isham research
This page is deprecated and has been archived. See instead the September 2007 update
IBM filed suit against PSI on 29 November 2006. PSI responded on 19 January 2007, and IBM responded to that on 8 March 2007. The case is Civil Action No. 06-cv-13565 (SCR) in the Southern District Court of New York. This is a derivative work - in all instances, the filed documents are superior.
This is a tabulation of 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. Now that T3 Technologies has entered the case, green is also pressed into service in later documents.
The implications of some arguments in the 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 is an underfunded company with almost no route to market and a product with only derisory support for the IBM mainframe environment - no z/VM or z/VSE, for instance - and could never have been a major player.
IBM's fifth claim is most extraordinary and has already had a major impact on the software industry. Essentially, IBM is seeking to outlaw emulation using an extreme 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 sixth claim is no less 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 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.
(And just in case IBM's crack legal team finds some way to furtle the Wayback Machine, there's a copy of the 20 February 2006 version at the foot of this page. And there's another copy, nice and safe on an isham research server.)
Two quite exceptional claims - one of which seeks to change the industry, and one of which implies a massive change in one of the industry's longest-standing business practices. A pair of truly massive sledgehammers to crack a very tiny nut. Perhaps we will yet see amicii curiae from IT industry associations.
One of Platform Solutions' claims is that IBM changed its mind. But why?
For some years, many in the industry have been discussing the IBM mainframe's critical mass. Just where is the point at which continued development of the proprietary platform becomes uneconomic? Wherever that point is, it's approaching - and what IBM is seeking to do with this lawsuit is not to crush PSI, which had very little chance of success anyway, but to grip the zSeries and its architecture in an iron fist so as to protect its middleware contribution margin through the end of the platform's life.
The fact that many Independent Software Vendors will find their new environment uneconomic is unfortunate but probably doesn't figure greatly in IBM's calculations. Those who want to operate their own z/OS environment are likely to be developing utility and similar software that interacts closely with the operating system and possibly requires modification to it or installation in it - a market that IBM would much rather have to itself anyway. VSE to z/OS migrations have shown that utility software often presents the greatest hurdles.
The truly deafening silence is coming from Fundamental Software. But given the billions involved, IBM and Fundamental could doubtless come to some - undoubtedly highly confidential - arrangement.
IBM's claims fall apart in detail, too. At least it managed to avoid the dreaded "synergy" word when describing the interaction between z/OS and IBM's own hardware - 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 outages 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's 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.
And finally - where on earth did "COBOL" come from in IBM's 8 March 2007 response? Has it been picked as an example of compatibility? If so, bad choice - look at the effect of VALUE in the FILE SECTION in a selection of compilers.
1.
This is an action for breach of contract, patent infringement and a declaratory judgement by IBM against PSI.
PSI admits that this action includes the causes of action set forth in IBM's complaint, and further states that the action also includes the counterclaims set forth below.
2.
IBM has invested substantial amounts of time, effort, know-how, creativity, and money to develop its computer systems, the architectures for those systems, and the operating systems and other software programs that are compatible with and run on those architectures. IBM's efforts have been directed to developing combinations of computer hardware and software specifically tailored to meet the most demanding customer requirements. As a result of IBM's investment, IBM's computer systems and programs provide unparalleled performance, reliability, availability, serviceability and security and have been widely accepted for use by consumers in environments where accuracy, data integrity, and reliability are critically important.
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 2. PSI admits the allegations of the third sentence of paragraph 2 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.
3.
PSI seeks to usurp the value of IBM's investment. PSI has developed and is bringing to market and offering for sale computer systems ("emulator systems") that seek to imitate IBM's computers and that PSI claims will run IBM's copyrighted operating systems and other software programs on computers other than the ones for which the IBM software was written.
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. 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 data center 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 3.
4.
PSI is using, promoting, and offering for sale PSI's emulator systems in New York and elsewhere and is asserting that (a) PSI's emulator systems allow users to translate and run IBM's operating systems on computers other than the ones for which the IBM software was written and allow users to obtain the patented functionality of IBM's computer architectures on computers that do not implement those architectures; and (b) purchasers of PSI's emulator systems will be able to license IBM's operating systems and other software for use on PSI's emulator systems.
PSI admits that its products are used, promoted and offered for sale in New York and elsewhere. PSI also admits that its products are compatible with IBM operating systems and enable non-IBM computers to run applications written for IBM operating systems, and that it uses, promotes, and offers them for sale as such. PSI further admits that it has asserted in the past that its customers would be able to license IBM's operating systems under IBM's purportedly non-discriminatory licensing policy and longstanding practice of selling its operating systems to customers of IBM-compatible products; that assertion is now qualified in light of IBM's practice of tying its operating systems to its mainframes and IBM's apparent refusal to sell its operating systems and applications to purchasers of the IBM-compatible computers marketed by PSI. PSI denies the remaining allegations of paragraph 4.
In developing, operating and promoting its emulator systems, PSI has breached the contracts under which IBM has licensed PSI to use IBM software to end user customers, including PSI, pursuant to the IBM Customer Agreement ("ICA"). PSI has obtained licenses to use IBM software pursuant to an ICA that expressly forbids, among other things, any translation of the licensed software programs. In violation of this express prohibition, to which PSI contractually bound itself in obtaining the applicable licenses, PSI has developed emulator systems that, according to PSI, translate IBM software that runs on IBM computer architectures so as -- again according to PSI -- to allow that software to be run on computer architectures other than the ones for which the software was written. By using IBM's software in conjunction with PSI's emulator system and thereby translating the IBM software, PSI has breached its license agreements with IBM. IBM seeks damages and a declaration that it is authorized to terminate PSI's software licenses based on PSI's breaches of the terms of the ICA.
PSI admits that it has licensed certain of IBM's operating systems and software and that IBM's complaint purports to seek damages and declaratory relief. PSI denies the remaining allegations of paragraph 5.
In addition, in developing, operating, and promoting its systems, PSI has used IBM's intellectual property without authorization. PSI's emulator systems, to work as PSI claims, necessarily infringe IBM patents. PSI's marketing program is a blatant attempt to infringe on IBM's intellectual property and to convert to PSI the fruits of IBM's substantial investments in developing computer systems, architectures, operating systems, and other software. By this action, IBM seeks to preclude PSI from marketing and offering for sale emulator systems that infringe IBM's patents. IBM seeks relief under the patent laws in order to prevent irreparable harm to IBM from PSI's infringing activities, including its sales of, and/or offers to sell, directly and through third parties, infringing emulator systems.
PSI denies the allegations of paragraph 6.
7.
As PSI has breached IBM's software license agreements and infringed IBM's patents in developing, operating and promoting its infringing emulator systems, PSI has insisted that IBM agree to license IBM's patents to PSI and IBM's copyrighted operating system and other software for use on PSI's systems. IBM has declined to grant the requested licenses because, among other reasons, PSI is infringing IBM's patents. PSI has responded by threatening baseless anti-trust litigation seeking substantial alleged damages. IBM 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 anti-trust laws - a declaration for which IBM relies, in part, on the same evidence of patent infringement by PSI that forms the basis for IBM's claims for affirmative relief under the patent laws.
PSI admits that it has requested that IBM make its operating system available to PSI to assist PSI in developing its products and that it has requested that IBM provide PSI any licenses under any potentially relevant patents that may be necessary for PSI to develop and market its products. PSI denies the remaining allegations of paragraph 7.
8.
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 8.
9.
Defendant PSI is a corporation organized and existing under the laws of California, having its principal place of business at 501 Macara Avenue, Suite 101, Sunnyvale, California 94085.
Admitted
10.
IBM's claims arise under the patent and antitrust laws of the United States, 35 U.S.C §§ 1 et seq. and 15 U.S.C. §§ 1 et seq. This court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331 and 1338(a).
Admitted
11.
This court has jurisdiction over IBM's breach of contract claim 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
12.
This court has authority to grant declaratory relief pursuant to the Declaratory Judgement Act, 28 U.S.C. §§ 2201 et seq.
Admitted
13.
This court has personal jurisdiction over PSI because PSI (directly and through its licensees and marketing partners): (a) is transacting business in the State of New York; (b) has offered its infringing products for sale in this District; (c) has an Eastern Regional Manager located in Rocester, New York; (d) has raised substantial funding for its emulator development program in New York; (e) has licensed IBM software pursuant to license agreements that are governed by New York law and were negotiated on the basis of correspondence and communications directed to New York; (f) has placed orders through IBM's New York website for IBM software which PSI has used in its emulator development and marketing program; and (g) has held meetings with IBM in New York, and directed correspondence to IBM in New York, concerning PSI's emulator systems in which it has requested that IBM license its patents to PSI and its copyrighted operating systems and other software for use on PSI emulator systems and threatened antitrust litigation. Because any use of IBM's software in conjunction with PSI's emulator system involves the translation of IBM's software in violation of the applicable license agreements, all demonstrations and uses of PSI's emulator systems involve breaches of contract that have occurred in New York. In addition, PSI has committed (and permitted its licensees and marketing partners to commit) acts of patent infringement or induced acts of patent infringement by others in New York, and has taken actions elsewhere directed t selling PSI emulator systems to customers based in New York, and/or PSI expects or should reasonably expect its acts to have consequences in New York and the acts have caused and will cause injury to IBM in New York. Among other things, PSI has publicly presented its infringing emulator systems in New York, including at a SHARE conference in New York; maintains an interactive website accessible to New York residents and contacts New York residents who express an interest in PSI's emulator systems from the office of its Eastern Regional Manager in Rocester, New York; and has met with customers in New York to promote the sale of, and offer to sell, PSI's emulator systems. An infringing PSI emulator system has been installed and used at a customer location in New York.
PSI admits that this Court has personal jurisdiction over PSI, and that PSI transacts business in the State of New York, is offering its products for sale in the State of New York, employs an Eastern Regional Manager in Rochester, New York who markets PSI products in New York and elsewhere, has licensed software products from IBM under agreements that are governed by New York law, has communicated with IBM representatives in New York, has placed orders through IBM's website, has attended meetings with IBM representatives in New York, presented a version of one of its products to prospective customers in New York, and installed a PSI mainframe at a customer location in New York. PSI denies the remaining allegations of paragraph 13.
14.
Venue is proper in this judicial district pursuant to 28 U.S.C §§ 1391(b), 1391(c), and 1400(b). A substantial part of the events giving rise to IBM's request for declaratory relief occurred in this judicial district. IBM and PSI met at IBM's offices in New York to discuss IBM's decision not to license its patents and software, and PSI directed correspondence to IBM's offices in New York, requesting a license for IBM's patents and software and threatening antitrust litigation. In addition, the actions of PSI (directly and through its licensees and marketing partners) in New York and directed to New York that infringe IBM's patents and breach IBM's license agreements are sufficient to give rise to personal jurisdiction in New york and accordingly support venue in this district. These activities include publicly presenting PSI's infringing emulator system at an industry conference in New York; using IBM software in New York in breach of the applicable license agreements; meeting with customers in New York to promote the sale of, and offer to sell, PSI emulator systems; and installing an infringing emulator system at a customer location in New York. Alternatively, the doctrine of pedant venue applies to IBM's patent infringement claims, so that this Court may at its discretion hear those claims, which arise out of the same nucleus of operative facts as IBM's declaratory judgement claim.
PSI denies that it ever threatened antitrust litigation, "translated" in violation of any licensing agreement, or infringed any patent in New York or any other venue. PSI admits that it met with IBM at IBM's offices in New York to discuss IBM's refusal to make its mainframe operating systems available to PSI and its customers, the conditions under which it might do so, and the anticompetitive nature of its refusal to do so. PSI further admits that it markets its products in New York, has presented a version of one of its products to prospective customers in New York, and has met with customers and potential customers in New York. PSI admits that venue is proper in the Southern District of New York. PSI denies the remaining allegations of paragraph 14.
15.
For over forty years, IBM has invested substantial time, effort, know-how, and creativity, and substantial amounts of money, in developing and improving its computer architectures and the computer systems that implement those architectures.
Admitted.
16.
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 has 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® (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 the development of System z or the System z products resulted solely from IBM's investments, and denies any remaining allegations of paragraph 16.
17.
A computer's architecture defines the logical structure and functional operation of the computer. System z computers implement IBM's current 64-bit z/Architecture®. As a result of IBM's investments, IBM's z/Architecture® has 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.
PSI admits the allegations of paragraph 17, except that PSI denies that the evolution of IBM's z/Architecture resulted solely from IBM's investments.
18.
Operating systems comprise the fundamental software that controls the execution of programs on the computer and provides 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 substantial investment over time.
Admitted.
Particular operating systems are designed to run on computers that implement a particular architecture and to capitalize on the features and characteristics of that architecture. IBM's copyrighted OS/390® operating system, for example, was designed to run on IBM's S/390® computers, which implement IBM's ESA/390 Architecture. IBM's copyrighted z/OS® operating system 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 od IBM's computer systems and to customer acceptance of those systems for mission-critical applications.
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 system 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 reliability of those systems and customer acceptance of those systems for mission-critical applications. PSI denies the remaining allegations of paragraph 19 on the ground that it is without knowledge or information sufficient to assess to the truth or falsity of those allegations.
20.
In addition to mainframe operating systems, architectures and computers that implement those architectures, IBM has invested substantial time, effort, know-how, creativity, and money in developing other software programs that work in conjunction with those operating systems and computers and themselves capitalize on the features and characteristics of IBM's computer architectures. Examples of such other IBM software programs include IBM's Customer Information Control Systems ("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 20. With respect to the third sentence of paragraph 20, PSI admits that the software programs referenced in the second sentence of paragraph 20 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.
21.
IBM holds a substantial 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®, as well as to aspects of the predecessor ESA/390 Architecture. IBM has further sought to protect its substantial investment in computer intellectual property by copyrighting its mainframe operating systems and other software and by imposing reasonable contractual restrictions on the manner in which customers may use these computer systems.
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 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.
22.
Recognizing the substantial value of IBM's intellectual property, PSI has developed and is now implementing a business model that seeks to usurp the value of IBM's investment in mainframe computer systems, architectures, operating systems, and other software programs. PSI seeks to do this by emulating, or mimicking, IBM's computer architecture. An emulator is a combination of software, firmware, and/or hardware added to a computer that implements one architecture (e.g., the Intel Architecture) for the purpose of translating computer programs written for a different architecture and enabling those programs to be run on the computer to which the emulator has been added. The purpose of an emulator is to allow the computer to which it is 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 objective by translating IBM's copyrighted software into a set of instructions that can be executed by a processor that is not capable of executing the original IBM instructions.
PSI admits the allegations of the fourth sentence of paragraph 22, and denies the remaining allegations of that paragraph.
23.
PSI claims to be the "first developer of a new generation of mainframe computers compatible with the broadest set of data center environments and operating systems, including IBM® z/OS®". PSI asserts that its emulator systems are compatible with IBM's ESA/390 Architecture and z/Architecture computer systems. The PSI emulator systems run on an Intel® Itanium®-based server. According to PSI, its emulator systems are capable of running IBM's OS/390® and z/OS® operating systems and other IBM computer programs that run on those operating systems, such as IBM's CICS® and DB2®.
PSI admits the first sentence of paragraph 23, admits that its products are compatible with IBM's ESA/390 architecture and z/Architecture computer systems, admits that its products run on Intel Itanium-based servers, and admits that its products are capable of running 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 denies the remaining allegations of paragraph 23.
24.
As PSI's public statements recognize, 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 an approximately 1000-page Principles of Operation ("POP"), the fifth edition of which was published in 2005. If the POP indicates that a facility is present, 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 mainframe, PSI's emulator system would have to accurately run z/OS® and at least any additional System z software required by the customers that PSI is tragetting.
PSI admits the allegations of the second sentence of paragraph 24, 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 by its customers. PSI denies the remaining allegations of paragraph 24.
25.
PSI has asserted that its emulator systems are 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® operating systems, other IBM software intended to run on OS/390® and z/OS®, and vendor and customer application software intended to run on those operating systems. PSI (through one of its licensees and marketing partners) has recently 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 an IBM mainframe computer.
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, 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 z/OS workloads as if they were operating on an IBM mainframe. PSI denies the remaining allegations of paragraph 25.
zSeries® servers and their predecessors have been the backbone of commercial computing for decades, reknowned for their reliability, scalability, availability, serviceability, and other industrial-strength attributes. The zSeries® server and its z/OS® operating system 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 cost millions of dollars in lost revenue or other significant negative business impact. 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 the potential to undermine either the reputation of z/OS® for accuracy, integrity, and reliability or customer acceptance of z/OS® for mission-critical applications.
Admitted, except that PSI denies the allegation of the first sentence of paragraph 26 that zSeries servers and their predecessors have been the backbone of commercial computing for decades on the ground that the 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 this allegation suggests that IBM has a dominant position in the market for mainframe computers, PSI admits this allegation.
27.
In March 2004, PSI executed an ICA with IBM. A true and correct copy of PSI's ICA is attached [to the court filing] as Exhibit 1. IBM has consistently made clear to PSI that the granting of software licenses has not in any way granted PSI a patent license or any express or implied rights, licenses, or immunities under IBM patents or other intellectual property. The ICA, by its terms, grants PSI "only the licenses and rights specified. No other licenses or rights (including licenses or rights under patents) are granted." The ICA expressly forbids PSI from, among other things, "translating" licensed ICA programs, including z/OS®. After executing the ICA, PSI licensed copies of z/OS® pursuant to the terms of the ICA.
PSI admits the first, second, fourth, fifth, and sixth sentences of paragraph 27. PSI denies the allegations of the third sentence of paragraph 27, and denies that the ICA prohibits anything that could broadly be considered "translating"; rather, the ICA requires the user to agree not to "reverse assemble, reverse compile, or otherwise translate." PSI denies the remaining allegations of paragraph 27.
28.
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 computer systems incorporating a different architecture. As described by PSI, z/OS® (and any other zSeries® software to be run on the emulator system) runs on top of the PSI "firmware" layer. In this arrangement, each instruction in z/OS® (and any other zSeries® software) that is being executed on the PSI emulator system is translated into one or more Itanium® instructions by the PSI firmware. PSI's translated Itanium® instructions are then executed by the Itanium® processor, with the intent of producing the same result as if the z/OS® (or zSeries® software) instructions translated by the PSI firmware were instead 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 instructions utilized by z/OS and other software written for those architectures, 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 28.
29.
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 used what PSI calls dynamic just-in-time translation, in which the object code of IBM's operating systems is translated, the translated instructions are stored or "cached" in the memory of the computer system on which the PSI emulator system is installed, and the translated instructions yielded by the emulator are executed by that computer system.
PSI admits that its products execute the "legacy instructions" included in the current version of IBM's mainframe operating system, that it has referred to its products' ability to execute the instructions contained in IBM's operating systems as "just in time translation," and that instructions are stored in cache in the computer's memory. PSI denies the remaining allegations of paragraph 29.
30.
As described in U.S. Patent 7,092,869 ("the '869 patent") issued to Ronald N. Hilton, PSI's founder and Chief Technology Officer, "[e]ach particular legacy instruction is translated into one or more particular translated instructions for emulating the particular translated legacy instruction." As further described in the '869 patent, the so-called legacy instructions at issue are for a "legacy system" (such as an IBM computer system having an ESA/390 Architecture or z/Architecture®); "the legacy instructions are object code instructions compiled/assembled for the S/390 [or System z] system and the translated instructions are for execution on a [different] architecture." As further described in the '869 patent, PSI's emulators use "translated code for emulating" the IBM computer system; the "native executable code" in the copyrighted IBM computer programs licensed by PSI under the ICA is "processed by the emulator .. to produce translated code .. for execution by the target system .. according to an architecture different from the native architecture." As described in the '869 patent, moreover, the "legacy code translator" in PSI's emulator systems stores ["]detailed information about the translation in translation store" and the "translated code .. output from this cache .. is executed" by the target computer system on which the emulator system is running. The net result, according to the '869 patent, is a "computer-implemented method for dynamic emulation of legacy instructions comprising," among other things, (a) "accessing said legacy instructions"; (b) "for each particular legacy instruction, translating the particular legacy instruction into one or more particular translated instructions for emulating the particular legacy instruction"; and (c) ultimately "executing the translated instructions to emulate execution of the legacy instructions."
PSI admits that its founder and Chief Technology Officer Ronald N. Hilton was the inventor of the inventions claimed in U.S. Patent No. 7,092,869 (the "'869 patent"), and that the patent includes the language quoted in paragraph 30. PSI denies the remaining allegations of paragraph 30.
31.
PSI's public presentations on its emulator systems have indicated that those systems operate in the manner described in the '869 patent, and that their purpose and function is to translate IBM's object code and to store the object code translations for use on a computer using an Itanium® processor. Based on PSI's public descriptions, PSI's emulator systems translate z/OS® into instructions that can be executed by the Itanium® processor in the computers on which the emulators are installed. Even if the resulting translations were accurate, and if the translated instructions in fact allowed an Itanium® processor to execute the translated instructions in a manner that provided performance comparable to the execution of the original instructions on a zSeries® server, such translation of z/OS® is prohibited by the ICA.
PSI admits that it has confirmed in public presentations that its products practice the invention claimed by the '869 patent and that the purposes of its products include enabling the Intel Itanium processors in those products to execute the z/Architecture and ESA/390 instructions utilized by IBM's z/OS and related object code. PSI denies the remaining allegations of paragraph 31.
32.
Based on the purpose and nature of PSI's emulator systems, as stated by PSI, and IBM's knowledge of emulator technology, the making, using, selling or offering for sale of those systems necessarily infringes IBM's patents, and/or will contribute to or induce infringement of those patents by users of PSI's emulator systems. IBM's conclusion that PSI's emulator systems infringe IBM's patents is not based on an examination of one of PSI's systems because IBM's request that it be permitted to conduct an examination of a PSI emulator system and its offer to discuss infringement in greater detail following such an examination have been ignored by PSI, which has instead threatened antitrust liability as a result of IBM's rejection of PSI's demands that IBM license its patents to PSI and its copyrighted software for use on PSI's emulator systems.
PSI admits that, to the best of its knowledge, IBM did not examine any product marketed by PSI before initiating this lawsuit. PSI denies the remaining allegations of paragraph 32.
33.
The IBM patents that are infringed by PSI include the following:
a. On December 9, 1997, the United States Patent and Trademark Office ("USPTO") issued U.S. Patent No. 5,696,709 entitled "Program Controlled Rounding Modes" (hereinafter "the '709 patent"). A true and correct copy of the '709 patent is attached [to the court filing] as Exhibit 2.
b. On October 20, 1998, the USPTO issued U.S. Patent No. 5,825,678 entitled "Method and Apparatus For Determining Floating Point Data Class" (hereinafter "the '678 patent"). A true and correct copy of the '678 patent is attached [to the court filing] as Exhibit 3.
c. On September 14, 1999, the USPTO issued U.S. Patent No. 5,935,520 entitled "Address Translation Buffer For Data Processing System Emulation Mode" (hereinafter "the '520 patent"). A true and correct copy of the '520 patent is attached [to the court filing] as Exhibit 4.
d. On November 16, 1999, the USPTO issued U.S. Patent No. 5,987,495 entitled "Method and Apparatus For Fully Restoring A Program Context Following An Interrupt" (hereinafter "the '495 patent"). A true and correct copy of the '495 patent is attached [to the court filing] as Exhibit 5.
e. On October 5, 2004, the USPTO issued U.S. Patent No. 6,801,993 entitled "Table Offset For Shortening Translation Tables From Their Beginnings" (hereinafter "the '993 patent"). A true and correct copy of the '993 patent is attached [to the court filing] as Exhibit 6.
Denied.
34.
IBM is the owner of all right, title and interest in and to the '709, '679, '250, '495, and '993 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 five 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 35, and therefore denies those allegations.
35.
IBM might identify additional IBM patents infringed by PSI's emulator systems after IBM has an opportunity to examine a PSI emulator system.
Denied.
36.
PSI and IBM have met and corresponded concerning PSI's activities. IBM has advised PSI that PSI's emulator systems infringe various IBM patents, and has offered to give PSI opportunities to demonstrate that its emulator systems are non-infringing if PSI so believes. PSI has declined IBM's invitations and 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 36.
37.
IBM and PSI have met and corresponded concerning PSI's demands that IBM agree to license its patents tp 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 has 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 somehow unlawful and damaging to PSI. 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 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 "intentionally anticompetitive" and that "our survival as a company has been 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 12, 2003, PSI wrote to IBM and stated that IBM's licensing position with regard to z/OS® "has severely [] 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 position is inconsistent with IBM's "prior practices and precedents" and (c) asserting that IBM's licensing position "is causing confusion -- both to us and our end user customers" and "is not just causing confusion in the market" but "is causing harm to our business."
PSI admits that it has met and corresponded with IBM regarding PSI's demands that IBM provide any patent licenses that may be necessary to develop, sell and distribute IBM-compatible mainframes and that IBM make its operating systems and other software available to PSI and customers of PSI's products; that IBM has refused to provide PSI or its customers with access to IBM's operating systems and software; and that PSI has informed IBM that IBM's conduct may be unlawful and is damaging to PSI. PSI admits that the allegations contained in the fourth through ninth sentences of paragraph 37 except insofar as the allegations refer to PSI's products as "emulator systems." PSI denies the remaining allegations of paragraph 37.
38.
At a meeting in New York 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 the 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. To date, PSI has provided IBM with no substantive response. Instead, PSI has chosen to continue its development and marketing efforts notwithstanding IBM's rights and interests."
With respect to the first sentence of paragraph 38, 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 38, and that IBM's correspondence dated May 24, 2006 contained the language quoted in the remainder of paragraph 38.
39.
On June 8, 2006, PSI directed correspondence to IBM at IBM's offices in New York asserting 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 the light of the history of communications between the parties, IBM reasonably construes this letter as threatening antitrust litigation if IBM continues 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 39, but denies that IBM did or could reasonably construe this as threatening antitrust litigation.
40.
On August 3, 2006, IBM declined PSI's request for reconsideration of its decisions not to grant PSI a patent license and not to license z/OS® and other software 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 IBM 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 40. PSI denies the remaining allegations of paragraph 40.
41.
On August 9, 2006, PSI directed correspondence to IBM at IBM's offices in New York. 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 "not undertaken the lengthy effort and expense of a detailed infringement analysis" with respect to other IBM patents, and 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 construes this correspondence as threatening antitrust litigation if IBM continues 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, and that the letter also indicated that PSI had 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.
42.
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 systems. 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 shipment 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% of the z/OS installed base." PSI has recently publicly demonstrated its infringing system in, among other places, Baltimore, Maryland; Houston, Texas; and San Jose and San Francisco, California; identified beta customers; and stated that its emulator would be generally available in the fourth quarter of 2006. PSI has been actively marketing and offering for sale its emulator systems tp potential customers, including potential customers in New York, and has 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 42.
43.
In addition to PSI's direct activities, beginning November 2006, one of PSI's licensees and marketing partners trumpeting the availability of one system based on PSI's emulator systems and the imminent availability of another PSI system. Following this announcement, PSI's emulator system are now being actively 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 43.
44.
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 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 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 system; (e) PSI is in discussions with IBM concerning software pricing for PSI systems and PSI will take care of 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 facilities 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 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 systems or the imposition of higher licensing fees for software used on PSI's systems than for software used on allegedly comparable IBM machines. As PSI reasonably expected, these statements and threats have been 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 in paragraph 44.
45.
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 website, 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 asserts that PSI has "rights to obtain IBM software licenses, and the legal know-how required to preserve and extend these rights," and suggests that with the "commercial marketing of PSI systems," IBM "will supply and support its full range of mainframe software products."
PSI admits that the referenced article appeared in a trade publication on September 26, 2006, 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.
46.
In addition, and also as a result of these and other activities, IBM has begun to receive customer communications suggesting confusion in the market with respect to customers' ability to use IBM software in conjunction with PSI's emulator systems.
PSI is without knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 46, and therefore denies those allegations.
47.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 46 of this Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-46 of the Complaint.
48.
PSI has 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 denies, however, that the scope of these licenses apply to any of the facts alleged in the Complaint.
49.
The ICA is, by its terms, governed by New York law.
Admitted
50.
IBM has fully performed all of its obligations under its license agreements with PSI.
Denied.
51.
The ICA expressly forbids PSI from, among other things, "translating" licenses ICA programs, including z/OS®.
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 the allegations in paragraph 50.
52.
According to PSI, PSI's emulator systems translate what PSI calls "legacy instructions" contained in z/OS® into what PSI calls "translated instructions." Based on PSI's public descriptions, PSI's emulator systems translate IBM's copyrighted software into instructions that can be executed by the Itanium® processor in the computers on which the emulators are installed.
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 52.
53.
PSI has used IBM's z/OS® operating system licensed pursuant to the terms of the ICA in conjunction in conjunction with PSI's emulator systems, and PSI's emulator systems have translated z/OS® in violation of the express prohibitions of the ICA. By doing so, PSI has breached its license agreements with IBM.
Denied.
54.
As a result of PSI's activities, IBM has been damaged in an amount to be proved at trial.
Denied.
55.
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.
56.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 55 of this Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-55 of the Complaint.
57.
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.
58.
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 system.
Denied.
59.
PSI has wilfully infringed the '709 patent.
Denied.
60.
PSI's acts of infringement of the '709 patent will continue after the service of this Complaint unless enjoined by the Court.
Denied.
61.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
62.
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.
63.
Unless PSI is enjoined by this Court from continuing its infringement of the '709 patent, IBM will suffer irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
64.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 63 of this Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-63 of the Complaint.
65.
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 '709 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
66.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '678 patent by contributing to or actively inducing the infringement by others of the '678 patent by providing PSI's emulator system.
Denied.
67.
PSI has willfully infringed the '678 patent.
Denied.
68.
PSI's acts of infringement of the '678 patent will continue after the service of this Complaint unless enjoined by the Court.
Denied.
69.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
70.
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.
71.
Unless PSI is enjoined by this Court from continuing its infringement of the '678 patent, IBM will suffer irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
72.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 55 of this Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-55 of the Complaint.
73.
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 '530 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
74.
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 system.
Denied.
75.
PSI has willfully infringed the '520 patent.
Denied.
76.
PSI's acts of infringement of the '520 patent will continue after the service of this Complaint unless enjoined by the Court.
Denied.
77.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
78.
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.
79.
Unless PSI is enjoined by this Court from continuing its infringement of the '520 patent, IBM will suffer irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
80.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 79 of this Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-79 of the Complaint.
81.
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.
82.
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 system.
Denied.
83.
PSI has willfully infringed the '495 patent.
Denied.
84.
PSI's acts of infringement of the '495 patent will continue after the service of this Complaint unless enjoined by the Court.
Denied.
85.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
86.
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.
87.
Unless PSI is enjoined by this Court from continuing its infringement of the '495 patent, IBM will suffer irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
88.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 87 of this Complaint as if fully set forth herein.
PSI incorporates by reference its responses to paragraphs 1-87 of the Complaint.
89.
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 '993 patent by practicing one or more claims in the '993 patent in the manufacture, use, offering for sale, and sale of PSI's emulator systems.
Denied.
90.
In violation of 35 U.S.C. § 271, PSI has infringed and is continuing to infringe the '993 patent by contributing to or actively inducing the infringement by others of the '993 patent by providing PSI's emulator system.
Denied.
91.
PSI has willfully infringed the '993 patent.
Denied.
92.
PSI's acts of infringement of the '993 patent will continue after the service of this Complaint unless enjoined by the Court.
Denied.
93.
As a result of PSI's infringement, IBM has suffered and will suffer damages.
Denied.
94.
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.
95.
Unless PSI is enjoined by this Court from continuing its infringement of the '993 patent, IBM will suffer irreparable harm and impairment of the value of its patent rights. Thus, IBM is entitled to an injunction against further infringement.
Denied.
96.
IBM realleges and incorporates herein the allegations of paragraphs 1 through 95 of this Complaint as if fully set forth.
PSI incorporates by reference its responses to paragraphs 1-95 of the Complaint.
97.
There is 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 emulators 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 the potential to undermine either the reputation of z/OS® for accuracy, data integrity, and reliability or customer acceptance of z/OS® for mission-critical applications.
Denied.
98.
Since PSI's emulator systems first came to IBM's attention, IBM has concluded, based on their purpose and nature, that those systems will necessarily infringe IBM patents. PSI has not ameliorated IBM's reasonable, good faith concerns that PSI's emulator systems infringe IBM patents.
PSI is without knowledge or information sufficient to form a belief as to the truth of the allegations in paragraph 98.
99.
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 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; and (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.
PSI admits that it has requested licenses to any potentially relevant IBM patents and to IBM software on the same terms as offered to other competitors and IBM's own customers, that it has asserted that a refusal to license on nondiscriminatory terms is anticompetitive, acknowledged confusion in the market over IBM's policies, has acknowledged on numerous occasions the harm to PSI flowing from IBM's discriminatory policy, and that it is prepared to litigate the issues in this case. PSI otherwise denies the allegations in paragraph 99.
100.
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 system that infringes IBM's patents. PSI's emulator systems infringe IBM patents, and IBM has so advised PSI. In response to IBM's stated concerns about patent infringement, PSI has asserted, without providing IBM with any supporting information or any opportunity to examine a PSI emulator system, that PSI's emulators do not infringe certain patents directed to aspects of z/Architecture® identified by IBM as likely to be infringed by PSI's emulators. In light of PSI's public statements concerning the purpose and capabilities of its emulators, and IBM's knowledge or emulator technology, PSI's unsupported assertion is wrong.PSI has provided no assurances whatsoever concerning a larger groups of patents identified by IBM as potentially infringed by PSI's emulator systems and has instead requested that IBM license PSI under IBM's patent portfolio -- an action that IBM is unwilling to take. Nevertheless, PSI (directly and through its licensees and marketing partners) has used in various public forums and is marketing and offering for sale emulator systems that necessarily infringe 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 denies that it initially denied IBM information about its product. PSI admits that it subsequently denied non-public information and access to its product because IBM conditioned such an examination upon it being of a non-confidential nature. PSI otherwise denies the allegations in paragraph 100.
101.
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 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 computer system that violates IBM's patents. Nevertheless, IBM has reasonably construed PSI's statements (and statements made by one of PSI's licensees and marketing partners) as portending inevitable and imminent litigation over the propriety of IBM's patent and software licensing decisions. 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 and other software for use on PSI's mainframes. Defendant otherwise denies the allegations in paragraph 101.
102.
Litigation over the propriety of IBM's licensing position under the antitrust laws is now 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 assertions 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. IBM and PSI have a real and actual 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.
Denied.
103.
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 not violate the antitrust laws.
Denied.
WHEREFORE, IBM prays for the following relief:
- That this court declare that IBM is entitled to terminate the ICA and all software licenses previously granted to PSI under the terms of the ICA as a result of PSI's breaches of the ICA;
- That PSI, its officers, agents, servants, employees, and those persons acting in active concert or in participation with it be enjoined from further infringement of the '709 patent, the '678 patent, the '520 patent, the '495 patent, and the '993 patent pursuant to 35 U.S.C. § 283;
- That this court declare 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 anticompetitive and does not violate the antitrust laws;
- That PSI be ordered to pay damages adequate to compensate IBM for PSI's infringement of the '709 patent, the '678 patent, the '520 patent, the '495 patent, and the '993 patent pursuant to 35 U.S.C. § 284 and adequate to compensate IBM for PSI's breaches of the IBM license agreements pursuant to which PSI has licensed IBM software for purposes of its emulator development program;
- That PSI be ordered to pay treble damages pursuant to 35 U.S.C. § 284;
- That PSI be ordered to pay attorney's fees pursuant 35 U.S.C. § 285
- That PSI be ordered to pay prejudgement interest;
- That PSI be ordered to pay all costs associated with this action; and
- That IBM be granted such other and additional relief as the Court or a jury may deem just and proper.
Further answering the 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 '709 patent, the '678 patent, the '520 patent, the '495 patent or the '993 patent, 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 '709 patent, the '678 patent, the '520 patent, the '495 patent or the '993 patent. Moreover, PSI does not intend or have knowledge that its customers will use its products in a manner that infringes the '709 patent, the '678 patent, the '520 patent, the '495 patent or the '993 patent.
3.
On information and belief, the claims of the '709 patent, the '678 patent, the '520 patent, the '495 patent and the '993 patent 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, 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 '709 patent, the '678 patent, the '520 patent, the '495 patent and/or the '993 patent 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 '709 patent, the '678 patent, the '520 patent, the '495 patent and/or the '993 patent, 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.
Plaintiff's claims against PSI are barred by the doctrines of acquiescence and equitable estoppel.
8.
The '709 patent, the '678 patent, the '520 patent, the '495 patent and the '993 patent are unenforceable due to patent misuse. Plaintiff has sought to illegally extend its alleged patent 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 to rights in another patent or purchase of a separate product. Specifically, IBM has conditioned the sale of its mainframe operating systems and other application software on the purchase and/or use of an IBM mainframe, and refused to sell to PSI and its customers.
10.
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.
11.
IBM's purported claims, individually and as a whole, are barred by the doctrine of unclean hands.
12.
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.
13.
IBM has failed to 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.
14.
IBM's purported breach of contract claim is barred 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.
15.
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.
16.
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 licensed IBM's operating systems for 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.
17.
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.
18.
Any breach of any contract was excused by PSI's right to use self-help to avoid the consequences of IBM's unlawful actions.
19.
IBM has not sufficiently alleged facts showing an actual case or controversy as to the declaratory judgment 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.
20.
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 judgment action.").
21.
Although PSI will not be filing a separate motion to dismiss the declaratory judgment action, it urges this Court to dismiss IBM's declaratory judgment allegations and claims sua sponte. See Soto v. United States, 185 F.3d 48, 51 (2d Cir. 1999) (stating that federal courts have both the power and obligation to raise their lack of jurisdiction sua sponte).
22.
IBM's purported declaratory judgment action has been rendered moot by PSI's counterclaims, as alleged herein.
Counterclaimant Platform Solutions, Inc., as and for its Counterclaims against IBM, alleges as follows:
1.
This case arises out of Counterclaim-Defendant IBM's unlawful and anticompetitive 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 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 sale of its operating systems upon the purchase or continued use of an IBM mainframe computer. By doing so, and by denying PSI and its customers access to the operating system and software products and technical support needed to operate competitive mainframe systems, IBM is depriving mainframe computer and operating system customers of the benefits of competition and forcing those customers to pay supracompetitive terms for its products and services.
Denied.
3.
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 mainframe computers 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.
IBM is the dominant player in both the United States and worldwide markets for mainframe computers and mainframe operating systems, and it has held that position for decades. Consumers have invested over a trillion dollars in IBM-compatible software and hardware.
IBM admits that it describes its zSeries servers as "mainframes"; avers that its zSeries servers compete with a wide range of servers and other computers; further avers that IBM is aware of estimates that $1 trillion worth of applications have been written in the COBOL programming language; further avers that the COBOL programming language is a multiplatform language available on many different computer systems, including many nonmainframe computer systems, and that COBOL facilitates the movement of applications among such different systems; and denies the remaining allegations of Paragraph 4.
5.
Compatibility between operating system 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-compatible mainframes and IBM-compatible software. Consumers who have adopted the IBM platform in the past are now "locked-in" to using IBM compatible software and hardware. Were they to change platforms, they would incur enormous switching costs.
(For the purposes of these Counterclaims, computers that will run IBM's mainframe operating system software are referred to as "IBM-compatible," regardless of whether those computers are manufactured by IBM or a third party. Software application programs that run on IBM-compatible mainframes using the IBM mainframe operating system are also referred to as "IBM-compatible" or "IBM-mainframe-compatible" software programs, regardless of whether those applications are made 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 computer 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 5.
6.
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 computers by providing them with licenses, technical information, and technical support for IBM's mainframe operating systems and related software applications. However, its two primary remaining competitors, Amdahl and Hitachi, announced their exit from the market in 2000. Thus, during the past six years, IBM has solidified its stranglehold on the IBM-compatible mainframe market and now faces virtually no competition from rival developers of IBM-compatible mainframes.
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; further admits that IBM has licensed what PSI refers to in its 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; further 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 customers 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 websites, for a fair and accurate summary of those companies' current activities; and denies the remaining allegations of Paragraph 6.
The URI supplied to the Court by IBM was mispelt - it has been corrected.
7.
Today, PSI 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 partner Hewlett-Packard Company ("HP"), 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. PSI has thus developed a mainframe computer system which would provide purchasers of IBM operating system and application software with an alternative to continuing to purchase mainframe computers from IBM, while allowing them to continue to run their current software applications - provided, however, that the consumer is able to license the mainframe operating system from IBM. In addition to providing consumers with an alternative to IBM's own mainframe computers, 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, and Windows; avers that PSI's allegations concerning PSI's company history, PSI's licensing of Amdahl technology, PSI's relationship with Hewlett-Packard Company, and the claimed capabilities of PSI's emulator systems appear to be consistent with certain statements that appear on PSI's website 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 7.
Rather than compete with PSI on the merits - as it did with Hitachi and Amdahl - IBM has now embarked on a campaign of unlawful, inequitable, deceptive, and anticompetitive 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 and z/VM (collectively "z/OS"), to consumers' purchase or continued use of an IBM mainframe, thereby forcing customers of its operating system and applications to purchase or 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 discontinued 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; (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; and (c) past licensing to companies operating the same business model in the same market.
[Emphasis added September 2007 after PSI's apparent platform switch from Hewlett-Packard to NEC]
IBM avers that PSI has inappropriately defined z/OS to include various other IBM operating systems; and denies the remaining allegations of Paragraph 8.
9.
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 hundreds of millions of dollars in damages.
[Emphasis added September 2007 after PSI's apparent platform switch from Hewlett-Packard to NEC]
Denied
10.
The market-wide cost of IBM's exclusionary campaign to eliminate competition to its mainframe computers will be hundreds of millions of dollars in additional hardware, software and service costs. 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
11.
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 11.
12.
IBM is, and at all times mentioned herein has been, 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.
13.
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 13.
14.
This Court has subject matter over PSI's claims for declaratory judgment of non-infringement and invalidity pursuant to 28 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 14.
15.
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 Clayton 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 based 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.
16.
This Court has jurisdiction over PSI's state law claims pursuant to 28 U.S.C. § 1367.
Admitted.
17.
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 or value of $75,000.
Admitted.
18.
Venue for these Counterclaims is proper in this District because IBM maintains its principal place of business in this District.
Admitted.
19.
The relevant markets in this case are the markets for IBM-compatible mainframe computers and IBM-compatible operating systems.
Denied
20.
Mainframe computers are large, expensive, powerful computers used for processing very 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 billing, accounting, order entry, record keeping and transaction processing. Much of the work done on these mainframe computers uses software custom-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 government 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 20.
21.
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.
22.
While 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 z/OS 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, consumers 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 many consumers to IBM-compatible mainframe computer systems, because conversion or migration to non-IBM-compatible mainframe computer systems would be prohibitively expensive.
IBM admits that it is aware of estimates that $1 trillion worth of applications have been written in the COBOL programming language; 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; and denies the remaining allegations of Paragraph 22.
23.
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 and to retrain employees and reconfigure operations to work with the new operating system. Many locked-in consumers who use IBM-compatible mainframe software for mission critical functions, such as banking, insurance, or 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.
24.
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.
25.
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 or IBM-compatible mainframes if the price increases did not exceed the costs of abandoning their existing investments in IBM-compatible mainframe software.
Denied.
26.
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 mainframe 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 servers and their predecessors; further admits that IBM sells such computers; and denies the remaining allegations of Paragraph 26.
27.
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 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 had entered the market in thirty years. IBM'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 anticompetitive conduct alleged herein, also creates additional barriers to entry.
Denied.
28.
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 lockin 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 "servers" 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 z/990 mainframe is 30 percent to 60 percent less than combining thirty Sun or Linux servers to perform the same functions.
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 computers from Unisys and Bull and a host of other servers and computers 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 28.
29.
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.
30.
The second relevant 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/390 (distribution and support for which has been dropped) and z/OS operating systems (which includes z/OS, VSE, z/TSF and z/VM), with thousands of customers worldwide.
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 levels of which run on certain levels of IBM S/390 and zSeries servers, as well as 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 17, 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 support 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 worldwide; and denies the remaining allegations of Paragraph 30.
31.
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 hardware 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 Paragraph 31.
32.
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 the 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 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; further admits that IBM is aware of estimates that $1 trillion worth of applications have been written in the COBOL programming language; 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; and denies the remaining allegations of Paragraph 32.
33.
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 programs, 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. 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-in to 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 admits that servers and other computers running Linux, Unix, and Windows are promoted by competitors, and are regarded by many users, as reasonable substitutes for servers running OS/390 and z/OS; denies that 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 33.
34.
Cross-elasticity of demand supports limitation of the market to IBM compatible mainframe operating 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 it is aware of estimates that $1 trillion worth of applications have been written in the COBOL programming language; further admits that it is aware of analyst estimates indicating that there are 200 billion lines of COBOL in use; 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 website 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 34.
35.
The primary IBM-compatible mainframe operating system currently marketed or supported by 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 35.
36.
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 thoroughly 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 customers' 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 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 36.
37.
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 and market power under that broader market definition, with a share in excess of 85 percent. As IBM has itself acknowledged, Linux, Unix or Windows are not true mainframe operating systems because they have neither the performance capabilities or 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 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 computers from Unisys and Bull and a host of other servers and computers 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 37.
38.
The relevant geographic market in this case is worldwide. 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 for the exclusionary conduct alleged below, PSI has lost and is losing sales both in the United States and in export markets throughout 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 worldwide; avers that PSI 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 thereof; and denies the remaining allegations of Paragraph 38.
39.
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.
40.
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 40.
41.
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.
Denied.
42.
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.
43.
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.
44.
IBM's policy of non-discriminatory licensing and system openness was integral to its public image, reputation and success.
Denied.
45.
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 run their IBM mainframe operating systems and IBM-compatible mainframe application software. For decades following the development of such IBM-compatible mainframe computers, IBM licensed its mainframe operating systems on nondiscriminatory terms to the purchasers of such IBM-compatible mainframe computers. The availability of competing IBM-compatible mainframe computers from Amdahl and from other vendors, such as Hitachi Data Systems, provided additional incentives for consumers to use IBM mainframe operating systems and to develop or use other IBM-compatible mainframe application software.
IBM admits the allegations of the first two sentences of Paragraph 45; and denies the remaining allegations of Paragraph 45.
46.
Although competition in related markets for mainframe computers and software applications written for mainframe computers provided some competitive pressure for IBM, IBM always retained 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.
Denied.
47.
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 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 websites, for a fair and accurate summary of those companies' current activities; and denies the remaining allegations of Paragraph 47.
48.
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 government concluded that, although IBM still had substantial market power in the S/390 operating systems market and mainframe market, 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 the 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 48.
49.
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 anticompetitive activity that would violate the antitrust laws, it would immediately be liable to suit. For example, should IBM engage in anticompetitive 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]. Also, IBM would be liable to a host of potential private treble damage actions. [citations omitted]."
[Emphasis added]
This can be found at http://www.usdoj.gov/atr/cases/f1200/1273.htm - page 42 paragraph 2.
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 the submission in its appropriate context; and otherwise denies the allegations of Paragraph 49.
50.
As discussed below, once Amdahl and Hitachi exited the market for IBM compatible mainframes, IBM reversed its practice of system openness and reasonable non-discriminatory licensing and embarked on a strategy of monopolizing the market for mainframe computers.
Denied.
51.
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 sold 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 51.
52.
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 that they would stop manufacturing IBM-compatible mainframe computers, leaving IBM as the sole developer.
IBM admits that 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 websites, for a fair and accurate summary of those companies' current activities; and denies the remaining allegations of Paragraph 52.
53.
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 March 1, 2001; and otherwise admits the allegations of Paragraph 53.
54.
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 production and serviced 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 54.
55.
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 September 2004 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 55.
56.
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 a computer system 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 consumers could continue to run their IBM-compatible applications software), but also would run other, non-IBM operating systems (such as UNIX, Linux or Windows) in order to accommodate consumers' desires to utilize additional, non-IBM-compatible applications software and provide consumers with greater flexibility in the future paths of their informational technology purchasing decisions.
IBM admits that public sources state that PSI was founded in 1999; further admits that the allegations of Paragraph 56 appear to be consistent with certain statements that appear on PSI's website and in PSI's public presentations; and otherwise denies the allegations of Paragraph 56 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
57.
PSI chose to utilize equipment manufactured by HP in its development. 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 57 appear to be consistent with certain statements that appear on PSI's website and in PSI's public presentations; and otherwise denies the allegations of Paragraph 57 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
58.
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 also can 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 Paragraph 58 appear to be consistent with certain statements that appear on PSI's website in PSI's public presentations; denies PSI's purported distinction between PSI's system and other emulators; and denies the remaining allegations of Paragraph 58 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
59.
Because of IBM's monopoly in the market for mainframe operating systems and the vast base of consumers locked-in to IBM-compatible mainframe software, PSI could not compete in the mainframe computer market if its computers were not compatible with IBM's mainframe operating systems. 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, customers 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.
60.
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 refusing 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 its 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 a Intel 64-bit system, but it offered no reason for not doing so. At the time, IBM was licensing OS/390 on its own 64-bit systems, and also had 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 systems marketed by Fundamental Software, Inc., which had a patent license with IBM that expired on October 31, 2006; further admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI in their appropriate context; and denies the remaining allegations of Paragraph 60.
61.
PSI sought further assurances that IBM would not discriminate against 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 respect 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; further admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI in their appropriate context; and denies the remaining allegations of Paragraph 61.
62.
In late February 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 for 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 would be 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 admits that the history of correspondence between IBM and PSI is a fair and accurate summary of PSI's communications to IBM in their appropriate context; and otherwise denies the allegations of Paragraph 62.
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 terms, based on performance and functionality, provided that PSI's computer systems did not infringe IBM intellectual property rights. IBM further stated: "[W]e believe 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 admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI in their appropriate context; 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 relating only to IBM's Enterprise Systems Architecture/390 and not to IBM's z/Architecture, and expressly referenced, among other things, IBM's right to change its then-current licensing practices; and denies the remaining allegations of Paragraph 63.
64.
Having been assured that IBM would not discriminate in its licensing and that any patent conflicts could be avoided though a licensing agreement, PSI proceeded with its development plan.
Denied.
65.
On or about May 14, 2003, entered into a development license agreement for OS/390. OS/390 had already been withdrawn from marketing and, undisclosed to PSI at the time of the agreement, IBM 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; avers that this development license did not give PSI the right to use OS/390 for the uses alleged in the Counterclaims; further admits that OS/390 V2R10, the latest version of OS/390, was withdrawn from marketing on December 17, 2002, that IBM announced on August 5, 2003 that it would discontinue 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 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 patents or other intellectual property"; further avers that IBM told PSI, in 2001, that IBM did not intend to license its z/Architecture and told PSI, on May 5, 2003, that IBM does "not plan to license PSI in the fields of zArchitecture and coupling"; and denies the remaining allegations of Paragraph 65.
66.
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 to PSI, however, IBM has reversed course and now refuses to grant further 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 licenses 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 licenses and communicated with IBM personnel who were not knowledgeable 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 66.
67.
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 admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI in their appropriate context; and otherwise denies the allegations of Paragraph 67.
68.
IBM has widely represented, on its website 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 on the website 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.
The Internet WayBack Machine has several copies of the cited page, the most recent being from February 2006. An accurate copy of this archived text will be found at the foot of this page. This page is not specific to IBM's mainframes and thus reflects a major change in IBM's practices.
IBM admits that the page formerly on its website at www.ibm.com/ibm/licensing/patents/practices.shtml was taken down on or about February 21, 2006; avers that the statement formerly contained at that website 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 website page for a fair and accurate summary of the statement in its appropriate context; and denies the remaining allegations of Paragraph 68.
69.
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 with PSI.
IBM admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI 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 69.
70.
In 2004, IBM engaged in patent license discussions with PSI. In those discussions, IBM represented to PSI that IBM would provide a nondiscriminatory patent 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 percent 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.
IBM admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI and PSI's communications to IBM in their appropriate context; and otherwise denies the allegations of Paragraph 70.
71.
IBM thereafter refused to continue patent license discussions with PSI unless PSI: (i) disclosed specific technical information about its product currently 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 would be fully usable 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, while simultaneously signing an agreement stating that PSI was not revealing confidential, proprietary information.
IBM admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI in their appropriate context; and otherwise denies the allegations of Paragraph 71.
72.
In August 2005, IBM sent PSI a list of some 150 patents which it characterized as a "representative list" of IBM patents that "may" be infringed by the PSI system, without linking 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 claims in any of these patents.
IBM admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI in their appropriate context; and otherwise denies the allegations of Paragraph 72.
73.
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 simply 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 product information confidential.
IBM admits that the history of correspondence between IBM and PSI is a fair and accurate summary of PSI's communications to IBM in their appropriate context; and otherwise denies the allegations of Paragraph 73.
74.
In February 2006, representatives of PSI and of 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 effect 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 74.
75.
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 PSI 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. This decision was made for purely anticompetitive reasons.
IBM admits that the history of correspondence between IBM and PSI is a fair and accurate summary of IBM's communications to PSI in their appropriate context; and otherwise denies the allegations of Paragraph 75.
76.
In 2005, PSI began considering a potential acquisition of its business to a major technology company, which, on information and 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 76 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
77.
In October 2006, PSI was on the verge of finalizing the acquisition.
IBM denies the allegations of Paragraph 77 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
78.
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 allegations of Paragraph 78 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
79.
Upon information and belief, that company was deterred by IBM's refusal to license z/OS on a PSI mainframe.
IBM denies the allegations of Paragraph 77 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
80.
Upon information and belief, IBM also threatened the would-be acquiring company with other adverse economic consequences were it to purchase PSI or market its products.
Denied.
81.
The abandonment of the potential acquisition has destroyed a substantial business opportunity for PSI, causing PSI hundreds of millions of dollars in damages.
Denied.
82.
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. IBM has also 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 82.
83.
The PSI mainframe's IBM-compatibility was implemented through the use of IBM's Principles of Operation, which are in the public domain. Many of the architectural 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 83 concerning PSI's intentions and activities for lack of knowledge or information sufficient to form a belief as to the truth thereof; and denies the remaining allegations of Paragraph 83.
84.
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 has no need to - practice.
Denied.
85.
IBM never accused PSI of breaching these provisions of its licensing agreement prior to initiating suit.
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, for a fair and accurate summary of IBM's communications to PSI in their appropriate context; 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; and denies the remaining allegations of Paragraph 85.
86.
Assuming arguendo that IBM's construction of the licensing agreement is correct - which it is not - the agreement would require that IBM's be run on only on mainframes with IBM architecture, which only IBM has. IBM cannot identify any legitimate, non-pretextual, pro-competitive justification for requiring customers to agree to such an exclusive dealing provision.
Denied.
87.
IBM's assertions that it is motivated by a desire to preserve the reputation of its product and enhance "reliability, availability and serviceability" lacks 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 systems to sophisticated consumers; and denies the remaining allegations of Paragraph 87.
88.
Although PSI at all times expected to obtain a license to IBM's patents on terms similar to those provided to Amdahl and Hitachi, and relied on IBM's representations that it would license them on a non-discriminatory basis, PSI was at all times, and remains, unaware of any valid IBM patents that are infringed by the PSI mainframe. Rather, PSI was aware that IBM possessed hundreds of patents in the field and believed that it was more cost-efficient to obtain a license from IBM to avoid potential litigation, such as the instant suit.
Denied.
89.
IBM's patents, including those asserted in this action, relate to 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.
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 89.
90.
Licensees of IBM's mainframe operating systems have an implied license to perform the functions described in these patents - without such a license, the operating software would be valueless. Regardless of how IBM's operating system license is phrased, it is not permitted to write its license in such a manner 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 the use of IBM's operating system on any mainframe, including a PSI mainframe.
IBM avers that the allegations of the second sentence of Paragraph 90 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 90.
91.
Moreover, upon information and belief, PSI and/or its customers cannot be held liable for infringement because HP, PSI's business partner, and Intel, the manufacturer of the Itanium processors in which some of the facilities IBM asserts are infringing reside, have patent cross-licenses with IBM that apply to PSI's mainframes.
Denied.
92.
Finally, even assuming arguendo that IBM has valid patents that are infringed by certain uses of PSI's mainframe, there are substantial non-infringing uses of those mainframes. IBM's accusations of infringement are therefore inaccurate.
IBM denies the allegations of Paragraph 92 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
93.
PSI cannot yet fully assess whether IBM brought its patent infringement claims based on a good faith belief in their merits, or instead is 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 establishes that IBM's patent infringement claims are part of its exclusionary campaign to foreclose competition in the market for mainframe computers, PSI reserves to right to include that conduct as among the grounds 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 93.
94.
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 patents would be essential facilities because any IBM-compatible mainframe would necessarily infringe IBM's patents.
Denied.
95.
IBM's refusal to provide access to that essential facility, when considered in light of IBM's market power, previous policy, practice, and representations to PSI, is independently, and in combination with IBM's tying and other wrongful conduct, anticompetitive. 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 its intellectual property, which it has freely licensed to others.
Denied.
96.
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 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.
97.
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 version 1.7. On August 8th, 2006, IBM announced the terms for its latest version of z/OS, version 1.8, which dropped the term "or equivalent," referencing only System z servers.
IBM admits that mainframe computers and operating systems could be sold separately; refers to its historical statements concerning software licensing terms for a fair and accurate summary of IBM's statements in their appropriate context; 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 97.
98.
By changing its historic practices of (i) providing nondiscriminatory licenses to its 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 patents on standard terms and conditions, among other things, IBM has engaged in exclusionary conduct injuring competition in the relevant market for IBM-compatible mainframe computers.
Denied.
99.
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.
100.
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 harms 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.
101.
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; and (c) delayed PSI's entry into the market. 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.
102.
IBM itself has recognized that conduct such as that in which it is now engaging is anticompetitive 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 it 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 102.
103.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 102 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-102.
104.
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) interference with a prospective contractual relationship, (vi) forcing customers to "upgrade" to newer versions of its operating system 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 in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2.
Denied.
105.
IBM has a monopoly and exercises market power in the relevant markets for IBM-compatible mainframe computers and mainframe operating systems.
Denied.
106.
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.
107.
IBM's purported bases for the anticompetitive acts alleged herein are pretextual and any pro-competitive benefits of such acts are outweighed by the harm to competition and consumers.
Denied.
108.
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 anticompetitive 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.
109.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 108 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-108.
110.
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) interference with a prospective contractual relationship, (vi) forcing customers to "upgrade" to newer versions of its operating system 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 system products 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 in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2.
Denied.
111.
IBM has undertaken these acts with the specific intent of monopolizing the market for IBM-compatible mainframes.
Denied.
112.
There is a dangerous probability that IBM, unless it is restrained, will succeed in monopolizing the market for IBM-compatible mainframe computers.
Denied.
113.
There are no legitimate business justifications for IBM's anticompetitive practices, and IBM's purported bases for tying its operating system to its mainframe and refusing to enter into a patent license with PSI on IBM's standard terms and conditions are pretextual.
Denied.
114.
As a direct and proximate result of IBM's tying, monopoly leveraging, interference with a prospective contractual relationship, denial of access to an essential facility, and other anticompetitive 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 of consumers in the affected markets.
Denied.
115.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 114 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-114.
116.
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 PSI 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.
117.
Alternatively, 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 PSI mainframes, as alleged hereinabove, constitutes a tying arrangement and an unreasonable restraint of trade that is unlawful under Section 1 of the Sherman Act, 15 U.S.C. § 1, under the rule of reason.
Denied.
118.
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.
119.
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 coerces consumers to purchase IBM's mainframe computers.
Denied.
120.
IBM has monopoly power in the market for IBM-compatible mainframe operating systems enabling it to appreciably restrain trade in the market for IBM compatible mainframes, and to coerce the purchase of IBM's mainframe computers.
Denied.
121.
IBM's tying has affected and will continue to affect a not insubstantial volume of interstate commerce in the relevant markets.
Denied.
122.
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.
123.
As a direct and proximate result of IBM's tying, 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 of consumers in the affected markets.
Denied.
124.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 123 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-123.
125.
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. § 14. The effect of these arrangements has been to substantially lessen competition in the relevant markets for mainframe computers.
Denied.
126.
There is no legitimate business justification for IBM's anti-competitive practices and any purported legitimate business justifications are mere pretexts.
Denied.
127.
IBM's anticompetitive practices have proximately caused damage to PSI in an amount to be proven at trial.
Denied.
128.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 127 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-127.
129.
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 anticompetitive acts as alleged herein.
Denied.
130.
IBM's conduct as alleged hereinabove threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law.
Denied.
131.
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 acts of unfair competition as alleged herein. If not enjoined, IBM's conduct will cause further injury to PSI and consumers.
Denied.
132.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 131 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-131.
133.
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 nondiscriminatory 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 requests, (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 consumers were relying on to its detriment.
Denied.
134.
IBM's conduct as alleged hereinabove is oppressive, offends public policy, and/or is injurious to consumers.
Denied.
135.
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.
136.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 135 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-135.
137.
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 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 consumers without disclosing this to customers, (vi) denigrating PSI and its products to consumers; and (vii) other false and misleading statements.
Denied
138.
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 by hindering and delaying PSI's entry into the market.
Denied
139.
PSI and consumers in the New York 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
140.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 139 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-139.
141.
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 141 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
142.
In October 2006, that company signed a letter of intent to purchase PSI for millions of dollars.
IBM denies the allegations of Paragraph 142 for lack of knowledge or information sufficient to form a belief as to the truth thereof.
143.
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.
144.
Upon information and belief, IBM wrongfully exerted economic pressure on the would-be purchaser and acted with intent to suppress competition in the IBM compatible mainframe market, thus creating an unlawful restraint of trade.
Denied.
145.
IBM was aware of the prospective economic relationship when it interfered with PSI's prospective contractual relationship and acted with the intent to destroy that relationship as a means to preserve its monopoly power.
Denied.
146.
As a direct and proximate result of IBM's tortious comment, PSI suffered injury and loss of money.
Denied.
147.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 146 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-146.
148.
Until 2006, IBM had a publicly announced policy of reasonable, nondiscriminatory patent licensing on its website.
IBM avers that the page formerly on its website at 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 website 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 website page for a fair and accurate summary of the statement in its appropriate context; and otherwise denies the allegations of Paragraph 68.
149.
In letters dated January 12, 2001, February 15, 2001, and March 9, 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 149.
150.
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 150.
151.
In 2004, IBM engaged in patent license discussions with PSI. In those discussions, IBM again represented to PSI that IBM would provide a nondiscriminatory 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 151.
152.
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.
153.
PSI reasonably, foreseeably, justifiably, and to its detriment, relied on IBM's representations and promises, within the past two years, by, among other things, obtaining more than $20 million in venture capital financing 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.
154.
IBM has failed and refused to perform its promises alleged above.
Denied.
155.
PSI will perform, or is excused from performing as a result of IBM's breaches, all of its obligations under the contract.
Denied.
156.
Particularly in light of the other behavior 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 an 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 acquiesced to that agreement, IBM revealed its true intent not to license any patents to PSI.
Denied.
157.
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 other parties to its license agreements and patent licenses.
Denied.
158.
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 intellectual property that IBM represented that it would license.
Denied.
159.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 158 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-158.
160.
Plaintiff purports to be the owner of the U.S. Patent No. 5,696,709 ("the '709 patent"), U.S. Patent No. 5,825,678 ("the '678 patent"), U.S. Patent No. 5,953,520 ("the '520 patent"), U.S. Patent No. 5,987,495 ("the '495 patent"), and U.S. Patent No. 6,801,993 ("the '993 patent").
IBM avers that it is the owner of the patents in suit; and otherwise admits the allegations of Paragraph 160.
161.
Plaintiff has alleged that PSI has infringed the '709 patent, the '678 patent, the '520 patent, the '495 patent and the '993 patent.
IBM avers that PSI has infringed the cited patents; and otherwise admits the allegations of Paragraph 161.
162.
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, on the noninfringement of the '709 patent, the '678 patent, the '520 patent, the '495 patent and the '993 patent.
Admitted.
163.
PSI has not infringed, contributed to the infringement of, or induced the infringement of any valid claim of the '709 patent, the '678 patent, the '520 patent, the '495 patent or the '993 patent, and is not liable for infringement thereof.
Denied.
164.
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 '709 patent, the '678 patent, the '520 patent, the '495 patent or the '993 patent. Moreover, PSI does not intend or have knowledge that its customers will use its products in a manner that infringes the '709 patent, the '678 patent, the '520 patent, the '495 patent or the '993 patent.
Denied.
165.
PSI has not directly infringed any valid claim of the '709 patent.
Denied.
166.
PSI has not directly infringed any valid claim of the '678 patent.
Denied.
167.
PSI has not directly infringed any valid claim of the '520 patent.
Denied.
168.
PSI has not directly infringed any valid claim of the '495 patent.
Denied.
169.
PSI has not directly infringed any valid claim of the '993 patent.
Denied.
170.
PSI has not induced infringement of any valid claim of the '709 patent.
Denied.
171.
PSI has not induced infringement of any valid claim of the '678 patent.
Denied.
172.
PSI has not induced infringement of any valid claim of the '520 patent.
Denied.
173.
PSI has not induced infringement of any valid claim of the '495 patent.
Denied.
174.
PSI has not induced infringement of any valid claim of the '993 patent.
Denied.
175.
PSI has not contributed to infringement of any valid claim of the '709 patent.
Denied.
176.
PSI has not contributed to infringement of any valid claim of the '678 patent.
Denied.
177.
PSI has not contributed to infringement of any valid claim of the '520 patent.
Denied.
178.
PSI has not contributed to infringement of any valid claim of the '495 patent.
Denied.
179.
PSI has not contributed to infringement of any valid claim of the '993 patent.
Denied.
180.
PSI realleges and incorporates by reference the allegations of paragraphs 1 through and including 179 of its Counterclaims.
IBM incorporates by reference its responses to Paragraphs 1-179.
181.
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, on the invalidity of the '709 patent, the '678 patent, the '520 patent, the '495 patent and the '993 patent.
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 181.
182.
On information and belief, the claims of the '709 patent, the '678 patent, the '520 patent, the '495 patent and the '993 patent 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 and the doctrine of double patenting.
Denied.
183.
IBM denies each and every allegation of the Counterclaims that is not expressly admitted in this Reply.
184.
IBM denies that PSI is entitled to any of the relief sought in the Counterclaims.
First PSI's closing:
PSI demands a jury on all issues triable to a jury.
Wherefore, PSI prays:
(1) That the Court enter a judgment that PSI has not infringed, contributorily infringed or induced the infringement of any claim of the '709, '678, '520, '495 or '993 patents;
(2) That the Court enter a judgment that the '709, '678, '520, '495 and '993 patents are invalid;
(3) That the Court enter a judgment that IBM take nothing by reason of its claims against PSI;
(4) That the Court enter a judgment 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;
(5) That the Court award PSI treble damages and attorneys' fees under the Sherman Act and section 4 of the Clayton Act, 15 U.S.C. § 15;
(6) 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 on PSI/HP mainframes on nondiscriminatory terms; and (b) enter into a reasonable, non-discriminatory patent licensing agreement with PSI;
(7) 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;
(8) That the Court award PSI damages for IBM's tortious interference with prospective contractual relations;
(9) That the Court declare this an exceptional case under 35 U.S.C. §285 and award PSI it reasonable attorney fees; and
(10) That the Court award PSI such other and further relief which the Court deems proper.
And IBM's closing:
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 Complaint herein was and is not objectively baseless and as a matter of law IBM's filing of its 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 as a consumer based on an alleged injury that affects the public as a whole.
5. PSI's purported declaratory judgment action has been rendered moot by IBM's affirmative claims for patent infringement, as alleged in IBM's 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:
a. That this Court grant IBM the relief sought in IBM's Complaint;
b. That this Court enter a judgment that PSI take nothing by reason of PSI's Counterclaims against IBM and dismiss the Counterclaims with prejudice; and
c. 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.