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This page is deprecated and has been archived.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.