member of Mr. Handschuh's staff. PSI admits that Mr. Handschuh and Mr. Hilton, to varying degrees, were aware that the TILA and TIDA agreements contained restrictions on disclosure. PSI otherwise denies the allegations of paragraph 45.
46.
IBM never authorized Amdahl to provide, and never authorized PSI to receive, TIDA/TILA Technical Information. PSI and its personnel recognized at all relevant times that the TIDA and TILA did not permit PSI to obtain any IBM Technical Information in Amdahl's possession.
Admitted, except to the extent that IBM considers TILA/TIDA information to be "provide[d]" or "receive[d]" when object code diagnostic tools are transferred, or to include non-confidential information, which PSI denies.
47.
[Five lines redacted.]
PSI admits that it unknowingly or inadvertently received certain diagnostic program listings that may have contained some TIDA-derived information from Amdahl/Fujitsu after both parties agreed that PSI should not receive such listings, and that it subsequently learned it had received such information and took steps to ensure that it made no improper use of such information. PSI denies that it ever used IBM trade secrets, and denies the remaining allegations of paragraph 47.
48.
[Four lines redacted.]
Denied.
49.
[Seven lines redacted.]
PSI admits that, prior to this suit, it maintained that it did not receive IBM confidential information. PSI admits that Mr. Hilton did unknowingly receive and retain BUP source listings in electronic form that Fujitsu had produced to PSI. PSI admits that it subsequently received diagnostic binary modules and source code listings for HOT and Alpha. PSI denies that it received source code listings for all programs, and specifically denies that it received them for HOT and 8E7. PSI further denies that it has ever used, or is using, source code listings to discern IBM's confidential information for the purpose of designing its products or that its products are derived from such information.
50.
Thus PSI has stated that, "We have successfully run Amdahl's system-level diagnostic such as HOT and DIRT to ascertain full compatibility."
Admitted.
51.
[Two lines redacted.]
Denied.
52.
In December 2000, PSI proposed that IBM join with PSI in a program to develop emulation software capable of running OS/390® and z/OS®. One of PSI's proposed terms and conditions was that IBM provide PSI with "TILA specifications of all IBM proprietary features and capabilities of the S/390 architecture, z//Architecture, and any future extensions thereto." IBM declined.
Admitted.
53.
In March 2001, PSI presented IBM with a grandiose vision, which included "negat[ing] any need of further S/390 custom chip design" by IBM, and having IBM "fully replace custom S/390 development" with PSI emulation software. In support of this proposal, PSI requested that IBM "provide PSI with TIDA, TILA and 64-bit (z/Architecture) specifications in exchange for equity in PSI. IBM again declined.
PSI admits the first sentence of paragraph 53 except for the "grandiose vision" characterization, which is too vague and conclusory to require a response. PSI admits the second sentence of paragraph 53. PSI admits that IBM refused to license its S/390 architectures and system designs in return for equity, but avers that it did so because of its own "similar business plans" and that it was at all times willing to license the interfaces and architectures "that have already been made available to others on comparable terms." PSI otherwise denies the allegations of paragraph 53.
54.
Also in March 2001, PSI inquired of IBM whether PSI could gain access to TIDA/TILA Technical Information by acquiring Amdahl's business. IBM responded by informing PSI that it could not do so: "Basically, Amdahl is licensed to use solely and does not own the documents, additionally Amdahl is prohibited from passing along either the material or the license in all cases. In essence it is not an asset of Amdahl's." PSI did not dispute IBM's response.
PSI admits that it inquired as to the implications of acquiring Amdahl's S/390 business on the TIDA/TILA information that Amdahl had licensed from IBM. PSI admits that IBM told PSI that Amdahl could not transfer the information. PSI admits that it did not dispute this assertion with IBM. PSI otherwise denies the allegations of paragraph 54.
55.
Among other options considered by PSI at that time was whether to try to license IBM's trade secrets directly, as Amdahl had done. PSI rejected this option because it recognized that IBM's trade secrets would command a "high fee," which PSI was unwilling to pay. [Two lines redacted.]
PSI admits that it considered licensing the TIDA/TILA information directly from IBM, and admits that its decision not to do so was in part guided by a cost-benefit analysis of whether it was worthwhile to purchase the information from IBM at a relatively high cost. PSI denies the remaining allegations of paragraph 55.
56.
On November 11, 2003, PSI sent IBM a letter advising that, "we have acquired the rights to the former Amdahl patents and all of their technology that doesn't include TIDA or TILA." [Several words redacted.]
PSI admits the first sentence of paragraph 56. PSI is without knowledge or information sufficient to form a belief as to the truth of the remaining allegations in paragraph 56, but denies the alleged falsity of the statement.
57.
In April 2005, responding to IBM's request for information that would allow IBM to determine whether PSI was using IBM's intellectual property, PSI's Vice President and General Counsel, Gregory Handschuh, denied IBM's request and wrote: "Let me categorically state that PSI has not misappropriated any IBM trade secret.
PSI admits the first sentence of paragraph 57. PSI denies that the quoted statement is false. PSI avers that in the same letter Mr. Handschuh requested IBM to advise if it had any basis for suspecting that PSI was using IBM intellectual property, and that PSI received no response. PSI further avers that it had advised IBM in 2001 that PSI possessed Amdahl diagnostic tools. PSI is without knowledge or information sufficient to form a belief as to the truth of the remaining allegations in paragraph 57, and therefore denies those allegations.
58.
Until discovery was permitted in this lawsuit, and despite repeated requests by IBM, PSI did not permit IBM to inspect a PSI emulator system. In June 2007, as PSI began producing its emulation software for inspection by IBM in this action, PSI suddenly advised IBM that, "PSI believes it may have inadvertently received IBM confidential information" from Amdahl "in the form of source code listings for test and diagnostic programs which were originally licensed to PSI in object code form by Amdahl ... when PSI was formed." [Five lines redacted.]
PSI admits that it refused IBM's unprecedented request that PSI allow it to inspect PSI's machine prior to it going to market. PSI admits that it notified IBM of the presence of diagnostics source code listings with TIDA tags, and admits the language quoted in paragraph 58. PSI further admits that, as set forth in the quoted language, PSI acknowledged that it received source code listings in addition to the object code versions of certain of Amdahl's test and diagnostic programs. PSI otherwise denies the allegations of paragraph 58.
59.
[Ten lines redacted.]
PSI admits the first sentence of paragraph 59. PSI admits the quoted portion of the second sentence of paragraph 59. PSI denies the remaining allegations of paragraph 59.
60.
[Seven lines redacted.]
PSI admits the first sentence of paragraph 60. PSI admits that after IBM sent a letter containing dozens of demand for detailed information, essentially asking for a written narrative of the creation of PSI's product, PSI informed IBM that it would not engage in extensive informal discovery. PSI lacks sufficient knowledge and information to respond to the third sentence of paragraph 60, and therefore denies the allegations contained therein. All remaining allegations of paragraph 60 are denied.
61.
[Twelve lines redacted.]
PSI admits that various versions of diagnostics have been transferred to and created by PSI over time and that they exist in different locations. PSI further admits that it inadvertently received some listings that contain source code related to functions that may have been initially disclosed to Amdahl pursuant to the TILA/TIDA agreements. PSI denies the remaining allegations of paragraph 61.
62.
[Five lines redacted.]
PSI admits that the listings reflected in the letter to IBM were the result of a preliminary and that PSI's investigation of IBM's allegations has been an is continuing. PSI is without knowledge or information sufficient to form a belief as to the remaining allegations of paragraph 62, and therefore denies them.
63.
[Seven lines redacted.]
PSI admits that the scan results do not reflect other diagnostic tools licensed by Amdahl that do not contain TILA/TIDA-derived source code, may not pick up all potential TILA/TIDA information, and may pick up source code that may be derived from TILA/TIDA information that is now in the public domain. PSI denies that all Amdahl diagnostic tools - and specifically executable versions of ALPHA and DIRT - illegally contain or reveal TIDA/TILA information, and avers that IBM has been aware since March 5, 2001 that PSI received DIRT, HOT and BUPs from Amdahl and that IBM has never - prior to its Amended Complaint - asserted that PSI's use of such diagnostics is improper or violates any agreement. PSI denies the remaining allegations of paragraph 63.
64.
[Eleven lines redacted.]
PSI admits that it inadvertently obtained assembly listings, some of which potentially disclose TILA/TIDA information, from Fujitsu, and avers that no IBM trade secrets were used in the development of its products. PSI denies the allegations of paragraph 64.
65.
[One line redacted.]
Denied.
66.
[Four lines redacted.]
Denied.
67.
[One line redacted.] PSI has also acquired confidential IBM business documents setting forth IBM pricing strategies and other IBM confidential business information. These documents are plainly labeled as IBM "confidential" information and contain proprietary business information that should never get into the hands of competitors like PSI.
PSI admits that one of its officers received, unsolicited, documents labeled as IBM confidential from a source outside of PSI, which he promptly turned over to trial counsel,and that these documents contain IBM pricing information and business information. PSI promptly produced those documents to IBM, and has maintained their confidentiality. PSI denies that these documents were ever circulated within PSI, that they were used in any way, that they are of any value to PSI, and PSI denies the remaining allegations of paragraph 67.
68.
When asked, PSI refused to explain how it obtained IBM's confidential documents, to identify how many other such documents are in its possession, and to return or certify destruction of its copies of these documents. Discovery to date has not yet disclosed the circumstances under which PSI acquired these IBM, but given the nature of the documents, PSI plainly knew that it was not authorized to possess them.
PSI admits that its counsel informed IBM that it was unwilling to engage in informal discovery by answering requests for information not made through the discovery process. PSI admits that it knew the documents were labeled IBM Confidential and it therefore promptly turned them over to trial counsel. PSI otherwise denies the allegations of paragraph 68.
69.
On February 7, 2003, PSI wrote to IBM concerning PSI's request for software licenses and advised IBM of its plans to emulate IBM's z/Architecture®: "We realize that some of this functionality may be covered by IBM patents ..." [Three lines redacted.]
PSI admits the used of the language quoted in paragraph 69, the dates of the correspondence, and the authors of the correspondence. PSI denies the remaining allegations of paragraph 69, including the characterization of the quoted language.
70.
Based on (a) the purpose and nature of PSI's emulator systems, as stated by PSI, (b) IBM's knowledge of emulator technology, (c) IBM's analysis of the source code for PSI's emulation software or firmware; and (d) IBM's inspection of a PSI emulator system purchased from PSI as part of the discovery process in this case, IBM has determined that the making, using, selling, or offering for sale of PSI emulator systems necessarily infringes IBM patents, and/or will contribute to or induce infringement of those patents by users of PSI's emulator systems.
PSI is without knowledge or information sufficient to form a belief as to IBM's subjective beliefs, and therefore denies the allegations of paragraph 70 concerning what IBM believes. PSI denies the remaining allegations of paragraph 70.
71.
The patents that are infringed by PSI include the following:
In the Amended Complaint, IBM dropped its allegations regarding U.S. Patent 6,801,993 entitled "Table Offset For Shortening Translation Tables From Their Beginnings". Additions are in italics.
Denied.
72.
IBM is the owner of all right, title, and interest in and to the '261, '520, '709, '678, '106, '495, '789, '851, '002, and '812 patents by assignment, with full and exclusive right to bring suit to enforce each of these patents, including the right to recover for past infringement.
PSI admits that IBM is designated on the face of the patents as the assignee. PSI is without knowledge or information sufficient to form a belief as to the truth of the remaining allegations in paragraph 72, and therefore denies those allegations.
73.
[Four lines redacted.]
PSI denies the first sentence of Paragraph 73. The second sentence of paragraph 3 is both a statement of intent and a legal conclusion, neither of which require a response.
74.
In March 2004, PSI executed an IBM Customer Agreement ("ICA") with IBM. A true and correct copy of that ICA is attached hereto as Exhibit 11. The ICA expressly prohibits PSI from, among other things, "translating" licensed ICA programs, including z/OS®. After executing the ICA, PSI licensed copies of z/OS® and other IBM software pursuant to the terms of the ICA.
PSI admits that it has, at various times, licensed copies of z/OS and other IBM software pursuant to the terms of the ICA. PSI admits that, among other things, the ICA requires the user to agree not to "reverse assemble, reverse compile, or otherwise translate the ICA program unless expressly permitted by applicable law without the possibility of contractual waiver." PSI otherwise denies that [sic] allegations in paragraph 74.
75.
PSI's emulator systems use software, which PSI refers to as firmware, to mimic IBM's ESA/390 Architecture and z/Architecture® by translating IBM software (written for computer systems using those architectures) into instructions that can be executed by the Intel processors contained in the emulator systems. PSI's translated Itanium® instructions are then executed by the Itanium® processor, with the intent of producing the same result as if the IBM software had been executed on an IBM zSeries® server.
PSI admits that its firmware enables its products to execute instructions written for IBM's ESA/390 Architecture and z/Architecture, admits that it has described z/OS and other zSeries software as having the capability to be run on top of the firmware layer in PSI's products, admits that its firmware works in conjunction with Intel Itanium processors to execute the z/Architecture and ESA/390 Architecture and admits that its products are intended, in part, to ensure that z/OS and other zSeries software run on a PSI system will produce the same results as they would when run on an IBM zSeries mainframe computer. PSI denies the remaining allegations of paragraph 75.
76.
According to PSI, PSI's emulator systems translate what PSI calls "legacy instructions" contained in IBM's copyrighted software into what PSI calls "translated" instructions". PSI's emulator systems sue what PSI calls dynamic just-in-time translation, in which IBM's operating system instructions are translated, the translated instructions are stored or "cached" in the memory of the PSI emulator, and the translated instructions stored in memory are then executed by the emulator.
PSI admits that its products execute the "legacy instructions" included in the current version of IBM's mainframe operating, that it has referred to its product's ability to execute the instructions contained in IBM's operating systems as "just in time translation," and that the instructions are stored in cache in the computer's memory. PSI denies the remaining allegations of paragraph 76.
77.
U.S. Patent No. 7,092,869 ("the '869 patent") issued to Ronald N. Hilton, PSI's founder and Chief Technology Officer, sets out the manner in which PSI translates IBM software so that such software can be run on a computer not based on IBM's architectures.
PSI admits that its founder and Chief Technology Officer Ronald N. Hilton was the inventor of the inventions claimed in U.S. Patent 7,092,869 ("the '869 patent"), and that its products practice the invention claimed by the '869 patent. PSI denies the remaining allegations of paragraph 77.
78.
PSI's public presentations on its emulator systems have confirmed that those systems translate IBM software so that the software can be run on a computer using an Itanium® processor. Such translation is expressly prohibited by the ICA.
PSI admits that it has stated in public presentations that its products execute the instructions of IBM's mainframe operating systems and that it has referred to this function as "just in time translation." PSI denies the remaining allegations of paragraph 78.
79.
In addition to breaching its own ICA, PSI has encouraged its customers to translate IBM software using PSI's emulator systems and otherwise to violate the terms of their ICAs, and has even offered to indemnify customers against claims arising from their use of PSI's emulator systems.
PSI admits that it has offered to indemnify and agreed to indemnify certain of its customers for patent infringement claims, and further avers that IBM indemnifies its own customers from claims of infringement related to its products. PSI denies the remaining allegations of paragraph 79.
80.
PSI and IBM have met and corresponded concerning PSI's activities. Before commencing this litigation, IBM advised PSI that PSI's emulator systems infringe various IBM patents, and offered PSI the opportunity to prove that this was not so. PSI declined IBM's offer, as well as IBM's requests for information about, and access to, PSI's emulator systems.
PSI admits that it has met with and corresponded with IBM regarding PSI's efforts to market IBM-compatible mainframe products. PSI denies the remaining allegations of paragraph 80.
81.
IBM and PSI have also met and corresponded concerning PSI's demands that IBM agree to license its patents to PSI and its copyrighted operating systems and other software for use on PSI's emulator systems. IBM has declined to provide the patent and software licenses demanded by PSI.
PSI admits that it has met and corresponded with IBM regarding PSI's reuests that IBM provide licenses for any patents that IBM believes are necessary to develop, sell and distribute IBM-compatible mainframes and that IBM make its operating system and other software available to PSI and customers of PSI's products. PSI further admits that IBM has refused to provide PSI or its customers with access to IBM's operating systems and software. PSI denies the remaining allegations of paragraph 81.
82.
Before the commencement of this litigation, PSI repeatedly asserted, in words or substance, that IBM's refusal to license IBM's patents to PSI and IBM's software for use on PSI's emulator systems is both unlawful under the antitrust laws and damaging to PSI.
PSI admits that, prior to the commencement of this litigation, it informed IBM that IBM's conduct is unlawful under the antitrust laws and is damaging to PSI. PSI denies the remaining allegations of paragraph 82.
83.
As early as March 16, 2001, PSI stated in correspondence to IBM that its "major concern" was "IBM's stated decision not to license the z/Architecture at all at this point," and that PSI assumed IBM would "continue to reevaluate that position, given the potential antitrust issues that could be raised." On October 29, 2002, PSI wrote to IBM and (a) asserted that IBM's decision not to license its software for use on PSI's systems is "not consistent with the long term IBM practice of licensing its software regardless of the implementation of the computing platform"; (b) requested licensing terms for commercial operation of IBM's software on PSI's emulator systems; and (c) stated that "each day that goes by is directly impacting our development schedule." On December 23, 2002, at a time when PSI said it was preparing "for the commercial introduction of our product line early next year," PSI wrote to IBM's President and CEO (a) criticizing IBM's decision not to license IBM's software for use on PSI's emulator systems; (b) arguing that IBM's refusal conflicts with historical "precedent" and is "discriminatory" and "purely arbitrary"; and (c) claiming that the effect of IBM's decision is "historically anti-competitive" and that "our survival as a company has ben placed in immediate jeopardy as a result." On February 7, 2003, PSI wrote to IBM seeking a letter of intent from IBM confirming IBM's willingness to license its software for use on PSI's emulator systems and asserting that "[t]he unexpected uncertainty on this point has severely hampered the execution of our business plans, jeopardizing the entire venture." On November 10, 2003, PSI wrote to IBM and stated that IBM's licensing position with regard to z/OS® "has severely impacted our ability to deliver a 64-bit machine" and requested reconsideration of that position. On October 5, 2005, PSI wrote to IBM (a) again criticizing IBM's refusal to license IBM's software to be run on PSI's emulator systems; (b) arguing that IBM's licensing policy is inconsistent with IBM's "prior practices and precedents"; and (c) asserting that IBM's licensing position is "causing confusion - both to us and to our end user customers" and "is not just causing confusion in the market" but "is causing harm to our business."
PSI admits that [sic] the allegations contained in paragraph 83 except insofar as the allegations refer to PSI's products as "emulator systems". PSI denies the remaining allegations of paragraph 83..
84.
At a meeting in February 2006, PSI requested that IBM reconsider PSI's request that IBM grant PSI a patent license for PSI's emulator systems and agree to license z/OS® and other IBM software for use on PSI's emulator systems. On May 24, 2006, IBM declined PSI's request. IBM stated at that time that "IBM continues to believe that PSI's products infringe IBM's intellectual property rights" and that "we continue to see indications that PSI is engaged in infringing activity .. IBM has clearly articulated to PSI its belief that by developing and/or offering for sale a product that can run IBM's z/OS operating system, PSI is infringing a number of IBM patents, including IBM's z/Architecture patents. A non-exhaustive list of IBM U.S. patents potentially infringed by PSI was provided to you on August 18, 2005. PSI provided IBM with no substantive response. Instead, PSI continued its development and marketing efforts notwithstanding IBM's rights and interests."
With respect to the first sentence of paragraph 84, PSI admits that it met with IBM in New York in February 2006 to discuss the licensing of any patents that IBM believed were relevant to PSI's products, but denies the remaining allegations of that sentence. PSI admits the allegations of the second sentence of paragraph 84, and that IBM's correspondence dated May 24, 2006 contained the language quoted in the remainder of paragraph 84.
85.
On June 8, 2006, PSI asserted that IBM's decision not to license its patents to PSI and not to license z/OS® to run on PSI systems was "completely unjustified". PSI asserted that IBM's position "will undoubtedly result in significant harm to both PSI and its customers" and "strongly urge[d]" IBM to reconsider its decision. In light of the history of communications between the parties, IBM reasonably construed this letter as threatening antitrust litigation if IBM continued to decline to license its patents to PSI and its operating systems and other software for use on PSI's emulator systems.
PSI admits the content of the June 8, 2006 correspondence alleged in paragraph 85, but denies that IBM did or could reasonably construe this as threatening antitrust litigation.
86.
On August 3, 2006, IBM declined PSI's request for reconsideration of IBM's decisions not to grant PSI a patent license and not to license z/OS® and other operating systems to run on PSI's emulator systems: "As we have explained, we believe that a PSI emulator that runs IBM's z/OS® operating system infringes a number of patents. We have repeatedly expressed this view to PSI, and you have acknowledged that PSI believes it requires patent licenses from IBM. In asking us to reconsider our decision, PSI has provided no new information. IBM would welcome the opportunity to examine one of PSI's systems and, following such an examination, would be willing to discuss PSI's infringements in greater detail." At the same time, IBM advised PSI that, "We are very concerned that, despite the fact that PSI is unlicensed to IBM's patents and has been informed that IBM will not license z/OS on PSI systems, PSI continues to make public statements that it intends to offer systems that run z/OS. IBM is extremely concerned that these statements will induce potential users of PSI systems to infringe IBM's intellectual property rights. Please ensure that PSI does not in any way represent or imply that PSI systems are authorized or eligible for a license to run the IBM z/OS operating system."
PSI admits that IBM declined PSI's request for reconsideration of IBM's decision not to grant PSI a patent license and not to license its software to run on PSI's products using the language quoted in paragraph 86. PSI denies the remaining allegations of paragraph 86.
87.
On August 9, 2006, PSI asserted that "PSI does not believe its systems infringe any patents that IBM may hold" in the fields of z/Architecture® and coupling; admitted that PSI "has not undertaken the lengthy effort and expense of a detailed infringement analysis" with respect to other IBM patents; and stated that it "was most surprised and disappointed" by IBM's position that it would not grant PSI a patent license. PSI further stated that, "PSI believes that IBM's current posture in dealing with PSI to be unwarranted and calculated to cause it substantial harm. It is for this reason that PSI urged IBM to reconsider its position, and does so again here." IBM reasonably construed this correspondence as threatening antitrust litigation if IBM continued to decline to license its patents to PSI and its operating systems and other software for use on PSI's emulator systems.
PSI admits the content of the communications alleged in paragraph 41 [sic - should be 87?] and avers that the letter also indicated that PSI has relied on IBM's representations that it would license the S/390 patents. PSI denies that IBM did or could reasonably construe this correspondence as threatening antitrust litigation.
88.
In response to IBM's Complaint in this action, PSI asserted various antitrust Counterclaims seeking substantial alleged damages. PSI's Counterclaims demonstrate that IBM's perception that PSI was threatening groundless antitrust litigation was well-founded and that there is an actual and justiciable controversy between the parties.
PSI admits that it has filed counterclaims alleging antitrust violations and claims substantial damaged as a result of IBM's antitrust violations and other unlawful conduct. PSI otherwise denies the allegations in paragraph 89.
89.
In March 2006, PSI announced that it was demonstrating and "delivering to customers today around the world" emulator systems that run IBM's z/OS® operating system. In March 2006, PSI also publicly announced that its z/Architecture® emulator system would be "generally available" in the second half of 2006. In June 2006, PSI publicly described its then-current activities as involving beta-test customer placements and initial early ship program shipments, as well as establishing a "direct and channel sales force," and "ISV relationships". In July 2006, PSI issued a press release stating that, "Later this year, PSI expects to deliver z/OS® compatible servers that use dual-core processor technology to address the performance requirements of more than 90 percent of the z/OS® installed base." In the Fall of 2006, PSI publicly demonstrated its infringing emulator systems in, among other places, Baltimore, Maryland; Houston, Texas; and San Jose and San Francisco, California; identified beta customers; and stated that its emulator systems would be generally available in the fourth quarter of 2006. During that same period, PSI actively marketed and offered for sale its emulator systems to potential customers, and publicly stated that a PSI system is installed and in use at a customer location in New York. IBM remains unwilling to license its patents to PSI or its software for use on PSI's emulator systems.. Accordingly, the parties' dispute is now ripe.
PSI denies that its products infringe the asserted IBM patents and denies that the parties' dispute was ripe as of the filing of IBM's complaint. PSI otherwise admits the allegations in paragraph 89.
90.
In addition to PSI's own activities, beginning in November 2006, one of PSI's licensees and marketing partners launched a new web site trumpeting the availability of one PSI emulator and the imminent availability of another. PSI's emulator systems are now being effectively marketed and offered for sale to potential customers, including potential customers in New York.
PSI admits that a distributor began marketing IBM-compatible mainframes containing PSI firmware in November 2006, that the distributor's web site announced the availability of those products and the imminent availability of additional open system mainframes containing PSI technology, and that the distributor is actively marketing those products and offering them for sale in New York and elsewhere. PSI denies the remaining allegations of paragraph 90.
91.
PSI (directly and/or through its licensees and marketing partners) has expressly and impliedly advised potential customers that they will be able to license IBM's mainframe operating systems and other software for use on PSI's emulator systems; has offered to indemnify customers against claims based on their use of PSI emulator systems, and has falsely stated, among other things, that (a) PSI's systems "will run" the "latest" IBM operating systems; (b) IBM software will be available for licensing for use on PSI's systems; (c) IBM will license its operating systems for use on PSI's emulator systems in a "business as usual" manner; (d) licensing of 64-bit software from IBM is available for PSI's systems but not for a competing emulator; (e) PSI is in discussion with IBM concerning software pricing for PSI systems and PSI will take care of software licensing issues with IBM; (f) software pricing for z/OS® will be the same as the price of that software when licensed on certain IBM machines; (g) PSI's systems have what PSI describes as "advanced partitioning capabilities that allow customers to control z/OS-based software licensing fees by isolation of individual workloads or logical server"; (h) PSI's systems will involve the use of a "[r]educed z/OS image"and therefore "qualify" for lower IBM software licensing rates for z/OS® and other IBM software; and has further stated that (i) their lawyers are "ready for anything" and are prepared to sue IBM over a refusal to license IBM software for use on PSI's emulator systems or the imposition by IBM of higher licensing fees for software used on PSI's systems than for software licensed for use on allegedly comparable IBM mainframe systems. As PSI reasonable expected, these statements and threats were communicated to IBM.
PSI admits that its products will run the latest IBM operating system and that its products have advanced partitioning capabilities that allow customers to control z/OS based software licensing fees by isolation of individual workloads on logical servers, but not in any way contrary to IBM's licensing rules. PSI has no knowledge as to whether the alleged "statement and threats" have been communicated to IBM. PSI otherwise denies the allegations of paragraph 91.
92.
As a result of these and other activities, an article appeared in a trade publication on September 26, 2006 entitled "A Joint Assault on the Mainframe Hardware Market." The article, which was subsequently posted on PSI's web site, described PSI as having a series of computers "that can load and run software written for the [IBM] System z9 and its antecedents" and that are compatible with "IBM's current 64-bit processor architecture." The article asserted that PSI has "rights to obtain IBM software licenses, and the legal know-how required to preserve and extend these rights," and suggested that with the "commercial marketing of PSI systems." IBM "will supply and support its full range of mainframe software products."
PSI admits that the references article appeared in a trade publication on September 26, 2006 and contained the quoted passages, but denies the allegation that the publication of the article resulted from "these and other activities" on the ground that it is too vague to permit a response.
93.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 92 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-92 of the Amended Complaint.
94.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '261 patent by practicing one or more claims in the '261 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
95.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '261 patent by contributing to or actively inducing the infringement by others of the '261 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
96.
PSI has willfully infringed the '261 patent.
Denied.
97.
PSI's infringement of the '261 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
98.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
99.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
100.
Unless PSI is enjoined by this Court from continuing its infringement of the '261 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
101.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 100 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-100 of the Amended Complaint.
102.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '520 patent by practicing one or more claims in the '520 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
103.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '520 patent by contributing to or actively inducing the infringement by others of the '520 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
104.
PSI has willfully infringed the '520 patent.
Denied.
105.
PSI's infringement of the '520 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
106.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
107.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
108.
Unless PSI is enjoined by this Court from continuing its infringement of the '520 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
109.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 108 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-108 of the Amended Complaint.
110.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '709 patent by practicing one or more claims in the '709 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
111.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '709 patent by contributing to or actively inducing the infringement by others of the '709 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
112.
PSI has willfully infringed the '709 patent.
Denied.
113.
PSI's infringement of the '709 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
114.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
115.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
116.
Unless PSI is enjoined by this Court from continuing its infringement of the '709 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
117.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 116 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-116 of the Amended Complaint.
118.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '678 patent by practicing one or more claims in the '678 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
119.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '679 patent by contributing to or actively inducing the infringement by others of the '678 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
120.
PSI has willfully infringed the '678 patent.
Denied.
121.
PSI's infringement of the '678 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
122.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
123.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
124.
Unless PSI is enjoined by this Court from continuing its infringement of the '678 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
125.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 124 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-124 of the Amended Complaint.
126.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '106 patent by practicing one or more claims in the '106 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
127.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '106 patent by contributing to or actively inducing the infringement by others of the '106 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
128.
PSI has willfully infringed the '106 patent.
Denied.
129.
PSI's infringement of the '106 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
130.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
131.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
132.
Unless PSI is enjoined by this Court from continuing its infringement of the '106 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
133.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 132 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-132 of the Amended Complaint.
134.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '495 patent by practicing one or more claims in the '495 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
135.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '495 patent by contributing to or actively inducing the infringement by others of the '495 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
136.
PSI has willfully infringed the '495 patent.
Denied.
137.
PSI's infringement of the '495 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
138.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
139.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
140.
Unless PSI is enjoined by this Court from continuing its infringement of the '495 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
141.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 140 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-140 of the Amended Complaint.
142.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '789 patent by practicing one or more claims in the '789 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
143.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '789 patent by contributing to or actively inducing the infringement by others of the '789 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
144.
PSI has willfully infringed the '789 patent.
Denied.
145.
PSI's infringement of the '789 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
146.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
147.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
148.
Unless PSI is enjoined by this Court from continuing its infringement of the '789 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
149.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 148 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-148 of the Amended Complaint.
150.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '851 patent by practicing one or more claims in the '851 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
151.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '851 patent by contributing to or actively inducing the infringement by others of the '851 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
152.
PSI has willfully infringed the '851 patent.
Denied.
153.
PSI's infringement of the '851 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
154.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
155.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
156.
Unless PSI is enjoined by this Court from continuing its infringement of the '851 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
157.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 156 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-156 of the Amended Complaint.
Denied.
158.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '002 patent by practicing one or more claims in the '002 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
159.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '002 patent by contributing to or actively inducing the infringement by others of the '002 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
160.
PSI has willfully infringed the '002 patent.
Denied.
161.
PSI's infringement of the '002 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
162.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
163.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
164.
Unless PSI is enjoined by this Court from continuing its infringement of the '002 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
165.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 164 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-164 of the Amended Complaint.
166.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe, literally and/or under the doctrine of equivalents, the '812 patent by practicing one or more claims in the '812 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
167.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '812 patent by contributing to or actively inducing the infringement by others of the '812 patent by providing PSI's emulator systems and offering to indemnify customers against claims based on the use of those emulator systems.
Denied.
168.
PSI has willfully infringed the '812 patent.
Denied.
169.
PSI's infringement of the '812 patent will continue after the service of this Amended Complaint unless enjoined by the Court.
Denied.
170.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
171.
IBM is entitled to recover from PSI the damages sustained by IBM as a result of PSI's wrongful acts in an amount subject to proof at trial.
Denied.
172.
Unless PSI is enjoined by this Court from continuing its infringement of the '812 patent, IBM will suffer additional irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
173.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 172 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-172 of the Amended Complaint.
174.
IBM owns trade secrets with respect to its computer architectures. Certain of these trade secrets - including information that disclosed various features of IBM's architectures not described in the PoP and IBM's actual implementation of those features - were licensed to Amdahl as Technical Information pursuant to the TIDA and TILA.
PSI is without knowledge or information sufficient to form a belief as to the first sentence of paragraph 174, and therefore denies those allegation [sic]. PSI admits that IBM licensed to Amdahl certain information that was not disclosed in the PoP. PSI otherwise denies the allegations of paragraph 174.
175.
IBM's trade secrets derive independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from their disclosure and use. These IBM trade secrets give IBM a significant advantage over its existing and would-be competitors, including PSI, and the advantage would be lost if companies like PSI were able to gain access to and use them, and to benefit from their use in product development programs, without IBM's consent.
Denied inasmuch as this paragraph relates to the purported trade secrets alleged to have been misappropriated by PSI. To the extent the allegations relate to other purported trade secrets that may be owned or created by IBM, PSI is without knowledge or information sufficient to form a belief, and therefore denies those allegations.
176.
The Technical Information that IBM disclosed to Amdahl under the TIDA and TILA generally was derived from a confidential version of the PoP and from other confidential architecture documents. Confidential aspects of IBM's architecture disclosed to Amdahl are still maintained today in a confidential version of the PoP and in other confidential documents.
PSI admits that the technical information disclosed to Amdahl may have initially been derived from a version of the PoP that was different from the public version of the PoP. PSI denies the remaining allegations of paragraph 176.
177.
IBM has made reasonable efforts to maintain the confidentiality of its Technical Information.
Denied inasmuch as this allegation relates to the purported trade secrets alleged to have been misappropriated by PSI.
178.
PSI was prohibited by the terms of the TIDA and TILA from acquiring the IBM trade secrets licensed to Amdahl pursuant to those agreements and also was prohibited from acquiring Amdahl's S/390® diagnostic tools and other materials developed by Amdahl with the use of IBM's trade secrets and derived from and/or containing those trade secrets.
On information and belief, PSI admits that trade secrets, if any, disclosed to Admdahl under the TILA/TIDA licenses were not transferable to PSI as long as such information remained confidential. PSI otherwise denies the allegations of paragraph 178.
179.
PSI was at all times aware of the terms of the TIDA and TILA [One line redacted.]
PSI admits that it was generally aware that the TIDA/TILA agreements had restrictions on use and that Amdahl had used certain information disclosed under the TIDA/TILA agreements in developing certain diagnostic programs. Upon information and belief, PSI avers that, as a maximum, less than ten percent of these diagnostics related to the so-called TIDA/TILA information. PSA denies the remaining allegations of paragraph 179.
180.
[Nine lines redacted.]
Denied.
181.
IBM did not discover PSI's misappropriation as alleged herein until after PSI produced evidence of such misappropriation during this case. PSI has asserted to IBM that it was not using IBM trade secrets. IBM had no reasonable way to learn that PSI had misappropriated its trade secrets before PSI's disclosures in the discovery process.
Denied.
182.
PSI's conduct was, is, and remains willful and wanton, and was taken in blatant disregard for IBM's valid and enforceable rights.
Denied.
183.
[Three lines redacted.]
This paragraph contains a legal conclusion and statement of intent that does not require a response.
184.
As a direct result of PSI's unauthorized misappropriation and use of IBM's trade secrets, IBM has been damaged in an amount to be proved at trial and PSI has been unjustly enriched by an amount to be proved as trial.
Denied.
185.
By reason of the foregoing, IBM has suffered irreparable harm, which cannot be adequately address at law, unless PSI and its agents, and all those acting in concert with PSI, are enjoined from engaging in any further use of IBM's trade secrets.
Denied.
186.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 185 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-186 of the Amended Complaint.
187.
Amdahl's TIDA and TILA contracts did not permit Amdahl to transfer IBM trade secrets to PSI for PSI's use in developing its emulator systems.
This allegation is too vague to permit a response, and is therefore denied.
188.
At all relevant times, PSI was aware of the TIDA and TILA restrictions described above.
Denied.
189.
[Three lines redacted.]
Denied.
190.
[Four lines redacted.]
Denied.
191.
PSI's interference with the foregoing contracts has been willful, improper, and unlawful.
Denied.
192.
IBM has sustained damages as a result of PSI's conduct.
Denied.
193.
IBM has suffered irreparable injury as a result of PSI's interference with IBM's TIDA and TILA contracts. Unless enjoined by this Court, the foregoing violations will continue, and IBM will continue to suffer irreparable harm.
Denied.
194.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 193 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-193 of the Amended Complaint.
195.
PSI has licensed copies of z/OS® and other IBM software from IBM pursuant to the terms of the ICA.
PSI admits that it has, at various times, licensed copies of z/OS and other IBM software pursuant to the terms of the ICA. PSI denies, however, that the scope of these licenses apply to any of the facts alleged in the Amended Complaint.
196.
The ICA is, by its terms, governed by New York law.
Admitted.
197.
IBM has fully performed all of its obligations under its license agreements with PSI.
Denied.
198.
The ICA expressly forbids PSI from, among other things, "translating" licensed ICA programs, including z/OS®
PSI admits that it has, at various times, licensed copies of z/OS and other IBM software pursuant to the terms of the ICA. PSI denies, however, that the scope of these licenses apply to any of the facts alleged in the Amended Complaint.
199.
PSI has used its emulator systems to translate z/OS® and other IBM software in violation of the express prohibitions of the ICA. By so doing, PSI has breached its license agreements with IBM.
PSI admits that its products execute the "legacy instructions" contained in z/OS, and that those instructions are executed by the Itanium processors contained in those products. PSI denies that running an IBM operating system on a PSI mainframe involves translation within the meaning of paragraph 4.1 of the ICA, and denies the remaining allegations of paragraph 199.
200.
In addition, PSI has encouraged its customers to translate IBM software using PSI's emulator systems and otherwise to violate the terms of their own ICAs with IBM, including by offering to indemnify customers against claims arising from their use of PSI's emulator systems.
Denied.
201.
As a result of PSI's activities, IBM has been damaged by an amount to be proved at trial.
Denied.
202.
As a result of PSI's breaches of its license agreements with IBM, IBM is entitled, pursuant to the terms of the ICA and New York law, to terminate the ICA and to terminate PSI's authorization to use the licensed software.
Denied.
203.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 202 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-202 of the Amended Complaint.
204.
IBM is the author and owner of z/OS® and OS/390®. Whether expressed in human-readable source code, or computer-readable object code, z/OS® and OS/390® are original works of authorship within the meaning of the Copyright Act, and are copyrightable subject matter.
PSI admits that certain versions of OS/390 and z/OS are registered as copyrighted. PSI is without knowledge or information sufficient to respond to the remaining allegations of paragraph 204.
205.
The United States Copyright Office issued Certificates of Registration for the following works ("the IBM copyrights") under the following registration numbers, effective on the following dates:
| Work | Registration Number | Date Effective |
|---|---|---|
| OS/390 Version 1 Release 1 | TXu 735-688 | April 8, 1996 |
| OS/390 Version 1 Release 2 | TXu 769-716 | November 22, 1996 |
| OS/390 Version 1 Release 3 | TXu 807-358 | May 20, 1997 |
| OS/390 Version 2 Release 4 Mod 0 | TX 5-455-669 | March 4, 2002 |
| OS/390 Version 2 Release 5 Mod 0 | TX 5-455-670 | March 4, 2002 |
| OS/390 Version 2 Release 6 Mod 0 | TX 5-455-671 | March 4, 2002 |
| OS/390 Version 2 Release 7 | TXu 905-902 | June 3, 1999 |
| OS/390 Version 2 Release 8 | TXu 923-305 | September 27, 1999 |
| OS/390 Version 2 Release 9 and kits | TXu 954-890 | March 30, 2000 |
| z/OS Version 1 Release 1 Mod 0 | TX 5-425-067 | April 2, 2001 |
| z/OS Version 1 Release 2 Mod 0 | TX 5-564-013 | October 29, 2001 |
| z/OS Version 1 Release 3 Mod 0 including web deliverables | TX 5-597-330 | October 10, 2002 |
| z/OS Version 1 Release 4 Mod 0 including msys and bimodal web deliverables | TX 5-560-060 | October 2, 2002 |
| z/OS Version 1 Release 5 Mod 0 | TX 5-950-229 | March 31, 2004 |
| z/OS Version 1 Release 6 Mod 0 | TX 6-037-031 | September 27, 2004 |
| z/OS Version 1 Release 7 Mod 0 | TX 6-266-402 | October 7, 2005 |
| z/OS Version 1 Release 8 Mod 0 | TX 6-438-572 | October 2, 2006 |
| z/OS Version 1 Release 4 Feature 0 including Feature 0 web deliverables | TX 5-802-855 | June 17, 2003 |
| z/OS Version 1 Release 4 Feature 1 - z990 Exploitation Support | TX 5-867-351 | November 4, 2003 |
| z/OS Version 1 Release 4 Mod 0 Feature 2 - Consoles Enhancements | TX 5-945-844 | March 31, 2004 |
| zIIP Release 6 dependent base | TX 6-404-747 | June 30, 2006 |
| zIIP Release 7 dependent base | TX 6-408-482 | June 30, 2006 |
Admitted.
206.
IBM's z/OS® and OS/390®, and all versions thereof, are copyrighted. IBM, at all relevant times, has owned the copyrights, and the copyrights are properly registered with the United States Copyright Office. IBM has duly and legally complied in all respects with the provisions of the Copyright Laws of the United States, and the copyrights are valid and subsisting.
PSI admits that IBM is identified as the owner of registered copyrights for //OS and S/390. PSI is without knowledge or information sufficient to respond to the remaining allegations of paragraph 206, and therefore denies them.
207.
PSI has infringed one or more of the IBM copyrights by, among other things, making and/or running unauthorized copies of z/OS® and/or OS/390® on PSI's emulator systems without authorization from IBM. [Six lines redacted.]
PSI admits that it has made duplicates of certain copies of IBM's operating systems. PSI denies the remaining allegations of paragraph 207.
The act of installing software makes a copy of it. Under the terms of the ICA, any copy made for any purpose should be labeled as containing proprietary material.
208.
[Five lines redacted.]
PSI admits paragraph 208, except inasmuch as it implies that PSI did any of the alleged copying referenced in this paragraph, participated in any of the alleged copying referenced in this paragraph, or that any such copying was unlawful..
209.
The infringement of each of IBM's rights in and to its copyrighted software constitutes a separate and distinct act of infringement.
Denied.
210.
PSI knew or should have known of this copyright infringement.
Denied.
211.
In addition, PSI has knowingly caused, induced, and materially contributed to copyright infringement.
Denied.
212.
PSI's conduct constitutes both direct and indirect infringement of IBM's copyrights and exclusive rights under copyright in violation of 17 U.S.C. §§ 106 and 501.
Denied.
213.
IBM is entitled to the maximum statutory damages under 17 U.S.C. § 504(c) with respect to each work infringed, or such other amounts as may be proper under U.S.C. § 504(c) and to an award of attorney's fees under 17 U.S.C. § 505.
Denied.
214.
Unless PSI is enjoined by this Court from continuing its infringement of IBM's copyrights, IBM will suffer additional irreparable harm and impairment of the value of its rights. Thus, IBM is entitled to an injunction against further infringement under U.S.C. § 502.
Denied.
215.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 214 of this Amended Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-214 of the Amended Complaint.
216.
There is a real and actual controversy between IBM and PSI concerning IBM's refusal to license its patents to PSI and its copyrighted mainframe software for use on PSI's emulator systems. IBM's refusal to license IBM's patents to PSI and IBM's copyrighted operating systems and other software for use on PSI's emulator systems does not violate the antitrust laws because, among other reasons, the antitrust laws recognize IBM's right, under the patent and copyright laws, to refuse to license its patents and copyrights. PSI's emulator systems infringe IBM patents, and the antitrust law specifically recognizes a copyright holder's right to decline to license copyrighted software for use on a system that infringes the copyright holder's patents. Thus, this controversy requires resolution of substantial questions of patent law and involves the same evidence of patent infringement by PSI that forms the basis for IBM's claims for affirmative relief under the patent laws. In addition, IBM has a strong interest in ensuring that z/OS® is not used on computer systems with which z/OS® is not fully compatible or used in ways that have potential to undermine the reputation of z/OS® for accuracy, data integrity, and reliability or customer acceptance of z/OS® for mission-critical applications.
PSI admits that, now that it has filed counterclaims in this action, there is a real and actual controversy between PSI and IBM relating to IBM's antitrust liability. PSI denies that there was a real and actual controversy between PSI and IBM at the time that IBM filed this action, and denies the remaining allegations of paragraph 216..
217.
IBM has concluded - based on (a) the purpose and nature of PSI's emulator systems, as stated by PSI, (b) IBM's knowledge of emulator technology, (c) IBM's analysis of the source code for PSI's emulator, and (d) IBM's inspection of a PSI emulator purchased by IBM as part of the discovery process in this case - that those emulator systems infringe IBM patents. PSI has not ameliorated IBM's reasonable, good faith concerns that PSI's emulator systems infringe IBM's patents.
PSI is without knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 217.
218.
Nevertheless, PSI (directly and/or through its licensees and marketing partners) has (a) demanded that IBM license IBM's patents to PSI and IBM's copyrighted mainframe operating systems and other software for use on PSI's emulator systems; (b) expressly and implicitly asserted that a refusal by IBM to license its patents, operating systems, and other software is anti-competitive and in violation of the antitrust laws; (c) asserted to IBM customers that purchasers of PSI's emulator systems will be able to license IBM's copyrighted operating systems and other copyrighted IBM software for the same license prices as users of allegedly comparable IBM mainframe systems; (d) acknowledged confusion in the market over this issue; (e) has raised the specter of substantial alleged harm to PSI from IBM's decision not to license its patents and copyrighted software; (f) advised IBM customers (in ways that it reasonably expected would be communicated to IBM) that their lawyers "are ready for anything" and are prepared to sue IBM; and (g) filed antitrust Counterclaims seeking substantial alleged damages.
PSI admits that it has (a) requested licenses to any patents that IBM believes to be relevant on the same terms as offered to their competitors and IBM's own customers, (b) requested software licenses, (c) asserted that IBM's refusal to license on non-discriminatory terms is anti-competitive, (d) acknowledged confusion in the market over IBM's policies, (e) acknowledged on numerous occasions the harm to PSI flowing from IBM's discriminatory policy, (f) has filed antitrust counterclaims in this actions, and (g) and [sic] stated that it is prepared to litigate the issues in this case. PSI otherwise denied the allegations in paragraph 218.
219.
IBM has refused to agree to license its patents to PSI and its copyrighted operating systems and other software for use on PSI's emulator systems despite PSI's demands because, among other reasons, IBM has no obligation to do so, and IBM is unwilling to allow its software to be run on an emulator that infringes IBM's patents. IBM and PSI therefore have a real and actual controversy concerning the issue of patent infringement by PSI's emulator systems.
PSI admits that IBM has refused to agree to license any arguable applicable patents to PSI, and it has refused to license its copyrighted operating systems and other software for use on PSI's systems. PSI admits there is a real and actual controversy regarding IBM's claims of patent infringement, except inasmuch as IBM has asserted patents based on possible future alleged infringement by PSI. PSI otherwise denies the allegations of paragraph 219.
220.
IBM has told PSI that IBM will not license its patents to PSI or its operating systems and other software for use on PSI's emulator systems. PSI has asserted that IBM's refusal to license IBM's patents, operating systems and other software is anti-competitive, violates the antitrust laws, and is causing confusion in the market and substantial damage to PSI's business. PSI is wrong. The antitrust laws do not restrict IBM's rights, under the patent and copyright laws, to refuse to license IBM's lawfully acquired patents and copyrights. Further, it is IBM's objective, reasonable, good faith belief that PSI's emulator systems infringe IBM's patents. That belief, standing alone, is a well-recognized and legally sufficient basis for IBM's decision to decline to license its operating systems and other software, as the antitrust laws do not require IBM to license its copyrighted software for use on a system that infringes IBM's patents. Judicial resolution of the parties' disputes is now required.
PSI admits that, after initially agreeing to license its patents and operating systems, IBM has told PSI that it will not license its patents or its operating systems nd other software for use on PSI's mainframes. PSI otherwise denies the allegations in paragraph 220.
221.
When IBM filed its original Complaint in this action, litigation over the propriety of IBM's licensing position under the antitrust laws was inevitable and imminent, in light of, among other things, (a) PSI's demands that IBM agree to license its patents to PSI and its copyrighted operating systems and other software for use on PSI's emulator systems; (b) PSI's baseless assertion that IBM's decision not to license its patents and software is anti-competitive and in violation of the antitrust laws; (c) PSI's statements concerning the impact on PSI's business of IBM's refusal to license its patents to PSI and its operating systems and other software for use on PSI emulator systems; (d) PSI's recent requests that IBM reconsider its refusal to license its operating systems and other software for use on PSI's emulator systems and IBM's decision not to do so; and (e) statements by PSI (directly and/or through its licensees and marketing partners) that their lawyers "are ready for anything" and are prepared to sue IBM over IBM's licensing decisions. In light of these facts and the antitrust Counterclaims filed by PSI, IBM and PSI have a real controversy over IBM's refusal to license its patents to PSI and its copyrighted operating systems and other software for use on PSI's emulator systems.
PSI admits that there is a real and actual controversy regarding IBM's antitrust liability not that PSI has filed antitrust counterclaims. PSI denies that there was a real and actual controversy at the time that IBM filed this action,and denies the remaining allegations of paragraph 221.
222.
IBM is entitled to a declaratory judgement that IBM's refusal to license its patents to PSI and its copyrighted operating systems and other software for use on PSI's emulator systems is not anti-competitive and does no violate the antitrust laws.
Denied.
WHEREFORE, IBM prays for the following relief:
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, IBM hereby demands a trial by jury as to all issues so triable.
Further answering the Amended Complaint, PSI asserts the following defenses. PSI's investigation of IBM's claims and its defenses is ongoing, and PSI reserves the right to amend its answer with additional defenses as further information is obtained.
1.
PSI has not infringed, contributed to the infringement of, or induced the infringement of any valid claim of the '261 patent, '520 patent, '709 patent, the '678 patent, '106 patent, '495 patent, '789 patent, '851 patent, '002 patent, or '812 patent (collectively, the "Asserted Patents"), and is not liable for infringement thereof.
2.
All PSI methods, systems, apparatus and/or products that are accused of infringement have substantial uses that do not infringe and therefore cannot induce or contribute to the infringement of the Asserted Patents. Moreover, PSI does not intend or have knowledge that its customers will use its products in a manner that infringes the Asserted Patents.
3.
On information and belief, the claims of the Asserted Patents are invalid for failing to comply with the provisions of the Patents Laws, Title 35 U.S.C., including without limitation one or more of 35 U.S.C. §§ 101, 102, 103, and 112, and the doctrine of double patenting.
4.
IBM's alleged causes of action for patent infringement are barred under the doctrine of prosecution history estoppel, and IBM is estopped from claiming that one or more of the Asserted Patents covers or includes any accused PSI method, system, apparatus, and/or product.
5.
IBM has dedicated to the public all methods, systems, apparatus, and/or products disclosed in the Asserted Patents, but not literally claimed therein, and is estopped from claiming infringement by any such public domain methods, systems, apparatus, and/or products.
6.
To the extent that any of IBM's allegations of infringement are premised on the alleged use, sale, or offer for sale of methods, systems, apparatus, and/or products that were developed by or for a licensee of IBM or its predecessors-in-interest and or provided to PSI by or to a licensee of IBM or its predecessors-in-interest, such allegations are barred pursuant to license.
7.
IBM's claims against PSI are barred by the doctrines of acquiescence and equitable estoppel.
8.
The Asserted Patents are unenforceable due to patent misuse. Plaintiff has sought to illegally extend its alleged patents rights by alleging that methods, systems, apparatus, and/or products having substantial non-infringing commercial uses contributorily infringe the patents and induce infringement of the patents.
9.
IBM has also sought to extend its patent rights by conditioning the license of its patents and/or the sale of its patented products on the acquisition of a license too rights in another patent or purchase of a separate product. Specifically, IBM has sought to extend its patent rights by refusing tot license its operating system to run on other suppliers' mainframes unless those suppliers obtain a license to IBM's patents - which license IBM also refuses to grant. In this way, IBM seeks to use its right to license its operating systems to extend the reach of its patents to devices (i.e. other manufacturers' mainframe) that they do not cover.
10.
IBM has also sought to extend its patent rights by inducing customers, business partners, application developers and competitors to standardize on the standards and specifications comprising the IBM z/Architecture and its predecessor architectures through repeated representations that it will license its intellectual property and other interoperability information needed to make compatible products on fair and non-discriminatory terms. Now that the mainframe industry has conformed to the mainframe standards and specifications adopted by IBM, and now that IBM's installed base of mainframe customers is locked in to the ise of IBM-compatible mainframes and IBM operating systems, IBM is seeking to [sic] improperly seeking to enforce Asserted Patents that purport to read on standards and specifications for the IBM z/Architecture.
11.
To the extent that any of IBM's allegations of infringement are premised on the alleged use, sale, or offer for sale of methods, systems, apparatus and/or products that were manufactured by or for a licensee of IBM or its predecessors-in-interest and/or provided to PSI by or from a licensee of IBM or its predecessors-in-interest, under a covenant not to sue, IBM's claims, individually and as a whole, are barred by said covenant.
12.
IBM's purported claims, individually and as a whole, are barred by the doctrine of unclean hands, including its deceptive and misleading conduct in the standard setting process relating to the development of the z/Architecture standards and its mainframe and mainframe operating system monopolies, including through its repeated representations that it would engage in fair, reasonable and non-discriminatory licensing of interoperability information and related intellectual property.
13.
IBM's purported claims, or some of them, are barred by inequitable conduct before the United States Patent and Trademark Office, including the failure to disclose relevant prior art, and by its deceptive and misleading conduct in the standard setting process relating to the development of the z/Architecture standards and its mainframe and mainframe operating system monopolies, including through its repeated representation that it would engage in fair, reasonable and non-discriminatory licensing of interoperability information and related intellectual property.
14.
IBM has failed too sufficiently allege facts showing a breach of any contract by PSI. As a matter of law, the terms of the contract alleged by IBM are not violated by the conduct alleged by IBM..
15.
IBM's claims are barred, in whole or in part, under the equitable doctrines of estoppel and acquiescence because inter alia, IBM licensed its operating system and related software to PSI with knowledge of PSI's intended use of those products.
16.
IBM's purported breach of contract claim is barred by the doctrine of waiver because inter alia, IBM licensed its operating system and related software to PSI with knowledge of PSI's intended use of those products, and accepted payment for those licenses.
17.
IBM's purported breach of contract claim is barred by the doctrine of laches because inter alia, IBM licensed its operating system and related software to PSI with knowledge of PSI's intended use of those products. Further, IBM has long known that PSI had licenses IBM's operating systems for the purposes of developing its own IBM-compatible mainframe computer products and has never previously claimed that PSI's conduct constituted a breach of any contract.
18.
The contract, as interpreted by IBM, is void for illegality and is contrary to public policy. Specifically, it seeks to enforce a tying agreement in contravention of state and federal antitrust laws and public policy.
19.
PSI actions were excused by PSI's right to use self-help to avoid the consequences of IBM's unlawful actions.
20.
IBM has not sufficiently alleged facts showing an actual case or controversy as to the declaratory judgement action. Specifically, it has failed to allege specific and concrete threats of litigation by PSI. The vague references to anticompetitive conduct alleged in the complaint are not sufficient.
21.
That PSI has counterclaimed for antitrust violations does not remedy these deficiencies. See Jervis B. Webb Co. v. Southern Sys., Inc, 742 F.2d 1388, 1398 (Fed. Cir 1984) ("A case or controversy must exist as of the date of the filing of the declaratory judgement action").
22.
Although PSI will not be filing a separate motion to dismiss the declaratory judgement action, it urges this Court to dismiss IBM's declaratory judgement allegations and claims sua sponte, See Soto v. United States, 185 F.3d 48, 51 (2d Cir 1999) (stating tha federal courts have the both the power and obligation to raise their lack of jurisdiction sua sponte.
23.
IBM's purported declaratory judgement action has been rendered moot by PSI's counterclaims, as alleged herein.
24.
The actions alleged to support IBM's purported tortious interference claim are privileged and justified by fair competition.
25.
PSI's alleged use, if any, of the work referred to in the Complaint constitutes fair use.
26.
PSI's actions were either expressly or implidely authorized by IBM.
27.
IBM's purported breach of contract claim is barred by the doctrine of laches. Among other things, IBM was aware in 2001 that PSI had licensed Amdahl's diagnostic programs.
28.
IBM's claims are barred, in whole or in part, by the applicable statute of limitations.
29.
PSI independently developed the information alleged in the Amended Complaint to constitute a trade secret.
30.
IBM did not exercise reasonable safeguards in protecting the information alleged in the Amended Complaint to constitute a trade secret.
31.
The information underlying IBM's trade secret misappropriation claim either never was, or no longer was at the time of the alleged misappropriation, a trade secret.
32.
IBM's claims are barred by the doctrine of copyright misuse.
33.
While denying each and every allegation by IBM that it has suffered any loss or damages, Defendants allege on information and belief that IBM failed to avoid, minimize, or mitigate the damages that IBM alleges and is barred from recovering those losses avoidable by reasonable efforts.
34.
Plaintiff's claims asserted in the Amended Complaint are barred, in whole or in part, by the doctrines of offset and recoupment.
35.
Plaintiff's claims are barred, in whole or in part, but [sic] the Parol Evidence Rule and Statute of Frauds.
1.
This case arises out of Counterclaim-Defendant IBM's unlawful and anti-competitive acts directed at PSI and its customers as part of IBM's efforts to continue to dominate the relevant product markets for large-scale computers, commonly known as "mainframe computers," that are compatible with the IBM operating systems needed to run these computers, called "mainframe operating systems".
IBM admits that this action includes the causes of action set forth in PSI's Counterclaims; avers that the action also includes the causes of action set forth in IBM's Amended Complaint; and denies the remaining allegations of Paragraph 1.
2.
In an effort to eliminate consumer choice and destroy the only viable source of competition to its own mainframe computers, IBM is tying its mainframe computers to its mainframe operating systems by conditioning the licensing of its operating systems upon the purchase or continued use of an IBM mainframe computer. By doing so, and refusing to license its operating systems to customers who wish to use IBM's dominant operating systems on PSI's mainframe systems, IBM is depriving mainframe computer and operating system customers of the benefits of competition and forcing those customers to pay supracompetitive prices for its products and services.
Denied.
3.
IBM is the dominant player in both the United States and world wide markets for mainframe computers and mainframe operating systems, and it has held that position for decades. Mainframe computers and mainframe operating systems support the mission critical data processing needs of a wide range of businesses and other entities, including federal, state and local governments, banks and other financial institutions, airlines and retailers. The markets for mainframe computers and mainframe operating systems are multi-billion dollar markets.
IBM admits that it refers to its zSeries servers as "mainframes"; avers that its zSeries servers compete with a wide range of servers and other computers; admits that mainframe computers and operating systems for such computers, including IBM's zSeries servers and operating systems for such computers, including IBM's zSeries servers and their predecessors and operating systems that run on those servers, are among the computers and operating systems that support the mission-critical data processing needs of a wide range of businesses and other entities; further admits that such mission-critical data processing is one of the uses to which mainframe computers and operating systems for such computers, as well as other computers and operating systems, are put; and denies the remaining allegations of Paragraph 3.
4.
Compatibility Between operating systems software, application software, and mainframe hardware is essential to the functionality of a mainframe computer system. Accordingly, IBM's dominance of these markets has created distinct product markets for IBM mainframe-compatible mainframes and IBM-compatible software. Consumers have invested over a trillion dollars in IBM-compatible software and hardware. These are now "locked in" to using IBM-compatible software and hardware. Were they to change platforms, they would incur enormous switching costs. As evidence of this facts, IBM's profit margins for mainframe products are the highest of all products sold by IBM.
IBM admits that, for any operating system to be able to run on any particular computer system, including a mainframe computer system, that operating system must adhere to the hardware instruction set of that operating system, and that, to run on any particular operating system, a particular application must adhere to the interfaces presented by that operating system, and denies the remaining allegations of Paragraph 4.
5.
IBM has historically faced competition from other manufacturers of IBM-compatible mainframes. For decades, IBM has licensed its mainframe operating systems to customers who have purchased IBM compatible mainframe computers from other manufacturers, and has cooperated with competing developers of IBM-compatible mainframe computer by providing them with licenses, technical information, and technical support for IBM's mainframe computer operating systems and related software applications.
IBM admits that it has faced competition historically, including competition from manufacturers of what PSI refers to as "IBM-compatible" mainframe computers; avers that IBM continues to face competition today and that its zSeries servers and the operating systems that run on those servers compete with a wide range of servers and other computers and the operating systems that run on those servers and other computers, as well as with other products and services offered by a wide range of competitors; further admits that IBM has licensed what PSI refers to in its Amended Counterclaims as IBM "mainframe operating systems" for use on certain computers not manufactured by IBM, including the computers listed on IBM's website at http://www-03.ibm.com/servers/eserver/zseries/library/swpriceinfo/hardware.html; further admits that IBM has provided third-party developers with certain licenses, technical information, and technical support relating to certain IBM computers and operating systems, including OS/390; and denies the remaining allegations of Paragraph 5.
6.
This conduct was part of a deliberate attempt to encourage mainframe manufacturers, application developers, and customers to adopt the IBM architecture as the industry standard. This campaign was successful. To this day, the IBM architectural platform defines a "mainframe," and thousands of companies have invested billions of dollars into this industry-standard platform.
Denied.
7.
When IBM's two primary remaining competitors, Amdahl and Hitachi, announced their exit from the market in 2000, however, IBM changed its policies and began exploiting its monopoly over the architectural platform that it has induced customers, programmers, and developers to adopt. As a result, according to a well known analyst and former member of IBM's senior management, prices of mainframes are now six times higher than they would have been under competitive conditions.
IBM admits that Amdahl Corporation ("Amdahl") became a wholly-owned subsidiary of Fujitsu Limited ("Fujitsu") and the combined company thereafter announced in or about October 2000 that it had decided not to develop a 64-bit processor, but would continue to deliver servers in inventory and upgrades and to service its Millennium processors for customer using them; further admits that Hitachi Data Systems ("Hitachi") announced in or about March 2000 that it would discontinue sales of its Trinium and Pilot servers to new customers and would continue to offer maintenance and service to existing customers and system upgrades to existing Trinium users; refers to public statements by Fujitsu and Hitachi, including statements on their web site, for a fair and accurate summary of those companies' current activities; avers that mainframes are sold under competitive conditions; and denies the remaining allegations of Paragraph 7.
Whilst it may have no immediate bearing on the above - beware of spin and pick the stated facts apart. Although IBM here lists Amdahl's decision first, this is disingenuous. Their own dating as quoted above and the facts show it otherwise; Hitachi was the first to leave the field, with Amdahl's decision coming two business quarters later after six months of results with one of its two competitors absent from the market. Amdahl's decision - and only Amdahl's decision and not Hitachi Data Systems' - carries weight.
8.
Today, IBM is the only remaining competitor marketing IBM-compatible mainframes. PSI was started by former Amdahl employees, licensed Amdahl's mainframe computer technology, and seeks to practice Amdahl's former business model of marketing IBM-compatible mainframes in competition with IBM. In conjunction with its business partners, PSI has developed and is continuing to develop and market IBM-compatible mainframes capable of running IBM's mainframe operating system and thereby processing IBM-mainframe-compatible application software and data to compete with IBM's own mainframe computers. In addition to providing customers with an alternative to IBM's own computer systems, a PSI computer system provides consumers with the ability to run other types of operating system software, such as Linux, Microsoft Windows and UNIX on a single machine. The PSI mainframe computer system is thus the first open architecture mainframe computer system.
IBM admits that PSI is marketing computer systems that PSI claims will run IBM operating systems developed by IBM to run on IBM zSeries servers and their predecessors and applications and data created for use with such operating systems and that PSI claims will also run other operating systems, such as Linux, UNIX, nd Windows; avers that PSI's allegations concerning PSI's company history, PSI's licensing of Amdahl technology, and the claimed capabilities of PSI's emulator systems appear to be consistent with certain statements that appear on PSI's web site and in PSI's public presentations, but denies those allegations for lack of knowledge or information sufficient to form a belief as to the truth thereof; and denies the remaining allegations of Paragraph 8..
9.
Rather than compete with PSI on the merits, IBM has embarked on a campaign of unlawful, inequitable, deceptive and anti-competitive conduct in an effort to maintain and expand its mainframe monopoly. In particular, IBM has: (1) tied the licensing of its most current mainframe operating systems, z/OS, VSE, TSF [sic] and z/VM (collectively z/OS), to consumers' purchase or continued use of an IBM mainframe, thereby forcing customers of its operating systems and applications to purchase and use IBM mainframes; (2) wrongfully interfered with the prospective sale of PSI to another large technology firm; (3) embarked on a campaign of systematic efforts to create "fear, uncertainty, and doubt" ("FUD") by falsely representing to customers that purchasing competing products will result in a loss of reliability, availability and serviceability ("RAS"); (4) implemented sales and support policies that effectively forced customers to "upgrade"to newer versions of its operating system and discontinue technical support of prior versions of its operating system in order to prevent those customers from using prior versions of its operating systems on competing computer systems; (5) refused to provide critical product interface information that IBM had previously provided to others and that was needed to develop a compatible mainframe operating system in order to hinder and delay PSI's ability to market its competing products; and (6) refused to license allegedly applicable patents to PSI notwithstanding its (a) publicly disseminated and relied upon policy of reasonable, non-discriminatory licensing; (b) express assurances to PSI that it would license its OS/390-related patents to PSI; (c) past licensing to companies operating the same business model in the same market, and (d) thirty years of actions and statements made during the development of the standards and specifications comprising IBM's architectural platform that were designed to encourage and induce programmers, developers, customers and competitors to adopt and conform to those standards, followed by its recent campaign to exploit the monopoly it obtained through its standard setting activities to extend and prolong its mainframe monopoly at the expense of consumers and competition.
IBM avers that PSI has inappropriately defined z/OS to include various other IBM operating systems, and denies the remaining allegations of Paragraph 9.
Hard to argue with IBM's position over the definition of z/OS, especially since z/VM has potential requirements well in excess of z/OS, and PSI has previously concentrated only on the latter. And TSF is obviously meant to be z/TPF.
10.
IBM is thus using its monopoly power in the relevant markets to harm competition, suppress innovation, and interfere with free customer choice. IBM's actions have injured PSI by excluding PSI as a competitor and preventing PSI from selling its computer systems. IBM has also tortiously interfered with the sale of PSI to another company, and has thus caused PSI and its shareholders hundred of millions of dollars in damages.
Denied.
"Hundreds of millions of dollars"? Only one story - in The Register puts a name and number on PSI's suitor - Hewlett-Packard for $200 million. Given the size of the potential market for small mainframes with no z/VM support, that seems an awful lot.
It is legitimate to wonder whether the founders of Platform Solutions originally had the intention of operating the business or whether they intended to make their money from a flotation or sale from day one. This is reminiscent of UMX Technologies famous quote: "A likely exit for UMX is a trade sale to one of the companies active in, or aiming at providing state of the art S/390 solutions." Except UMX only sank $10 million of other people's money into the sand, not $100 million.
11.
The market-wide cost of IBM's exclusionary campaign to eliminate competition to its mainframe computers will be billions of dollars. These costs will ultimately be paid by consumers. By this action, PSI seeks to recover damages based on the lost profits and lost business opportunities that it has suffered and is suffering as a result of IBM's exclusionary conduct, and to restore free and open competition in the relevant markets so that future customers will have the opportunity to choose the best products at competitive prices.
Denied.
In some respects PSI seems to be living in a bygone age. A market worth "billions of dollars" to a company that can't run z/VM on its machine? There are only around 1,000 current technology mainframes within PSI's performance reach, and many if not most of them need z/VM. Then there's the minor matter of obtaining market share within the remaining subset. PSI has already burnt something up to $80 million.
12.
PSI is, and at all times mentioned herein has been, a corporation incorporated and existing under the laws of the State of California, with its principal place of business in Sunnyvale, California.
IBM admits that PSI's allegations concerning PSI's corporate existence and principal place of business are consistent with public information; and otherwise denies the allegations of Paragraph 12.
13.
IBM is, and at all times mentioned herein, a corporation incorporated and existing under the laws of the State of New York, with its principal place of business in Armonk, New York.
Admitted.
14.
Both parties transact business in interstate and foreign commerce, and the activities alleged herein have a substantial effect on interstate and foreign commerce.
IBM admits that IBM transacts business in interstate commerce; further admits that PSI claims to transact business in interstate and foreign commerce, but denies that allegation for lack of knowledge or information sufficient to form a belief as to the truth thereof; and denies the remaining allegations of Paragraph 14.
15.
This Court has subject matter over PSI's claims for declaratory judgement of non-infringement and invalidity pursuant to U.S.C. §§ 1331, 1338, 2001, 2201 and 2201 [sic].
IBM denies PSI's allegation with respect to 28 U.S.C.§ 2001; and admits the remaining allegations of Paragraph 15.
16.
This Court has jurisdiction over PSI's claims under Sections 1 and 2 of the Sherman Act,15 U.S.C. §§ 1, 2, and §§ 3 and 4 of the Sherman Act, 15 U.S.C. §§ 14 and 15, pursuant to 28 U.S.C. § 1331. The Court has jurisdiction over any claims not so arising on 28 U.S.C. § 1367 because such claims are so related to the claims within this Court's original jurisdiction that they form part of the same case or controversy.
Admitted.
17.
This court has jurisdiction over PSI's state law claims pursuant to 28 U.S. § 1367.
Admitted.
18.
This Court also has jurisdiction over this action pursuant to 28 U.S.C. § 1332 because plaintiff and defendant are citizens of different states and the matter in controversy exceeds, exclusive of interest and costs, the sum of $75,000.
Admitted.
19.
Venue for these counterclaims is correct because IBM maintains its normal place of business in this District.
Admitted.
20.
The relevant markets in this case are the markets for IBM-compatible mainframe computers and IBM-compatible operating systems.
Denied.
21.
Mainframe computers are large, expensive, powerful computers used for processing high volumes of information at very high speeds. Most of the world's largest corporations and government entities rely on mainframe computers for their high volume and mission-critical data processing needs, including matters such a [sic] billing, accounting, order entry, record keeping and transaction processing. Much of the work done on these mainframe computers uses software customer-written by or for the end-user organization for the specific needs of the user.
IBM admits that mainframe computers, like other computers, can be large, expensive, and powerful; further admits that mainframe computers are among the computers used by corporations and gorvernment entities for high-volume and mission-critical data processing needs, as well as for other purposes; further admits that custom-written software is sometimes used on mainframe computers; and denies the remaining allegations of Paragraph 21.
22.
Although IBM holds a dominant position in the broader market for all mainframe computers, the relevant antitrust market in this case is the market for mainframe computers that are compatible with IBM's mainframe operating systems and other IBM-compatible applications (the "IBM-compatible mainframe" market).
Denied.
23.
Wile non-IBM-compatible mainframe computers may be reasonable substitutes for limited subcategories of mainframe customers - such as new purchasers with relatively low data processing demands or purchasers with limited needs for legacy applications written for IBM-compatible systems - there are no reasonable substitutes for IBM-compatible mainframes for a substantial and well-defined subset of mainframe customers who are "locked in" to the IBM platform based on their prior hardware/software purchasing decisions and their relatively high data processing demands. By IBM's own estimates, customers have invested well over $1 trillion in software compatible with IBM's mainframe operating systems and hardware. Such enormous investment in IBM-compatible software has effectively locked in so many consumers to IBM-compatible mainframe computer systems, because conversion or migration to non-IBM-compatible mainframe computer systems would be prohibitively expensive.
Denied.
24.
To switch to a non-IBM-compatible mainframe computer system, locked in consumers would need to expend enormous amounts of time, money, and other resources to acquire new applications software and/or to translate, convert or migrate their existing data and applications to a non-IBM-compatible mainframe computer system. Many locked in consumers who use IBM-compatible mainframe software for mission critical functions, such as banking, insurance and governmental functions, cannot risk catastrophic failures caused by switching to a non-IBM-compatible mainframe system. Moreover, many large customers have more than one mainframe and their mainframes must be compatible to permit "coupling," which allows for substantially reduced software licensing fees, increases the amount of computing power that can be devoted to particular tasks, and creates other efficiencies. Thus, other than prematurely replacing hardware costing hundreds of thousands of dollars, these customers have no choice but to purchase IBM-compatible mainframes.
Denied.
25.
Even if they had comparable data processing and other performance capabilities, computers that principally run UNIX, Linux, or Windows operating systems are not reasonable substitutes because "lock in" effects prevent customers from choosing products that are not compatible with their existing mainframe operating systems and applications, and because mainframe software applications were not written for those operating systems.
Denied.
26.
Cross-elasticity of demand supports defining IBM-compatible mainframes as a distinct antitrust market because consumers locked in to IBM-compatible mainframe applications would tolerate supracompetitive price increases for IBM-compatible mainframe operating systems of IBM-compatible mainframes if the price increases did not exceed the costs of abandoning their existing investments in IBM-compatible mainframe software.
Denied.
27.
Other than PSI, whose efforts to market its IBM-compatible mainframes have been thwarted by IBM's actions as alleged herein, IBM is the sole current developer of IBM-compatible mainframe computers, and its share of IBM-compatible sales currently stands at almost 100 percent. However, until roughly 2001, other developers of IBM-compatible mainframes such as Amdahl and Hitachi competed with IBM in the relevant market, and the existence of that history of competition from IBM-compatible mainframe developers further demonstrates the existence of a relevant market for IBM-compatible mainframes. Indeed, following Amdahl's and Hitachi's exit from the market, prices for mainframe computers have been substantially higher than they would have been in a competitive market.
IBM admits that it knows of no other company today that is developing new computers that are capable, lawfully, of running IBM operating systems developed by IBM for use on IBM's zSeries and their predecessors; further admits that IBM sells such computers; and denies the remaining allegations of Paragraph 27.
28.
There are substantial barriers to entry in the IBM-compatible mainframe market. Mainframes are extremely expensive to build, and it takes years to gain market acceptance. Even where a developer such as PSI uses existing hardware, it takes years to develop IBM-compatibility. Prior to PSI, no significant developer of IBM-compatible mainframes has entered the market in thirty years. ISM's last two remaining competitors, Amdahl and Hitachi, exited the market in 2000 instead of continuing to invest in the development of the mainframe technologies needed to market a mainframe computer in competition with IBM. IBM's market influence, including the types of anti-competitive conduct alleged herein, also creates additional barriers to entry.
Denied.
29.
The relevant market in which IBM-compatible mainframes compete could alternately be defined to include the mainframe computers manufactured by companies such as Unisys and Bull that share "Reliability, Availability and Serviceability" and lock-in characteristics similar to IBM-compatible mainframes. However, these mainframes are marketed and supported as niche products, have very small market shares, and do not pose significant competition to IBM. As IBM has itself noted, other "severs" running UNIX and Windows are not actual mainframes that are interchangeable with IBM mainframes. For example, according to IBM's own documents, the total cost of ownership for its flagship z990 [sic] mainframe is 30 percent to 0 percent less than combining thorty Sun or Linux servers to perform the same function.
IBM admits that Unisys Corporation ("Unisys") markets a line of servers under the names ClearPath Plus Libra Series and ClearPath Plus Dorado Series, that Bull markets a line of servers under the name DPS 9000, and that IBM and a number of other manufacturers market servers and other computers that they call "mainframes" or that they refer to with phrases such as "mainframe-class"; further admits that IBM's zSeries servers compete with these Unisys and Bull servers and other servers from Unisys and Bull and a host of other servers and compters from IBM and other manufacturers; refers to its public statements concerning Linux, UNIC, and Windows for a fair and accurate summary of IBM's statements in their appropriate context; and denies the remaining allegations of Paragraph 29..
30.
IBM also has monopoly and market power under this broader market definition, with a share in excess of 85 percent. All of the allegations made herein apply with equal force to this alternate market definition.
Denied.
31.
The second antitrust market in this case is the market for IBM-compatible mainframe operating systems. Operating systems are required for the mainframe to function; they control the operational resources of the computer and allow compatible application software to run on the computer. The dominant mainframe computer operating systems are IBM's OS/39 (distribution and support for which has been dropped) and z/OS operating systems (which includes z/OS, VSE, z/TSF [sic] and z/VM), with thousands of customers world wide.
IBM admits that operating systems are necessary for any computer, including a mainframe computer, to operate and that operating systems control the computer's operational resources and allow application software to run on the computer; further admits that OS/390 and z/OS are IBM operating systems, certain releases and versions of which run on certain IBM S/390 and zSeries servers, as well as on other servers, and that, in the ordinary course of its business, IBM withdrew marketing for OS/390 V2R10, the latest version of OS/390, on December 12, 2002, announced on August 5, 2003 that it would discontinue service for OS/390 V2R10 as of September 30, 2004, and discontinued warranty service for OS/390 V2R10 on September 30, 2004; avers that extended service suport may be available from IBM for a fee with respect to operating systems as to which IBM has discontinued warranty service; further admits that OS/390 and z/OS are used by thousands of customers world wide; and denies the remaining allegations of paragraph 31.
32.
As discussed above, the operating system has to be compatible with both the mainframe hardware and the software applications that run on the computer. To be viable, an operating system must be "backward compatible" with prior versions of that operating system and with the software applications written for those prior versions of the operating system so that customers can continue to access their existing applications and data.
IBM admits that, for any operating system to be able to run on any particular computer, including a mainframe computer, that operating system must adhere to the particular instruction set of that computer, and that, to run on any particular operating system, a particular application must adhere to the interfaces presented by that operating system; and denies the remaining allegations of Pararaph 32.
33.
Due to its longstanding monopoly in mainframes and mainframe operating systems, IBM has an enormous, trillion dollar installed base of software and hardware. IBM-compatible mainframe operating systems are specifically designed to work with and exploit he technical complexities and capabilities of mainframe computers and must be compatible with the hardware architecture, specifications and interfaces to function properly. In addition, the operating system and its application program interfaces must be compatible with the existing installed base of IBM and IBM and third-party IBM-mainframe-compatible software
IBM admits that IBM operating systems developed by IBM to run on IBM mainframe computers are specifically designed by IBM to work with and exploit the capabilities of such computers and must adhere to the architectural specifications and interfaces of such computers; and denies the remaining allegations of Paragraph 33.
34.
Locked in consumers with existing applications and software cannot as a practical matter switch to other operating systems such as Bull, Unisys, UNIX, Linux, or Windows, because of the prohibitive switching costs such consumers would incur in abandoning their installed base of IBM-compatible mainframe software. Application program, data files, and other software designed to operate with only IBM-compatible mainframe operating systems are not compatible with other operating systems. Large customers also have employees specifically trained to operate IBM software and hardware. Accordingly, to switch to a non-IBM-compatible operating system, locked in consumers would either have to abandon their existing investment in IBM-compatible mainframe software or expend enormous amounts of money and other resources to retrain employees and to convert or replace their existing applications and data to work with a non-IBM-compatible mainframe operating systems [sic]. Thus, while Linux UNIX and Windows may be reasonable substitutes for limited subcategories of potential mainframe customers - such as new purchasers with relatively low data processing demands or purchasers with limited needs for legacy applications written for IBM-compatible systems - there are no reasonable substitutes for z/OS for a substantial and well-defined subset of mainframe customers who are locked into the IBM operating systems based on their prior hardware/software purchasing decisions and their relatively high data processing demands.
IBM admits that application programs, data files, and other software designed to operate with only IBM operating systems - by definition - may not run, unmodified, with other operating systems, further admits that many IBM customers have employees specifically trained to operate IBM hardware and software; further avers that servers and other computers running Linux, UNIX, and Windows are promoted by competitors, and are regarded by users, as reasonable substitutes for servers running OS/390 and z/OS; denies there is a "substantial and well-defined subset" of locked-in "mainframe" customers who are "locked-in to the IBM operating systems"; and denies the remaining allegations of Paragraph 34.
35.
Cross-elasticity of demand supports limitation of the market to IBM-compatible mainframe operatig systems, because consumers locked in to IBM-compatible mainframe software would tolerate supracompetitive prices for IBM-compatible mainframe operating systems if the supracompetitive portion of the price did not exceed the cost of abandoning their existing investment in IBM-compatible mainframe software. According to IBM itself, the vast majority of core, back-office applications are still implemented as COBOL transactions running on IBM mainframes, and analysts have estimated that the value of COBOL lines in use (which number in the hundreds of billions) exceeds the value of the largest publicly traded companies. As IBM succinctly states on its web site, "[a]fter 20 years, and billions of dollars wasted on trying to migrate applications from mainframes, the largest and most robust enterprises continue to depend heavily on the mainframe.
IBM admits that many COBOL applications run on IBM mainframes; avers that the COBOL programming language is a multi-platform language available on many different computer systems, including many non-mainframe computer systems, and that COBOL facilitates the movement of applications among such different systems; refers to the IBM web site page entitled "Center stage in SOA development: System z" for a fair and accurate summary of IBM's statements in their appropriate context; and denies the remaining allegations of Paragraph 35.
PSI's citation is in fact from that very page.
36.
The primary IBM-compatible mainframe operating system currently marketed or supported byy IBM is z/OS. Because IBM has withdrawn the OS/390 version and its predecessors from marketing, and no longer supports them, z/OS is the only IBM-compatible mainframe operating system available to either purchasers of new IBM-compatible mainframes or existing customers who wish to upgrade. Thus, IBM has monopoly power in the market for IBM-compatible operating systems.
IBM admits that it currently markets and supports z/OS and that it has withdrawn marketing and support for OS/390 in the ordinary course of its business; avers that extended service support may be available from IBM for a fee with respect to operating systems as to which IBM has discontinued warranty service; and denies the remaining allegations of Paragraph 36.
37.
There are significant barriers to entry in the market for mainframe operating systems. A new operating system for a mainframe computer is extraordinarily complex and takes many years to develop. Because of the mission-critical nature of the work performed on mainframe computers, it is extremely unlikely that a customer would choose an operating system that has not been throughly developed, tested and proven over many years. To the extent that any operating system conceivably could develop into a viable competing operating system for mainframe computers, that operating system would require compatibility with customer's current operating systems and software applications so that customers could continue to access their existing programs and data. The existence of intellectual property rights in the relevant market also creates additional barriers to entry.
"IBM will accept APARs where the installation of MVS introduces an exposure to system integrity."
Software Announcement P81-174 dated October 21, 1981.
Note this announcement was twenty-six years ago, and even then served to formalize a long-standing practice dating back to the early 1970s.
IBM admits that operating systems for any computer, including mainframe computers, are complex and take time to develop and that many customers want operating systems that have been thoroughly developed, tested, and proven; and denies the remaining allegations of Paragraph 37.
38.
The relevant market in which IBM mainframe operating systems compete could alternately be defined to include other mainframe operating systems, such as the proprietary operating systems used to run mainframe computers manufactured by Unisys and Bull. IBM also has monopoly power and market power under that broader market definition, with a share in excess of 85%. As IBM has itself acknowledged, Linux, UNIX or Windows are not true mainframe operating systems because they have neither the performance capabilities nor the dynamic functionality of a mainframe operating system. Thus, for customers with high data processing needs, those operating systems are not reasonable substitutes. All of the allegations made herein apply with equal force to this alternate market definition.
IBM admits that Unisys markets a line of servers under the name DPS 9000, and that IBM and a number of other manufacturers market servers and other computers they call "mainframes" or that they refer to as "mainframe-class"; further admits that IBM's zSeries servers compete with these Unisys and Bull servers and other computers from Unisys and Bull and a host of other servers from IBM and other manufacturers; refers to its public statements concerning Linux, Unix, and Windows for a fair and accurate summary of IBM's statements in their appropriate context; and denies the remaining allegations of Paragraph 38.
39.
The relevant geographic market is in this case world wide. IBM markets its mainframe computers and operating systems to customers throughout the world, and PSI is seeking to compete against IBM for customers throughout the world. As a result of the exclusionary conduct alleged below, PSI has lost and is losing sales both in the United States and in export markets around the world.
IBM admits that the product market or markets in which IBM's zSeries servers and their predecessors, and the IBM operating systems developed by IBM for use on these servers, compete is world wide; avers that POSI has failed to define an appropriate market; denies the allegations concerning PSI's business strategy for lack of knowledge or information sufficient to form a belief as to the truth therefo; and denies the remaining allegations of Paragraph 39.
40.
IBM has long dominated competition in the relevant markets for mainframe computers and mainframe operating systems. From the 1950s to the early 1970s, IBM achieved dominance in the market for mainframe computers. Toward the end of this period IBM achieved dominance in the market for mainframe operating systems as well.
Denied.
41.
In 1956, IBM responded to antitrust claims brought by the United States Department of Justice by entering into a Consent Decree that put limits on its ability to exploit its monopoly in tabulating machines and electronic data processing machines.
IBM admits that it entered into a Consent Decree in 1956; avers that the dissolution of the Consent Decree was approved by the U.S. District Court for the Southern District of New York on May 1, 1997 and that the Consent Decree was phased out by July 2, 2001; and denies the remaining allegations of Paragraph 41.
42.
Beginning with IBM's introduction in 1964 of its S/360 line of mainframe computers and operating systems, and continuing with subsequent model lines, IBM freely and broadly disseminated the architecture specifications of its mainframe computers and operating systems. Customers, competitors, and other third-party software and hardware developers used the information disseminated by IBM to create software and hardware products designed specifically for use with IBM's mainframe computers and operating systems - resulting in the adoption of the IBM architectural platform and the standards and specifications embodied therein as the industry standards for complex computing.
Denied.
43.
The profusion of new IBM-compatible mainframe software and hardware products vastly expanded the installed base of IBM-compatible mainframe operating systems. The resulting "network" effect provided additional incentive for consumers to adopt and to use IBM mainframe operating systems, which further expanded the installed base of IBM-compatible application software.
Denied.
44.
The expansion in the installed base of IBM mainframe operating systems and other IBM-compatible mainframe software benefited IBM by making its mainframe operating systems more desirable and decreasing the viability of operating systems incompatible with that installed base. The development by customers and competitors of IBM-compatible mainframe hardware and application software benefited consumers by spurring innovation and decreasing prices for IBM-compatible mainframe hardware and software..
Denied.
45.
IBM's policy of reasonable and non-discriminatory licensing and system openness was integral to its success, public image and reputation. IBM knew that such policies were integral to customer and developer acceptance and continued use of the IBM architectural platform as an industry standard.
Denied.
46.
Since the 1970s, customers and programmers have adopted the IBM architecture standard with knowledge that IBM would face competition in IBM-compatible computers, and would not have a complete monopoly over the market. They adopted the IBM architectural standard based on IBM's conduct and public statements that it would promoted free competition.
Denied.
47.
By 1976, competitors such as Amdahl Corporation were using the information disseminated by and licensed from IBM to develop competing IBM-compatible mainframe computers, on which consumers could runtheir IBM mainframe operating systems and IBM-compatible mainframe application software. For decades following the development of such IBM-compatible computers, IBM licensed its mainframe operating systems on non-discriminatory terms to the purchasers of such IBM-compatible mainframe computers. The availability of competing IBM-compatible mainframe computers from Amdahl and other vendors, such as Hitachi Data Systems, provided additional incentives for consumers to use IBM mainframe operating sytsems and to develop or use other IBM-compatible mainframe application software. Nonetheless, IBM always maintained a competitive advantage because there was a "lag" in the development of compatible products, and because it has always enjoyed a lucrative monopoly over the operating systems run on mainframe computers.
IBM admits the allegations of the first two sentences of Paragraph 47; and denies the remaining allegations of Paragraph 47.
48.
By the late 1990s, Amdahl and Hitachi collectively attained over a twenty percent market share in the IBM-compatible market. However, in 2000, Amdahl and Hitachi announced that they were exiting the mainframe computer market, leaving IBM as the only developer of IBM-compatible mainframes.
IBM admits that Amdahl and Hitachi sold mainframe computers; further admits that Adamhl became a wholly-owned subsidiary of Fujitsu anf the combined company herefater announced in or about October 2000 that it had decided not to develop a 64-bit processor, but would continues to deliver servers in inventory and upgrades and to service its Millennium processors for customers using them; further admits that Hitachi announced in or about March 2000 that it would discontinue sales of its Trinium and Pilot servers to new customers and would continue to offer maintenance and service to existing customers and system upgrades to existing Trinium users; refers to public statements by Fujitsu and Hitachi, including statements on their web sites, for a fair and accurate summary of those companies' current activities, and denies the remaining allegations of Paragraph 48.
49.
At approximately the same time, the United States Department of Justice joined IBM in a motion to eliminate all remaining provisions of the 1956 Consent Decree, which imposed some limits on IBM's ability to exploit its dominant position in the markets for operating systems and mainframe computers. The overnment concluded that, although IBM still had substantial market power, the Decree should be dissolved because: (1) IBM had confirmed that it instituted and maintained a policy of "system openness," making its computer systems more compatible with those of other developers and that this policy derived from considerations independent of the Decree and would continue after the Decree terminated; (2) IBM faced competition in the market for IBM-compatible mainframes from companies such as Amdahl and Hitachi. The court approved the dissolution of hte Decree on May 1, 1997 and it was phased out by July 2, 2001.
IBM admits that the U.S. Department of Justice joined IBM in a motion to dissolve the 1956 Consent Decree; further admits that the dissolution of the Consent Decree was approved by the U.S. District Court for the Southern District of New York on May 1, 1997 and that the Decree was phased out by July 2, 2001; refers to the docket of the proceeding in which the Consent Decree was dissolved for a fair and accurate summary of the positions taken by the U.S. Department of Justice in their appropriate context; and denies the remaining allegations of Paragraph 49.
50.
The Department of Justice, in agreeing to dissolve the decree, explicitly stated that any attempt by IBM to return to its tying practices would be unlawful:
"If, after the Decree terminates, IBM engages in any activity that would violate the antitrust laws, it would be immediately liable to suit. For example, should IBM engage in anti-competitive tying - be it to parts or operating systems - the United States could bring an action for injunctive relief both to stop the illegal conduct and to get other, broader prophylactic relief. [citations omitted [in filing]]. Also, IBM would be liable to a host of potential private treble damage actions. [citation omitted [in filing]].
(Emphasis added in filing.)
IBM refers to the quoted submission by the U.S. Department of Justice and the docket of the proceeding in which the Consent Decree was dissolved for a fair and accurate summary of trhe submission in its appropriate context; and otherwise denies the allegations of Paragraph 50.
51.
As discussed further below, once Amdahl and Hitachii exited the market for IBM-compatible mainframes, IBM reversed its practice of system openness and reasonable non-discriminatory licensing and embarkked on a strategy of monopolizing the market for mainframe computers.
Denied.
52.
IBM's post-2000 dominance has allowed it to resist the downward pricing pressures that competition and innovation should have created. IBM measures mainframe performance by a measurement known as millions of instructions per second or "MIPS". IBM has tracked the "price per MIPS" of its mainframe systems over more than forty (40) years. The price per MIPS has precipitously fallen over this period of time, from nearly $10,000,000 U.S. in 1960 to approximately $2,000 in 2000. This general trend of decreasing prices has been observed throughout the computer industry and is attributable in large part to advances in processor design and manufacturing techniques.
IBM admits that it measures mainframe performance by reference to MIPS; further admits that the "price per MIPS" of its mainframe systems has fallen over the past forty years; further admits that advances in processor design and manufacturing techniques have contributed to decreasing prices; and denies the remaining allegations of Paragraph 52.
53.
When competition for IBM-compatible mainframes disappeared, IBM was able to significantly resist the downward trend in price per MIP [sic]. Amdahl and Hitachi, left the market for IBM-compatible mainframes in 2000. If the downward trend in price per MIPS between 1960 and 2000 had continued from 2000 to 2006, the price per MIPS should now be approximately %165 - but today it is more than six times that amount at approximately $1,000. As a result, the largest systems today cost closer to $18 million rather than the $3 million they would have cost based on the price trends that were followed throughout most of the mainframe's history. This is the inevitable result when competition is eliminated.
Denied.
54.
The documents that IBM has produced in this case illustrate just how insulated IBM's mainframe prices and profits are from competition. In its internal documents, IBM itself has acknowledged that [two lines redacted]. Thus, IBM is well aware that the PSI system offers mainframe customers both a competitive choice they want and the opportunity for substantial cost savings vis-á-vis the IBM systems that they would be forced to purchase or maintain if IBM could succeed in its campaign to exclude PSI from the market.
IBM refers to the referenced document for a fair and accurate summary of any statements contained therein in their appropriate context; and denies the remaining allegations of Paragraph 54.
55.
From 1996 to 2000, the leading operating system marketed by IBM was OS/390. OS/390 was compatible with the version of IBM's mainframe operating system it superseded and with the huge installed base of IBM-compatible mainframe application software and data.
IBM admits that it licensed OS/390 between 1996 and 2000 and thereafter; further admits that OS/390 could run most applications that ran on predecessor operating systems for IBM mainframe computers and that those applications could access certain data created or maintained for use with such operating systems; and denies the remaining allegations of Paragraph 55.
56.
Initially, and for several years following the release of IBM's OS/390, consumers could also run the IBM OS/390 operating system and their installed base of other IBM-compatible mainframe software on IBM-compatible mainframe computers supplied by other computer developers such as Amdahl and Hitachi Data Systems, which combined to account for roughly 21 percent of the mainframe computer market by 1999. In 2000, however, both Amdahl and Hitachi Data Systems announced they would stop manufacturing IBM-compatible mainframe computers, leaving IBM as the sole developer.
IBM admits consumers can run OS/390 and certain application software on computers supplied by other computer developers such as Amdahl and Hitachi; further admits that Amdahl and Hitachi sold mainframe computers; further admits that Amdahl became a wholly-owned subsidiary of Fujitsu and the combined company thereafter announced in or about October 2000 that it had decided not to develop a 64-bit processor, but would continue to deliver servers in inventory and upgrades and to service its Millennium processors for customers using them; further admits that Hitachi announced in or about March 2000 that it would discontinue sales of its Trinium and Pilot servers to new customers and would continue to offer maintenance and service to existing customers and system upgrades to existing Trinium users; refers to public statements by Fujitsu and Hitachi, including statements on their web sites, for a fair and accurate summary of those companies' current activities; and denies the remaining allegations of Paragraph 56.
57.
In October 2000, IBM upgraded its OS/390 operating system to the z/OS operating system and made it available for shipment in January of 2001. z/OS was compatible with existing IBM-compatible mainframe software, including the installed base of OS/390-compatible mainframe software. z/OS also included additional features and capabilities over the previous version of IBM's operating system, OS/390.
IBM avers that the availability date for z/OS was Match 1, 2001; and otherwise admits the allegations of Paragraph 57.
58.
In December 2002, IBM withdrew marketing of the superseded OS/390 version of its operating system and announced that it would discontinue service for OS/390 by September 30, 2004, leaving z/OS as the only version of the IBM-compatible mainframe operating system in service or supported by IBM.
IBM refers to its December 2002 announcement for a fair and accurate summary of the announcement in its appropriate context; avers that extended service support may be available from IBM for a fee with respect to operating systems as to which IBM has discontinued warranty service; and denies the remaining allegations of Paragraph 58.
59.
In September of 2004, IBM announced that, as of March 2007, it will discontinue supporting z/OS versions that run on anything other than 64-bit hardware. Accordingly, IBM will no longer support the use of z/OS on Amdahl's and Hitachi's IBM-compatible mainframes, which are 31-bit.
IBM refers to its December 2002 announcement for a fair and accurate summary of the announcement in its appropriate context; avers that extended service support may be available from IBM for a fee with respect to operating systems as to which IBM has discontinued warranty service; and denies the remaining allegations of Paragraph 58.
60.
PSI was founded in 1999 - shortly before Amdahl and Hitachi left the IBM-compatible mainframe computer market - with the goal of developing its competitive computer system. In particular, PSI sought to develop that (i) would include less expensive hardware than IBM's mainframe computers, and (ii) not only would run the IBM mainframe operating system (so that customers could continue to run their IBM-compatible applications software), but would also run other, non-IBM operating systems (such as UNIX, Linux or Windows) in order to accomodate customers' desires to utilize additional, non-IBM-compatible applications software and provide consumers with greater flexibility in the future paths of their information technology purchasing decisions.
IBM admits that public sources state that PSI was founded in 1999; further admits that the allegations of Paragraph 60 appear to be consistent with certain statements that appear on PSI's web site and in PSI's public presentations; and other wise denies the allegations of Paragraph 60 for lack of information sufficient to form a belief as to the truth thereof.
61.
PSI initially chose to utilize equipment manufactured by Hewlett Packard ("HP"). HP provides the hardware, while PSI, an authorized reseller of the hardware, implements binary compatibility with IBM's machine architecture through specialized firmware that runs on Intel 64-bit Itanium processors used in the HP equipment. PSI additionally provides hardware for data transfer.
IBM admits that the allegations of Paragraph 61 appear to be consistent with certain statements that appear on PSI's web site and in PSI's public presentations; and other wise denies the allegations of Paragraph 61 for lack of information sufficient to form a belief as to the truth thereof.
62.
PSI implements guest-to-host compatibility of the IBM z/Architecture and the Intel Itanium architecture through firmware which executes directly on the Itanium processor. In this way PSI is distinguished from so-called "emulators," which are typically higher level software applications running on top of an operating system. Thus, the PSI mainframe is designed to operate far more efficiently than emulator applications. The mainframes marketed by PSI can also run open operating systems such as Linux, HP-UX, and Open VMS. This enables the entire hardware system to present both open and IBM-compatible machine architectures to the end user.
IBM admits that the allegations of the first and fourth sentences of Paragraph 62 appear to be consistent with certain statements that appear on PSI's web site and in PSI's public presentations; and other wise denies the allegations of Paragraph 62 for lack of information sufficient to form a belief as to the truth thereof.
63.
Because of IBM's monopoly in the market for mainframe operating systems and the vast base of customers locked in to IBM-compatible software, PSI could not compete in the maoinframe computer market if its computers were not compatible with IBM's mainframe operating syustems. More specifically, PSI could not compete if its computer systems were not compatible with IBM's most recent and currently supported version of its mainframe operating system. Accordingly, to develop and test its technology for IBM-mainframe-compatible computers, PSI needed to license the IBM mainframe operating system. Moreover, customer who wish to purchase a PSI computer system must be assured that they will be able to license IBM's mainframe operating system for use on that computer - otherwise they would not be able to continue to run their IBM-compatible application software.
Denied.
64.
In December 2000, PSI began negotiations to ensure that IBM would license operating systems and associated intellectual property for use on PSI mainframes, as it had in the past for customers of mainframe computers developed by Amdahl and others. IBM, which had apparently adopted a new strategy of exploiting its entrenched operating system monopoly to reinforce its mainframe computer monopoly, was resistant and offered conflicting reasons for its refusal to license its operating systems for use on PSI mainframes. With respect to OS/390, IBM stated that it would continue licensing that version of the operating system as it had in the past. Then it asserted that it would license neither z/OS, its latest operating system, nor OS/390, for use on an Intel 64-bit system, but it offered no reason for not doing so. At the time, IBM was licesning OS/390 on its own 64-bit systems, and had also licensed OS/390 and VSE for use on emulator systems marketed by a company called Fundamental Software Inc. ("Funsoft").
IBM admits that PSI first corresponded with IBM in or about late 2000; further admits that it has licensed certain IBM operating systems, including OS/390 and VSE, for use on non-IBM computer systems, including computer systems marketed by Fundamental Software, Inc., which had a patent license with IBM that expired on October 31, 2006; refers to the history of correspondence between IBM and PSI; and denies the remaining allegations of Paragraph 64.
65.
PSI sought further assurances that IBM would not discriminate againstt PSI's consumers in its software and intellectual property licensing. IBM, however, delayed responding to PSI's requests. By january 2003, IBM had still refused to reach an agreement with regard to licensing. However, it denied that it had rejected PSI's request and instead stated that it had not yet decided whether to license z/OS and OS/390 for use by PSI on a 64-bit platform, in part because it had not yet determined an appropriate price for the license.
IBM admits that it had not agreed to license IBM patents to PSI or its operating systems for use on PSI systems by January 2003; refers to the history of correspondence between IBM and PSI; and denies the remaining allegations of Paragraph 65.
66.
In late Februaryy 2003, PSI wrote to IBM making "a final plea for a timely resolution to this issue" and reiterating the details of its request. PSI sought an agreement in principle from IBM not to deny licenses foro its operating systems to customers of PSI's computer systems. PSI emphasized that, as a company in the process of closing its first round of venture financing, PSI likely woul dbe irreparably harmed if IBM's delay in resolving these issues resulted in PSI's inability to close on its financing in a timely fashion. PSI also wrote that "[a] simple letter confirming that IBM intends to pursue the same non-discriminatory licensing policy as in the past, or something to that effect, should suffice for our immediate purposes."
IBM refers to the history of correspondence between IBM and PSI; and otherwise denies the allegations of Paragraph 66.
67.
In response, IBM represented that it would permit customers of PSI to license IBM's mainframe operating system for use on PSI computer systems under IBM's then-current licensing policy, based on performance and functionality, provided that PSI's computer systems did not infringe IBM's intellectual property rights. IBM further stated: "[W]e believe that the system described by you will have needs under IBM's patents. Under our current practice, IBM would be willing to enter into a patent license with PSI."
IBM refers to the history of correspondence between IBM and PSI; avers that IBM's March 14, 2003 and April 2, 2003 letters referred to IBM's licensing practices relating to OS/390 and not to z/OS, and to patents licensed for use in the field of IBM's Enterprise Systems Architecture/390, and expressly referenced, among other things, IBM's right to change its then-current licensing practices; and denies the remaining allegations of Paragraph 67.
68.
Having been assured that IBM would not discriminate in its licensing and that any patent conflicts could be avoided through ta licensing agreement, PSI proceeded with its development plan.
Denied.
69.
On or about May 14, 2003, PSI and IBM entered into a development license agreement for OS/390. OS/390 had already ben withdrawn from marketing and, undisclosed to PSI at the time of the agreement, IM withdrew the OS/390 from service and support in September 2004, leaving z/OS as the only supported mainframe operating system.
IBM admits that IBM and PSI entered into a limited-term, six-month development license agreement for OS/390 on or about May 14, 2003; further admits that OS/390 V2R109, the latest version of OS/390, was withdrawn from marketing on December 17, 2002, that IBM announced on August 5, 2003 that it would discuntinue service for OS/390 V2R10 as of September 30, 2004, and that IBM discontinued warranty service for OS/390 V2R10 on September 30, 2004; avers that extended service support may be available from IBM for a fee with respect to operating systems as to which IBM has discontinued warranty service; further avers that PSI acknowledged on April 11, 2003 that the May 2003 development license agreement "may be a temporary agreement for the sake of expediency"; further avers that PSI agreed that "the granting of this license does not in any way grant PSI a patent license or give PSI any express or implied rights, licenses or immunities under any IBM patents or other intellectual property"; further avers that IBM told PSI, on May 5, 2003, that IBM did not plan to license its z/Architecture and told PSI, on May 5, 2003, that IBM does "not plan to license PSI in the fields of z/Architecture and Coupling"; and denies the remaining allegations of Paragraph 69.
70.
In March 2004, PSI ordered and subsequently received two licenses to run z/OS on PSI mainframes. These orders were processed through PSI's IBM account representatives at IBM's Atlanta and Dallas offices. They were aware that the software was ordered for use on the PSI platform. Since issuing those initial licenses of the current version of its mainframe operating system to PSI or to license its mainframe operating system to PSI customers.
IBM admits that, after IBM formally rejected PSI's requests for license for z/OS for use on PSI's systems and told PSI that IBM would not license z/OS to PSI for use on PSI's systems, PSI bypassed the designated IBM personnel to whom PSI had been told to address all communications and requests for license and communicated with IBM personnel who were not knowledgable about the history of communications between IBM and PSI; further admits that by so doing and by placing orders through IBM personnel other than the designated IBM personnel to whom PSI had been told to address all communications and requests for licenses, PSI obtained licenses for z/OS that, as PSI knew, IBM did not intend to grant; further admits that IBM has declined to grant PSI additional licenses for z/OS and has advised PSI that it will decline to license z/OS to others for use on PSI systems; and denies the remaining allegations of Paragraph 70.
71.
In a May 24, 2006 letter, IBM definitively stated that it would refuse to license its mainframe operating system to any customer of PSI's competing mainframe computer system.
IBM refers to the history of correspondence between IBM and PSI; and otherwise denies the allegations of Paragraph 71.
72.
IBM has widely represented, on its web site and elsewhere, that it is committed to openness and that it licenses its patents on a nondiscriminatory basis. Product developers such as PSI have consistently relied on this policy over the years in the event there was any concern over infringement of IBM patents. The link to this page was http://www.ibm.com/ibm/licensing/patents/practices.shtml, which was taken down without any statement or explanation sometime in 2006. Consumers have relied on similar assurances of system openness in choosing to purchase IBM products.
IBM admits that the page formerly on its web site at http://web.archive.org/web/20060220102134/http://www.ibm.com/ibm/licensing/patents/practices.shtml was taken down on or about February 21, 2006; avers that it "highlights IBM's present patent licensing practices and is subject to change at any time"; refers to the statement formerly contained at that web site page for a fair and accurate summary of the statement in its appropriate context, and denies the remaining allegations of Paragraph 72.
73.
In 2001, IBM represented to PSI that it would make available OS/390 interfaces and architectures that had been made available to other competitors. In March 2003, IBM also represented that it would be willing to enter into a patent license agreement with PSI.
IBM refers to the history of correspondence between IBM and PSI; avers that, in 2001, IBM offered to license to PSI certain information concerning IBM's Enterprise Architecture/390, which PSI declined to license, and told PSI that IBM would not license its z/Architecture to PSI; and otherwise denies the allegations of Paragraph 73.
74.
In 2004, IBM engaged in patent license discussions with PSI. In those discussions, IBM represented to PSI that IBM would provide a non-discriminatory license to PSI on standard terms and conditions. In particular, IBM represented that it would license patents required for IBM mainframe compatibility for a running royalty rate of 1 percent of net sales of licensed products, up to a maximum cumulative royalty rate of 5 pecent for a license of five or more patents. In the course of those discussions, PSI provided IBM with substantial technical information about its product under development. PSI requested that IBM identify any of its patents that IBM believed might be implicated by PSI's proposed product. IBM did not do so.
Denied.
75.
IBM thereafter refused to continue patent license discussions with PSI unless PSI: (i) disclosed specific technical information about its product under development; (ii) executed an agreement stating that any information PSI disclosed to IBM in the course of those discussions would be treated as non-confidential and fully useable by IBM, including in its business activities in competition with PSI; and (iii) agreed that IBM was not obligated to enter into any license agreement. Accordingly, as a condition of even entering into licensing negotiations, IBM required PSI to disclose confidential, proprietary information, whilst simultaneously signing an agreement stating that PSI was not revealing confidential, proprietary information.
IBM refers to the history of correspondence between IBM and PSI; and otherwise denies the allegations of Paragraph 75.
76.
In August 2005, IBM sent PSI a list of some 150 patents which it characterized as a "representative list" of IBM patents that "amy" be infringed by the PSI system, without linking any of them to any PSI product. IBM stated that this was "not an exhaustive list," and requested PSI to demonstrate - but again without agreeing to maintain the confidentiality of PSI's product information - that PSI's system did not infringe any of the complaints in these patents.
IBM refers to the history of correspondence between IBM and PSI; and otherwise denies the allegations of Paragraph 76.
77.
Because of the extensiveness of the list of "representative" patents that IBM had asserted "may" be infringed by PSI's product, and the fact that it would have been prohibitively expensive for PSI to analyze every IBM patent claim even on that "representative" list in order to make a non-infringement demonstration to IBM, PSI suggested the parties simpy resume their patent licensing discussions. In this connection, PSI offered to provide whatever technical information about its products that would be needed by IBM, without requiring IBM to agree to keep PSI's technical information confidential.
IBM refers to the history of correspondence between IBM and PSI; and otherwise denies the allegations of Paragraph 77.
78.
In February 2006, representatives of PSI and IBM met again to discuss the patent licensing issues. The IBM personnel at the meeting stated that, with respect to a patent license, there would be substantial resistance from IBM's business side. Specifically, an IBM representative stated something to the effetc of: "No one on the zSeries hardware team wants to see z/OS on an HP machine."
IBM admits that representatives of PSI and IBM met in February 2006; and denies the remaining allegations of Paragraph 75.
79.
More than three months later, On May 24, 2006, IBM wrote to PSI stating that it would refuse to license any IBM patents to PSI or PSI customers. IBM thus reneged on its express promises made to OSI in 2001 through 2004 concerning its willingness to license its patents to PSI and to continue its decades-long practice of licensing its patents to third parties engaged in the development of IBM-compatible mainframe computers.
IBM refers to the history of correspondence between IBM and PSI; and otherwise denies the allegations of Paragraph 79.
80.
As IBM's limited production in this case to date confirms, IBM's decisions and conduct were motivated solely by its desire to eliminate a competitor that threatens its highest margin business, and not by a desire to protect the intellectual property that it has freely licensed to others.
Denied.
81.
In 2005, PSI began considering a potential acquisition of its business by a major technology company, which, on information of belief, has a patent cross-licensing agreement with IBM - and is thus insulated from IBM's pretextual allegations of patent infringement. Following the completion of that transaction, PSI's mainframes would have been marketed by the acquiring company and encompassed within that company's cross-license.
IBM denies that its allegations of patent infringement are pretextual; and denies the remaining allegations of Paragraph 81 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
82.
In October 2006, PSI was on the verge of finalizing the acquisition.
IBM denies the allegations of Paragraph 82 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
83.
In November 2006, after learning of IBM's refusal to sell its operating systems and software applications for use on PSI mainframes, the would-be acquiring company refused to complete the acquisition.
IBM avers that it does not "sell" its copyrighted operating systems and relevant software applications but rather licenses them pursuant to the terms of IBM Customer Agreements and/or other appropriate documents; and otherwise denies the remaining allegations of Paragraph 83 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
84.
Upon information and belief, that company was detered by IBM's refusal to license z/OS on a PSI mainframe.
IBM denies the allegations of Paragraph 84 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
85.
Upon information and belief, IBM also threatened to would-be acquiring company with other adverse economic consequences were it to purchase PSI or market its products.
Denied.
86.
The abandonment of the potential acquisition has destroyed a substantial business opportunity for PSI, causing PSI hundreds of millions of dollars in damages.
Denied.
87.
IBM has also been contacting PSI's customers and potential customers to instill "Fear, Uncertainty, and Doubt" regarding PSI and its products. IBM has told PSI's customers and potential customers, without any basis, that PSI's products will not work as PSI asserts.
Denied.
88.
IBM has told PSI's customers and potential customers that it will refuse to license its operating systems for use on PSI mainframes and that it is "committed to putting PSI out of business."
IBM admits that it has stated that it will not license z/OS and OS/390 for use in conjunction with PSI's emulator systems; and denies the remaining allegations of Paragraph 88..
89.
IBM has further threatened PSI's business partners with lawsuits to dissuade them from working with PSI. In fact, even since since IBM's Amended COmplaint was filed, a senior IBM executive contacted a PSI business partner and threatened that company with litigation if ot continues to do business with PSI.
Denied.
90.
The PSI mainframe's IBM-compatibility was implemented through the use of IBM's Principles of Operation, which reflect a set of standards for the IBM z/Architecture that are in the public domain. Many of the architectural standard and specifications of IBM's operating systems are also in the public domain. PSI licensed IBM's operating system solely to test the product, and it did not run the program in any manner materially different than any other end user would.
IBM admits that IBM has published various versions of IBM's Principles of Operation; avers that the Principles of Operation contain information protected by patents and copyright; denies the allegations of Paragraph 90 concerning PSI's intentions and activities for lack of knowledge of information sufficient to form a belief as to the truth thereof; and denies the remaining allegations of Paragraph 90.
91.
IBM'S trade secret misappropriation claims are without merit. PSI received a license to Amdahl's diagnostics, a fact of which IBM was aware as early as 2001. This transfer was enirely proper. PSI believes these programs were [as] freely licensable as any other program written to run on an IBM or Amdahl processor, such as IBM's OS/390 or Amdahl's former UTS operating systems. Moreover, PSI believes that, at a maximum, less than ten percent of these diagnostics related to so-called TIDA/TILA information. PSI acknowledges that it inadvertently received source code listings from Fujitsu related to some of these diagnostics which the parties had intended to be excluded from the scope of the license. But PSI can readily demonstrate, even assuming for the sake of argument that this source code would disclose some relevant information, that the functions to which the subject diagnostics relate were publicly available at the time these materials were received by PSI. Finally, PSI can demonstrate in every case the information sources used for its product design and that these sources did not include any diagnostic source materials or any other purported IBM confidential information.
IBM admits that PSI entered into a license agreement with Amdahl; further admits that PSI obtained source code listings from Fujitsu related to Amdahl diagnostic tools; denies the allegations concerning PSI's beliefs for lack of knowledge or information sufficient to form a belief as to the truth thereof; and denies the remaining allegations of Paragraph 91.
92.
PSI did not need to - and did not - "reverse assemble, reverse compile, or otherwise translate" the operating system software that IBM licensed to PSI. Contrary to IBM's assertion that "otherwise translate" has a boundless definition and applies to the implementation of a particular computer's instruction set (architecture) in a computer with a different architecture, the term "otherwise translate" in the context of the licensing agreement clearly refers to the reverse engineering of software, which PSI does not - and had no need to - practice.
Denied.
93.
IBM never accused PSI of breaching these provisions of its licensing agreement prior to initiating suit and IBM's own practices are inconsistent with such a strained interpretation. In 2003 IBM willingly licensed its OS/390 operating system to PSI under the terms of the ICA knowing full well that PSI was developing an IBM-compatible system based on machine instruction. Further, IBM readily licensed its software products to run on emulator systems developed by Fundamental Software, in the broadest sense a technology similar to that developed by PSI.
IBM admits that it did not literally refer to section 4.1 of PSI's IBM Customer Agreement in communications with PSI before initiating suit; refers to the history of correspondence between IBM and PSI, and to IBM's letter of August 3, 2006 in particular; avers that IBM made clear in that letter that PSI had not properly obtained any license for z/OS for use in conjunction with PSI's emulator system; admits that IBM and PSI entered into a limited-term six-month development license agreement for OS/390 on or about May 14, 2003; avers that PSI acknowledged on April 11, 2003 that the May 2003 development license "may be a temporary arrangement for the sake of expediency"; further avers that PSI agreed that "the granting of this limited license does not in any way grant PSI a patent license or give PSI any express or implied rights, licenses or immunities under any IBM patent or other intellectual property; further avers that IBM told PSI, in 2001, that IBM did not intend to license its z/Architecture and tols PSI, on May 5, 2003, that IBM does "not plan to license PSI in the fields of z/Architecture and coupling["]; further admits that IBM licensed certain software products to run on emulator systems developed and marketed by Fundamental Software; further admits that PSI's technology purports to emulate the IBM mainframe; and denies the remaining allegations of Paragraph 93.
94.
Assuming arguendo that IBM's construction of the licensing agreement is correct - which it is not - the agreement would require that IBM's operating system be run only on mainframes with IBM architecture, which only IBM sells. IBM cannot identify any legitimate, non-pretextual, pro-competitive justification for requiring customers to agree to such an exclusive dealing provision.
Denied.
95.
IBM's assertions that it is motivated by a desire to preserve the reputation of its product and enhance "reliability, availability, and serviceability" lack any basis in fact. Lack of RAS is simply another slur that IBM uses to denigrate competitors and instill "Fear, Uncertainty and Doubt" in consumers. The performance of Amdahl and other competitors' compatible mainframes demonstrates that non-IBM mainframes can work equally as well as IBM mainframes, and that the market (which consists of highly sophisticated consumers) are able to judge for themselves which mainframes can reliably utilize IBM's operating systems.
IBM admits that it sells its servers and licenses its operating system to sophisticated consumers; and denies the remaining allegations of Paragraph 95.
96.
Although PSI at all times expected to obtain a license to IBM's patents and intellectual property on fair, reasonable and non-discriminatory terms similar to those provided to Amdahl and Hitachi, and relied on IBM's representations that it would license them ont hat basis, PSI was at all times, and remains, unaware of any valid IBM patents, that are infringed by the PSI mainframe. Rather, PSI believed that it was more cost-efficient to obtain a license from IBM to avoid potential litigation (such as the instant suit) and to prevent IBM from using the lack of a patent licensing agreement as a pretext to deny software licenses to PSI's customers.
Denied.
97.
IBM's patents, including those asserted in this action, relate to the standards and specifications of minor functions such as rounding modes and determining types of floating point data that are not central to the functionality of either the operating system or the hardware. Moreover, they purport to claim discrete functionalities that IBM has historically licensed, and continues to license, to end users and software developers for little or nothing, and IBM has historically licensed to competing manufacturers of IBM-compatible mainframes on reasonable and non-discriminatory terms.
IBM refers to the patents in suit for a fair and accurate summary of their claims and the context for the inventions described therein; and otherwise denies the allegations of Paragraph 97.
98.
Licensees of IBM's mainframe operating systems have an implied license to perforrm the functions described in these patents - without such a license, the operating sogtware would be valueless. Regardless of how IBM's operating system license is phrased, it is not permitted to write its license in such a menner that requires a consumer to also purchase an IBM mainframe in order to perform the functions dictated by the operating system, and IBM may not collect a double royalty. Thus, IBM's patents cannot be infringed though [sic] the ise ofIBM's operating system on any mainframe, including a PSI mainframe.
IBM avers that the allegations of the second sentence of Paragraph 98 state a legal conclusion to which no response is required; to the extent a response is required, IBM denies those allegations; and otherwise denies the allegations of Paragraph 98.
99.
Moreover, upon information and belief, PSI and/or its customer cannot be held liable for infringement because HP and NEC, PSI's business partners, and Intel, the manufacturer of the Itanium processors in which some of the functions IBM asserts are infringing reside, have patent cross-licenses with IBM that apply to PSI's mainframes.
Denied.
100.
Finally, even assuming arguendo that IBM has valid patents that are infringed by certain users of PSI's mainframe, there are substantial non-infringing uses of those mainframes. IBM's accusations of infringement are therefore inaccurate.
Denied.
101.
PSI cannot yet fully assess whether IBM brought its patent infringement claims based on a good belief in their merits, or is instead pursuing this litigation as a competitive weapon to drive PSI from the market without regard to the merits of its claims or lack thereof. If further investigation and discovery establish that IBM's patent infringement claims are part of its exclusionary campaign to foreclose competition in the market for mainframe computers, PSI reserves to [sic] right to include that conduct as among the ground for its monopolization claim.
IBM acknowledges that PSI has purported to reserve its rights to amend the allegations of its Counterclaims; and otherwise denies the allegations of Paragraph 101.
102.
Assuming arguendo that PSI's system infringes IBM's patents because it is capable of performing the functions dictated by IBM's operating system software when a licensed copy is installed on a PSI system by a consumer - which PSI denies - IBM's current efforts to enforce those patents against PSI constitutes an abuse of IBM's monopoly power.
Denied.
103.
For decades, IBM has actively encouraged customers, developers, programmers, business partners and competitors to standardize on its mainframe architecture by repeatedly representing that it engages in fair, reasonable and non-discriminatory licensing of interoperability information needed to manufacture compatible products and related intellectual property. IBM postures itself as a champion of "open systems and standards," arguing that competitors must have reasonable and non-discriminatory access to interoperability information and related intellectual property is essential to competitive development and innovation in information technology industries, such as the mainframe industry.
Denied.
104.
Customers, developers, programmers, business partners and competitors have relied on IBM's position of reasonable and non-discriminatory licensing of interoperability information and related intellectual property throughout the development of the standards and specifications embodied in the IBM mainframe architectures. IBM customers are now locked in to the use of IBM-compatibles and operating systems as a result of these standards and specifications. It is a blatant abuse of that standard setting process for IBM to now seek to enforce patents it claims read on those standards and specifications to exclude PSI from the mainframe market and thereby extract higher prices and higher profits from its customers. Yet, that is exactly what IBM is seeking to do through this litigation and through its refusal to provide its mainframe operating system to PSI customers.
Denied.
105.
To the extent that use of the functionalities claimed by IBM's patents is necessary to manufacture any IBM-compatible mainframe, those patents also are essential facilities. IBM's refusal to provide access to these essential facilities, when considered in light of IBM's market power, previous policy, practice, representations, and inducement of customers, developers, and programmers to adopt IBM's architectural platform as an industry standard, is independently, and in combination with IBM's tying and other wrongful conduct, anti-competitive. IBM's sole intent in changing its policy is to maintain and expand its monopoly; it does not have a legitimate pro-competitive interest in protecting the same intellectual property that it has freely licensed to others.
Denied.
106.
IBM's z/OS operating system is the only operating system currently available to run on IBM-compatible mainframes and that is compatible with the application software written for IBM-compatible mainframes. By refusing to license z/OS to customers for use on PSI's competing mainframe, IBM has made itself the only supplier of IBM-compatible mainframes. Accordingly, all consumers locked in to IBM-compatible mainframe operating systems must purchase IBM mainframe computers.
Denied.
107.
Mainframe operating systems and mainframe computers are separate products that could be sold separately by IBM, as demonstrated by IBM's past practice for several decades of licensing IBM mainframe operating systems to consumers for use with IBM-compatible mainframe computers developed by Amdahl or Hitachi Data Systems. In fact, IBM has historically published software licensing terms for OS/390 and z/OS stating that the operating system will run on the then currently supported IBM servers "or equivalent." This included the 64-bit only versions of z/OS, version 1.6 and versions 1.7. On August 8th, 2006, IBM announced the terms for its latest version of z/OS 1.8, which dropped the term "or equivalent," referencing on System z servers.
IBM admits that mainframe computers and operating systems could be sold separately; refers to its historical statements concerning software licensing terms; avers that the "Specified Operating Environment" section of its August 8, 2006 Software Announcement on "IBM z/OS V1.8 - Extending the enterprise-wide role" relates to IBM's warranty obligations under the IBM Customer Agreement; refers to the August 8, 2006 announcement for a fair and accurate summary of its contents in their appropriate context; and denies the remaining allegations of Paragraph 107.
108.
By changing its historic practices of (1) providing non-discriminatory license toits mainframe operating systems to developers of compatible mainframes and software, (ii) licensing its mainframe operating systems to purchasers of competitors' mainframe computers, and (iii) freely licensing its interoperability and other related intellectual property on reasonable and non-discriminatory terms, among other things, IBM has engaged in exclusionary conduct injuring competition in the relevant market for IBM-compatible mainframe computers.
Denied.
109.
Locked in consumers could not have known at the time of their initial investment in applications requiring IBM mainframe operating systems that IBM would discontinue its longstanding policy of licensing its mainframe operating systems to run on competing IBM-compatible mainframe computers.
Denied.
110.
IBM is seeking to extend and prolong its longstanding monopoly over IBM-compatible mainframe computers and mainframe operating systems and ensure that rival hardware and software platforms do not become viable alternatives to IBM's proprietary mainframe systems. IBM's conduct in the mainframe operating systems market significantly harms and threatens continuing harm to competition, offends established public policy as set forth in federal and state antitrust laws, is oppressive, and is substantially injurious to consumers. IBM has created insurmountable barriers to entry in the market for IBM-compatible mainframe computers and excluded competitors such as PSI from that market. The resulting elimination of competition in the market for IBM-compatible mainframe computers hrams consumers by giving IBM monopoly pricing power and reducing innovation. The harm to such consumers from IBM's conduct outweighs any utility it might have.
Denied.
111.
By discriminating in its software licensing based on whether or not the customer has chosen to use an IBM machine or a PSI machine, IBM has injured PSI as a competitor in the market for IBM-compatible mainframe computers. IBM's unlawful conduct has (a) prevented PSI from marketing and selling its competing computer system; (b) jeopardized PSI's funding and its relationship with prospective customers; (c) delayed PSI's entry into the market; and (d) allowed IBM to reap hundreds of millions of dollars in additional profits that otherwise would have been realized as cost savings by the governmental institutions, corporations, and academic institutions that would have purchased PSI's lower-priced products. Moreover, in addition to preventing PSI from selling its mainframes, IBM's unlawful conduct has prevented PSI from selling related applications and services, such as storage, technical support, maintenance and consulting services.
Denied.
112.
IBM itself has recognized that conduct such as that in which it is now engaging is anti-competitive and unlawful. As part of the United States Department of Justice's antitrust action against Microsoft,IBM testified that Microsoft had engaged in exclusionary conduct by discriminating against IBM with respect to the terms on which it made its Windows operating system available to IBM in retaliation against IBM's efforts to develop a competing operating system, OS/2. IBM subsequently pursued private antitrust claims against Microsoft, and obtained a $775 million settlement of those claims without even filing a complaint. IBM's prior antitrust claims against Microsoft in the markets for PC operating systems and personal computers are very similar to PSI's current claims based on IBM's exclusionary conduct in the markets for mainframe computers and mainframe operating systems. Indeed, PSI's claims are based on conduct that is even more blatantly exclusionary because IBM has expressly tied sales of its operating system to the purchase or continued use of an IBM mainframe and has refused to make its operating systems available at all to purchasers of PSI's mainframe computer products.
IBM admits that an IBM employee testified on behalf of the United States, that IBM entered into a settlement agreement with Microsoft Corporation ("Microsoft"), and that Microsoft paid IBM approximately $775 million and extended $75 million in credit towards deployment of Microsoft software at IBM pursuant to the terms of that settlement agreement; and denies the remaining allegations of Paragraph 112..
113.
And in the European Union, IBM, through its trade organization ECIS, has taken legal positions completely contrary to its arguments in this case. For example, IBM currently contends, through its trade organization, that Microsoft should be compelled to timely supply full interoperatibility information to competitors for various products, including Microsoft Office, Windows, and Exchange programs, and that such information constitutes an essential facility. Again, IBM's conduct here is even more blatantly exclusionary than Microsoft's. Microsoft never disclosed interoperability information to expand the market and encourage the adoption of a Microsoft standard. IBM, by contrast, did just that: promoting a policy of reasonable, non-discriminatory licensing to help the market for its operating systems, applications, and mainframes.
Denied.
114.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 113 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-113.
115.
IBM's (1) tying, (ii) leveraging of its monopoly over mainframe operating systems to maintain and prolong its monopoly over IBM-compatible mainframes, (iii) changing of its historic practices and course of dealing with respect to the develop [sic] of the standards and specifications embodied in the z/Architecture and its practice of reasonable and non-discriminatory licensing of intellectual property to maintain its monopoly power, (iv) denial of access to an essential facility, (v) interferences with a prospective contractual relationship, (vi) forcing customers to "upgrade" to newer versions of its operating systems and discontinuing technical support of prior versions of its operating system in order to prevent those customers from using prior versions of its operating system on competing mainframe computer systems, (vii) denial of critical information regarding product interface information needed to develop mainframe computer systems that are compatible with those products in order to hinder and delay PSI's ability to market its competing products, (viii) and/or other wrongful conduct as alleged hereinabove, individually and collectively constitute monopolization of Section 2 of the Sherman Act, 15 U.S.C. § 2.
Denied.
116.
IBM has a monopoly and exercises market power in the relevant markets for IBM-compatible mainframe computers and mainframe operating systems.
Denied.
117.
IBM's conduct as alleged herein has enabled it to unlawfully maintain, extend and prolong its monopoly in the market for IBM-compatible mainframes.
Denied.
118.
IBM's purported bases for the anti-competitive acts alleged herein are pretextual and any pro-competitive benefits of such acts are outweighed by the harm to competition and consumers.
Denied.
119.
As a direct and proximate result of IBM's tying, denial of access to an essential facility, interference with the potential sale of PSI, and other anti-competitive acts as alleged herein, PSI and consumers in the affected markets have suffered injuries, and competition in the affected markets has been suppressed and injured. If not enjoined, IBM's conduct will cause further injury to the business and property of PSI and consumers in the affected markets.
Denied.
120.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 119 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-119.
121.
IBM's (i) tying, (ii) leveraging of its monopoly over mainframe operating systems to maintain and prolong its monopoly over IBM-compatible mainframes, (iii) changing of its historic practices and course of dealing to maintain its monopoly power, (iv) denial of access to an essential facility, (v) interferences with a prospective contractual relationship, (vi) forcing customers to "upgrade" to newer versions of its operating systems and discontinuing technical support of prior versions of its operating system in order to prevent those customers from using prior versions of its operating system on competing mainframe computer systems, (vii) denial of critical information regarding the development path for IBM's operating systems and the technical information needed to develop mainframe computer systems that are compatible with those products in order to hinder and delay PSI's ability to market its competing products, (viii) and/or other wrongful conduct as alleged hereinabove, individually and collectively constitute attempted monopolization of Section 2 of the Sherman Act, 15 U.S.C. § 2.
Denied.
122.
IBM has undertaken these acts with the specific intent of monopolizing the market for IBM-compatible mainframes.
Denied.
123.
There is a dangerous probability that IBM, unless it is restrained, will succeed in monopolizing the market for IBM-compatible mainframe computers.
Denied.
124.
There are no legitimate business justifications for IBM's anti-competitive practices, and IBM's purported bases for tying its operating system to its mainframe and refusing to entier into a patent license with PSI on IBM's standard terms and conditions are pretextual.
125.
As a direct and proximate result of IBM's tying, denial of access to an essential facility, interference with the potential sale of PSI, and other anti-competitive acts as alleged herein, PSI and consumers in the affected markets have suffered injuries, and competition in the affected markets has been suppressed and injured. Ig not enjoined, IBM's conduct will cause further injury to the business and property of PSI and consumers in the affected markets.
Denied.
126.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 125 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-119.
127.
IBM's conditioning of the license and sale of its mainframe operating systems on the purchase or continued use of an IBM mainframe, and its refusal to license those operating systems for use on IBM mainframes, as alleged hereinabove, constitutes a tying arrangement and an unreasonable restraint of trade that is per se unlawful under Section 1 of the Sherman Act, 15 U.S.C. § 1.
Denied.
128.
Alternatively, IBM's conditioning of the license and sale of its mainframe operating systems on the purchased or continued use of an IBM mainframe, and its refusal to license those operating systems for use on PSI mainframes, as alleged hereinabove, constitutes a tying arrangement and an unreasonable restraint of trade under Section 1 of the Sherman Act, 15 U.S.C. § 1, under the rule of reason.
Denied.
129.
Mainframe operating systems and mainframe computers are separate products in separate markets, not substitutable for one another, can be sold or licensed separately, and are subject to separate consumer demand. Moreover, the licensing of a mainframe operating system necessarily implies a license to perform all of the functions required by the operating system, including any that may be validly patented.
Denied.
130.
By discriminating in its software licensing based on whether or not the customer has chosen to use an IBM machines or a PSI machine, IBM coerces consumers to purchase IBM's mainframe computers.
Denied.
131.
IBM has monopoly power in the market for IBM-compatible mainframe operating systems enabling it too appreciably restrain trade int he market for IBM-compatible mainframes, and to coerce the purchase of IBM's mainframe computers.
Denied.
132.
IBM's tying has affected and will continue to affect a not insubstantial volume of interstate commerce in the relevant markets.
Denied.
133.
PSI has been injured in its business and has suffered pecuniary harm as a consequence of IBM's tying and will continue to suffer such harm so long as IBM's tying persists.
Denied.
134.
As a direct and proximate result of IBM's tying, PSI and consumers in the affected markets has been suppressed and injured. If not enjoined, IBM's conduct will cause further injury to the business and property of PSI and of consumers in the affected markets.
Denied.
135.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 134 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-134.
136.
As alleged above, IBM conditions the license of its mainframe operating systems on the use of an IBM mainframe, in violation of Section 3 of the Clayton Act, 15 U.S.C § 15. The effect of these arrangements has been to substantially lessen competition in the relevant markets for mainframe computers.
Denied.
137.
There is no legitimate business justification for IBM's anti-competitive practices and any purported legitimate business justifications are mere pretexts.
Denied.
138.
IBM's anti-competitive practices have proximately caused damage to PSI in an amount to be proven at trial.
Denied.
IBM incorporates by reference its responses to Paragraphs 1-138.
139.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 138 of its Amended Counterclaims.
140.
IBM has engaged in unlawful or unfair business acts and practices within the meaning of California Business and Professions Code §§ 17200 et seq. by, among other things, its tying arrangements, denial of access to an essential facility, exclusionary conduct, monopolization, attempted monopolization, and/or other anti-competitive acts as alleged herein.
Denied.
141.
IBM's conduct as alleged hereinabove threatens an incipient [sic - imminent?] violation of an antitrust law, or violates the policy or spirit of an antitrust law.
Denied.
142.
PSI and its customers in the affected markets, including in California, have suffered and will continue to suffer injury andlost of money or property as a result of IBM's acts of unfair competitions as alleged herein. If not enjoined, IBM's conduct will cause further injury to PSI and customers.
Denied.
143.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 142 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-142.
144.
IBM has engaged in unfair or fraudulent business acts and practices within the meaning of California Business and Professions Code § 17200 by, among other things, (i) misrepresenting to PSI and the public that it practices reasonable non-discriminatory licensing; (ii) representing to PSI in 2001, 2003 and 2004 that it would enter into a patent license with respect to the OS/390 patents on a nondiscriminatory basis and on standard terms and conditions, (iii) using pretext of purported patent infringement to renege on its promises made over a number of years as alleged above, (iv) requiring that PSI disclose confidential, proprietary information on a non-confidential basis before licensing negotiations could begin, (v) intentionally delaying responses to licensing request, (vi) changing its products and support without need or notice in order to exclude PSI, and (vii) other false and misleading statements and unfair conduct, all of which IBM knew PSI and its customers were relying on to its [sic] detriment.
Denied.
145.
IBM's conduct as alleged hereinabove is oppressive, offends public policy, and/or is injurious to consumers.
Denied.
146.
PSI and consumers in the affected markets, including in California, have suffered and will continue to suffer injury and loss of money or property as a result of IBM's unfair or fraudulent business acts and practices as alleged herein. If not enjoined, IBM's conduct will cause further injury to PSI and consumers.
Denied.
147.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 146 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-150.
148.
IBM has engaged in deceptive acts and practices within the meaning of Sections 349-50 of New York General Business Law by, among other things, (i) misrepresenting to PSI and to the public that it practices reasonable non-discriminatory licensing; (ii) representing to PSI in 2001, 2003 and 2004 that it would enter into a patent license with respect to the OS/390 patents on a nondiscriminatory basis and on standard terms and conditions; (iii) using pretext of purported patent infringement to justify tying; (iv) changing its products and support without need or notice in order to exclude PSI and harm customers without disclosing this to customers; (vi) [sic] denigrating PSI and its products to customers; and (vii) other false and misleading statements.
Denied.
149.
IBM's conduct as alleged hereinabove causes consumer injury and harm to the public interest because (a) consumers have been deceived into purchasing IBM's products based on its reputation and representations of openness and fairness, and (b) IBM's conduct has fomented its monopoly and caused higher prices in the mainframe computers [sic] by hindering and delaying PSI's entry into the market.
Denied.
150.
PSI and consumers in the New York [sic] have suffered and will continue to suffer injury and loss of money or property as a result of IBM's unfair or fraudulent business acts and practices as alleged herein. If not enjoined, IBM's conduct will cause further injury to PSI and consumers..
Denied.
151.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 150 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-150.
152.
In 2005 and 2006, PSI had a legitimate prospective contractual relationship with a large technology firm, which was interested in purchasing PSI for millions of dollars.
IBM denies the allegations of Paragraph 152 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
153.
In October 2006, that company signed a letter of intent to purchase PSI for millions of dollars.
IBM denies the allegations of Paragraph 153 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
154.
Because of IBM's unlawful policy of conditioning the sale of its mainframe operating systems to the purchase of an IBM mainframe, and/or the refusal to license its product on an HP/PSI mainframe, the would-be purchaser backed out of the deal.
Denied.
155.
Upon information and belief, IBM wrongfully exerted economic pressure on the would-be purchaser and acted will intent to suppress competition in the IBM-compatible mainframe market, and thus creating an unlawful restraint of trade..
Denied.
156.
IBM was aware of the prospective economic relationship when it interferes with PSI's prospective contractual relationship and acted with the intent to destroy that relationship as a means to preserve its monopoly power.
Denied.
157.
As a direct and proximate result of IBM's tortious comment, PSI suffered injury and loss of money.
Denied.
158.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 157 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-157.
159.
Until 2006, IBM had a publicly announced policy of reasonable, non-discriminatory patent licensing on its web site.
IBM avers that the page formerly on its web site at http://www.ibm.com/ibm/licensing/patents/practices.shtml was taken down on or about February 21, 2006; further avers that the statement formerly contained at that web site page expressly stated that it "highlights IBM's present patent licensing practices and is subject to change at any time"; refers to the statement formerly contained at that web site page for a fair and accurate summary of the statement in its appropriate context; and otherwise denies the allegations of Paragraph 159.
160.
In letters dated January 12, 2001. February 15, 2001, and March 2001, IBM represented that it would license intellectual property that had previously been licensed to Amdahl and others on similar terms.
IBM admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's statements in their appropriate context; avers that, in 2001, IBM offered to license to PSI certain information concerning IBM's Enterprise Systems Architecture/390, which PSI declined to license, and told PSI that IBM would not license its z/Architecture to PSI; and otherwise denies the allegations of Paragraph 160.
161.
In March 2003, after being informed by PSI that it needed assurances regarding licensing, IBM represented to PSI that, "[u]nder our current practice, IBM would be willing to enter into a patent license with PSI."
IBM admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's statement in its appropriate context; and otherwise denies the allegations of Paragraph 161.
162.
In 2004, IBM engaged in patent license discussions with PSI. In those discussions, IBM again represented to PSI that IBM would provide a non-discriminatory patent license to PSI on standard terms and conditions.
IBM admits that it communicated with PSI in 2004 on the subject of IBM patents; and denies the remaining allegations of Paragraph 162.
163.
IBM was aware of the importance to PSI's business of licensing patents, and IBM made the promises and representations alleged above with the knowledge that PSI was relying on them.
Denied.
164.
PSI reasonably, foreseeably, justifiably, and to its detriment, relied on IBM's representations and promises, within the last two years, by, among other things, obtaining more than $20 million in venture capital funding and expending that money on development of its computer system, which PSI is now unable to market and sell as a result of IBM's actions as alleged herein.
Denied.
165.
IBM has failed and refused to perform its promises alleged above.
Denied.
166.
PSI will perform, or is excused from performing as a result of IBM's breaches, all of its obligations under the contract.
Denied.
167.
Particularly in light of the other behaviour alleged herein, it would be unconscionable not to enforce IBM's promises. IBM, with sole control over what it considers to be essential facilities, made promises and delayed definitive responses while aware that PSI was building a business model and obtaining financing based on those promises. Ultimately, it attempted to force PSI to disclose confidential, proprietary information - while signing and unconscionable and nonsensical agreement that such information was not confidential and could be used by IBM in any manner that it pleased - as a precondition to further negotiations. After PSI eventually acquiesed to that agreement, IBM revealed its true intent not to license any patents to PSI.
Denied.
168.
The terms of the promise were and are just and reasonable, and provide for adequate consideration, in that PSI will undertake the same terms and conditions as IBM has accepted from othe rparties to its license agreements and patent licenses.
Denied.
169.
PSI has no adequate remedy at law, in that IBM's continuing breach and its failure to perform in the future cannot be adequately compensated for in money damages. Accordingly, PSI is entitled to specific performance of the contract as alleged herein. In the alternative, IBM is estopped from asserting infringement of the intellectual property that IBM represented that it would license..
Denied.
170.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 169 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-169.
171.
Plaintiff purports to be the owner of the U.S. Patents no. 6,009,261 ("the'261 patents"), U.S. Patent No. 5,953,520 ("the '520 patent"), U.S. Patent 5,696,709 ("the '709 patent"), U.S. Patent No. 5,825,678 ("the '678 patent"), U.S. Patent No. 5,687,106 ("the '106 patent"), U.S. Patent No. 5,987,495 ("the '495 patent"), U.S. Patent No. 6,775,789 ("the '789 patent"), U.S. Patent No. 5,414,851 ("the '851 patent"), U.S. Patent No. 6,971,002 ("the '002 patent"), and U.S. Patent No. 6,654,812 ("the '812 patent") - collectively, the "Asserted Patents".
IBM avers that it is the owner of the patents in suit; and otherwise admits the allegations of Paragraph 171.
172.
Plaintiff has alleged that PSI has infringed the Asserted Patents.
IBM avers that PSI has infringed the cited patents; and otherwise admits the allegations of Paragraph 172.
173.
An actual controversy, within the meaning of 28 U.S.C §§2201 and 2202, exists between Plaintiff, in the one hand, and PSI, on the other hand, as to the non-infringement of the Asserted Patents.
Admitted.
174.
PSI has not infringed, contributed to the infringement of, or induced the infringement of any valid claim of the Asserted Patents, and is not liable for infringement thereof.
Denied.
175.
All PSI methods, systems, apparatus, and/or products that are accused of infringement have substantial uses that do not infringe and therefore cannot induce or contribute to the infringement of the Asserted Patents. Moreover, PSI does not intend or have knowledge that its customers will use its products in a manner that infringes the Asserted Patents.
Denied.
176.
PSI has not directly infringed any valid claim of the '261 patent.
Denied.
177.
PSI has not directly infringed any valid claim of the '520 patent.
Denied.
178.
PSI has not directly infringed any valid claim of the '709 patent.
Denied.
179.
PSI has not directly infringed any valid claim of the '678 patent.
Denied.
180.
PSI has not directly infringed any valid claim of the '106 patent.
Denied.
181.
PSI has not directly infringed any valid claim of the '495 patent.
Denied.
182.
PSI has not directly infringed any valid claim of the '789 patent.
Denied.
183.
PSI has not directly infringed any valid claim of the '851 patent.
Denied.
184.
PSI has not directly infringed any valid claim of the '002 patent.
Denied.
185.
PSI has not directly infringed any valid claim of the '812 patent.
Denied.
186.
PSI has not induced infringement of any valid claim of the '261 patent.
Denied.
187.
PSI has not induced infringement of any valid claim of the '520 patent.
Denied.
188.
PSI has not induced infringement of any valid claim of the '709 patent.
Denied.
189.
PSI has not induced infringement of any valid claim of the '678 patent.
Denied.
190.
PSI has not induced infringement of any valid claim of the '106 patent.
Denied.
191.
PSI has not induced infringement of any valid claim of the '495 patent.
Denied.
192.
PSI has not induced infringement of any valid claim of the '789 patent.
Denied.
193.
PSI has not induced infringement of any valid claim of the '851 patent.
Denied.
194.
PSI has not induced infringement of any valid claim of the '002 patent.
Denied.
195.
PSI has not induced infringement of any valid claim of the '812 patent.
Denied.
196.
PSI has not contributed to any infringement of any valid claim of the '261 patent.
Denied.
197.
PSI has not contributed to any infringement of any valid claim of the '520 patent.
Denied.
198.
PSI has not contributed to any infringement of any valid claim of the '709 patent.
Denied.
199.
PSI has not contributed to any infringement of any valid claim of the '678 patent.
Denied.
200.
PSI has not contributed to any infringement of any valid claim of the '106 patent.
Denied.
201.
PSI has not contributed to any infringement of any valid claim of the '495 patent.
Denied.
202.
PSI has not contributed to any infringement of any valid claim of the '789 patent.
Denied.
203.
PSI has not contributed to any infringement of any valid claim of the '851 patent.
Denied.
204.
PSI has not contributed to any infringement of any valid claim of the '002 patent.
Denied.
205.
PSI has not contributed to any infringement of any valid claim of the '812 patent.
Denied.
206.
PSI realleges and incorporates by references the allegations of paragraphs 1 through and including 205 of its Amended Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-205.
207.
An actual controversy, within the meaning of 28 U.S.C. §§ 2201 and 2202, exists between plaintiff, on the one hand, and PSI, on the other hand, as to the invalidity of the Asserted Patents.
IBM avers that PSI never challenged the validity of any IBM patents before the initiation of this lawsuit; and otherwise admits the allegations of Paragraph 207.
208.
On information and belief, the claims of the Asserted Patents are invalid for failing to comply with the provisions of the Patent Laws, Title =35 U.S.C., including without limitation one or more of 35 U.S.C. §§ 101, 102, 103, and 112 nd the doctrine of double patenting.
Denied.
209.
IBM denies each and every allegation of the Counterclaims that is not expressly admitted in this Reply.
210.
IBM denies that PSI is entitled to any of the relief sought in the Counterclaim.
PSI demands a jury on all issues triable to a jury.
Wherefore, PSI prays:
- That the Court enter a judgement that PSI has not infringed, contributorily infringed, or induced the infringement of any claim of the Asserted Patents;
- That the Court enter a judgement that the Asserted Patents are invalid;
- That the Court enter a judgement that IBM take nothing by reason of its claims against PSI;
- That the Court enter a judgement that the Asserted Patents are invalid;
- That the Court enter a judgement that IBM has violated sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act, Section 17200 of the California Business and Professions code, Section 349-50 of New York General Business Law;
- That the Court award PSI treble damages and attorney's fees under the Sherman Act and Section 4 of the Clayton Act, 15 U.S.C. § 15;
- That, should the Court determine any claims of the patents-in-suit are infringed, the Court award injunctive relief to PSI directing IBM to (a) license its operating systems for use of PSI/HP mainframes on no-discriminatory terms; and (b) enter into a reasonable, non-discriminatory patent licensing agreement with PSI;
- That the Court award PSI specific performance of IBM's promise to license its OS/390 related patents on the same terms as extended to others;
- That the Court declare this an exceptional case under 35 U.S.C. § 285 and award PSI it [sic] reasonable attorney's fees; and
- That the Court award PSI such and other further relief which the Court deems proper.
Dated: September 21, 2007.
Further replying to PSI's Counterclaims, IBM asserts the following defenses. IBM's investigation of PSI's claims and its defenses is ongoing, and IBM reserves the right to amend its reply with additional defenses as further information is obtained.
1.
The Counterclaims fail to state a claim on which relief may be granted.
2.
IBM's Amended Complaint herein was and is not objectively baseless and as a matter of law IBM's filing of its Amended Complaint is protected by applicable privileges.
3.
PSI's purported claims, individually and as a whole, are barred by the doctrine of unclean hands.
4.
There is no private right of action under New York General Business Law § 350 for a plaintiff who is not suing in its capacity based on an alleged injury that affects the public as a whole.
5.
PSI's purported declaratory judgement action has been rendered moot by IBM's affirmative claims for patent infringement, as alleged in IBM's Amended Complaint.
6.
PSI's purported claims, or some of them, are barred by the doctrines of laches, estoppel, waiver and/or acquiescence.
WHEREFORE, IBM prays for the following relief:.
- That this Court grant IBM the relief sought in IBM's Amended Complaint;
- That this Court enter a judgement that PSI take nothing by reason of PSI's Counterclaims against IBM and dismiss the Counterclaims with prejudice; and
- That this Court award IBM such other and further relief as this Court may deem just and proper.
http://web.archive.org/web/20060220102134/http://www.ibm.com/ibm/licensing/patents/practices.shtml
IBM has an open approach to patent licensing for products in the Information Technology (IT) field and is generally willing to grant nonexclusive licenses under reasonable and nondiscriminatory terms and conditions to those who in turn respect IBM's intellectual property (IP) rights. An exception to this open licensing practice is for patents directed to ornamental designs. These address the "look" of a product and are not normally licensed. IBM also has patents relating to products outside of the IT field, such as apparatus patents that cover machinery used to manufacture IT products. These may be available for licensing at IBM's discretion.
IBM includes in the terms and conditions of a license an option for a comparable license-back of the licensee's patents under similar terms and conditions. In cases where a licensing partner has a significant patent portfolio, IBM will consider entering into a patent cross license agreement.
A license under IBM's patents does not include any rights to IBM technology or "know-how" (for information click Technology Practices). It also does not include any licenses under the IP rights of others, nor any assurance that a license under the patents, copyrights or technology of others is not needed. A licensee must make his own determination on that matter.
This highlights IBM's present patent licensing practices and is subject to change at anytime, as well as to variation to conform to local laws and regulations.
IBM has its own internal use only emulator system, known as zPDT. It was announced in April 2007 and runs under Linux to provide ca. 25 MIPS and 2GB of z/OS memory in a fast PC with at least 3GB of memory. That is quite poor performance, so it is possible that zPDT is a simple interpreter.
zPDT supports current levels of z/OS, z/VM, z/VSE and Linux for System z.