July 20, 1998
Computer graphics system developer Intergraph Corp. argues that Intel Corp. has offered no valid defense against charges that it abused its monopoly power in the microprocessor industry. The brief was filed in opposition to Intel's motion to lift a federal judge's injunction against it, claiming that the chip-maker "mounts a blunderbuss attack on nearly every aspect of the district court's decision."
BRIEF FOR PLAINTIFF-APPELLEE INTERGRAPH CORPORATION
UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
Appeal from the United States District Court for the
UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
Appeal from the United States District Court for the
CERTIFICATE OF INTEREST ....................................................................................i
TABLE OF AUTHORITIES ..........................................................................................vi
STATEMENT OF RELATED CASES ..........................................................................xiii
I. STATEMENT OF THE ISSUES .................................................................................1
II. STATEMENT OF THE CASE ...................................................................................2
Preliminary Statement.................................................................................................. 2
Intels Monopoly Power.............................................................................................. 5
Intel Induces Intergraph To Drop Its Competitive Processor And
Intergraph Now Has No Practical Alternative To Intels Processors............................. 6
Intel And Intergraphs Harmonious And Mutually Beneficial Relationship...................... 7
Intels Change In Policy From An "Open" To A "Closed" System................................. 8
Intels Misuse Of Monopoly Power To Coerce Intergraph To
Intels Unconscionable Termination Of Nondisclosure
Intels Expansion Of Its Monopoly To The Graphic
Harm To Competition, Innovation, And The Public Interest......................................... 11
Subsequent Federal Trade Commission Proceedings Challenging
The Preliminary Injunction Is A Limited, Stand-Still Remedy To
III. STANDARD OF REVIEW.......................................................................................15
IV. SUMMARY OF THE ARGUMENT........................................................................ 16
V. ARGUMENT: THE DISTRICT COURT PROPERLY AND CAREFULLY
A. The Court Applied The Familiar Four Factor Test ...................................................20
B. Each Of The Four Factors Weighed Heavily In Favor Of The
2. The Balance Of Harms And Equities Clearly Favored Intergraph ........................25
Intels Unlawful Use Of Monopoly Power
C. The Preliminary Injunction Fully Complies With Rule 65(d) ......................................49
VI. CONCLUSION .......................................................................................................50
CERTIFICATE OF SERVICE
TABLE OF AUTHORITIES
STATEMENT OF RELATED CASES
Pursuant to Federal Circuit Rule 47.5, plaintiff-appellee Intergraph Corporation states that (i) no other appeal in or from the civil action below has been before this or any other appellate court, and (ii) there are no cases known to counsel to be pending in this or any other court that will directly affect or be directly affected by this appeal. The two cases cited in defendant-appellant Intel Corporations statement of related cases (Intel Br. xv) have since been dismissed by Intel.
1. Whether the district court abused its discretion in granting preliminary injunctive relief to maintain the status quo pending trial and decision on the merits of Intergraphs claims, when the district court found, after an evidentiary hearing, that:
2. Whether the district court abused its discretion in ruling that Intel, as a monopolist, did not have a legitimate business justification to retaliate against Intergraph and completely cut off supply of critical components and product information, merely because Intergraph sought to enforce patents on microprocessor technology which Intel was infringing.
Preliminary Statement. Although Intels brief treats this appeal as if it involves the resolution of various significant antitrust issues on the basis of a complete record, that is in fact not the case. This appeal is from the grant of a preliminary injunction. The decision whether to grant preliminary injunctive relief is committed to the discretion of the district court, to be exercised pursuant to familiar standards, subject to review only for clear abuse of that discretion. The decision is made on the basis of necessarily abbreviated proceedings, not a full trial, and the court does not finally decide the merits of any legal claims before it, but simply assesses the plaintiffs likelihood of prevailing after trial.
The district court recognized all this, noting that its factual findings may turn out to be different after a full trial, A4 n.4, and that "the courts role at this juncture is not to make final determinations on the merits." A68. Intel, however, loses sight of the nature of the interlocutory order it is appealing, arguing at one point -- in the face of the district courts thoughtful, 80-page opinion -- that what was needed was "a great deal of additional evidence, findings, and legal analysis." Intel Br. 10. Not so; and the assertion rings particularly hollow given that, as the district court noted, "Intel has had an opportunity to rebut, but has failed to rebut, the key evidentiary assertions made by Intergraph." A69 n.46.
Intel does not seriously contest three of the four bases for the preliminary injunction -- that Intergraph will be irreparably injured in the absence of an injunction, that the balance of harms favors injunctive relief, and that the injunction serves the public interest. The order simply requires Intel to continue dealing with Intergraph as it had for several years, to prevent Intel from driving Intergraph out of business before its claims can be heard and adjudicated. The recent decision of the Federal Trade Commission ("FTC") to file an administrative complaint against Intel, based in large part on the same anticompetitive conduct and same antitrust theories at issue in this case, as well as similar conduct directed at other firms, corroborates Intergraphs claims. For now, it is enough to determine that the district court did not abuse its discretion in finding that Intergraph was likely to prevail on one or more of those claims.
The district courts factual findings reveal, at this preliminary stage, a textbook case of a monopolist unlawfully misusing its monopoly power to maintain and extend its monopoly. The record is clear, as the court found, that Intel -- with a 90% market share -- dominates the manufacture and supply of microprocessors, the essential "brains" of computers. A4-6. Computer companies such as Intergraph are absolutely dependent on Intel for microprocessors and product information on how to use them. Despite what Intel admits was a harmonious and mutually beneficial business relationship for several years, Intel abruptly terminated its contractual commitments to supply Intergraph with the microprocessors, advance samples, and related information essential for Intergraphs business survival. The court found that Intel did so in retaliation for Intergraphs efforts to enforce its patent rights to microprocessor technology used by Intel -- just as the FTC alleges Intel did under similar circumstances with respect to Digital Equipment Corporation ("Digital") and Compaq Computer Corporation ("Compaq"), as well as Intergraph -- and because Intel wanted to maintain its microprocessor monopoly and expand it into downstream markets where it competes with Intergraph. A15, A18-24.
Intel bluntly admits that its purpose in retaliating against Intergraph was to protect its "core business" -- i.e., its microprocessor monopoly. Intel claims that "the evidence shows that Intels actions were taken solely in response to a patent dispute initiated by Intergraph," that its purpose in retaliating was "to resolve an intellectual property dispute that threatened Intels core business," and that Intergraph cannot expect to enforce its patents against Intel "without suffering any inconvenience to its business" at the hands of Intel. Intel Br. 11, 12, 22. The patent laws encourage innovation, and investment-backed innovation could threaten Intels microprocessor monopoly. Intel seeks to safeguard its monopoly -- its core business -- from that threat by compelling those in the industry to give up their patent rights as the price for dealing with it. That constitutes unlawful "willful maintenance" of the monopoly, and violates Section 2 of the Sherman Act without more. Yet there is more. Intel not only took retaliatory measures to solidify its monopoly of the relevant microprocessor market, it also did so to expand its monopoly into adjacent markets for workstations and graphic subsystems -- ultimately to fill the void created by Intergraphs forced departure. That too constitutes unlawful "willful maintenance" -- more precisely, expansion -- of Intels monopoly in violation of Section 2.
The district court found that Intels conduct with respect to Intergraph -- calculated to enforce and maintain Intels monopoly -- had and was intended to have a "chilling effect" on the industry as a whole, causing serious harm not just to Intergraph but to competition and innovation generally. A28. The Intel sales representative who regularly dealt with Intergraph candidly admitted that it did not matter to Intel that Intergraphs patent was enforceable, because Intel would handle the dispute the "Intel way" and "squash" Intergraph. A425, A428-29. As he put it, Intergraph might be "right," but it would be "dead right" after Intels legal team finished with it. Id. In these circumstances the district court did not abuse its discretion in entering a standard, stand-still preliminary injunction to ensure that Intels documented misuse of monopoly power did not doom Intergraph before its claims could be decided at trial.
Intels Monopoly Power. Intel is acknowledged throughout the technology world as the overwhelmingly dominant manufacturer and supplier of high-performance microprocessors (also known as central processing units or "CPUs"). Intels CPUs are extraordinarily complex, expensive, and difficult to manufacture. A4-6.
The district court found that Intel had clear monopoly power in the relevant micro-processor markets based on numerous facts: (1) Intels market share of about 90% of all microprocessors; (2) the significant barriers to entry -- including the complex design and engineering resources and billions of dollars required to build a new microprocessor fabrication plant -- that prevent new competitors from entering the market; (3) the inability of major companies, such as IBM and Motorola, to compete successfully with Intel microprocessors; (4) the technological and financial "lock-in" of Intels customers to Intels microprocessor architecture, preventing those customers from feasibly switching to any other microprocessor; (5) the huge installed base of Intel-based computer products that has made Intel microprocessors the "standard" for the industry, with resulting "network effects" that further magnify Intels market power; (6) the facts that Intel microprocessors are compatible with and supported by Microsofts advanced Windows NT operating system, and that Microsoft has withdrawn such support from other microprocessors; (7) Intels remarkable brand name recognition, with more than 1300 licensees worldwide in the "Intel Inside" program, and its rank as the tenth most valuable brand in the world; and (8) Intels rapid and consistent growth and very high profits, making it the eighth most profitable company in the world. A4-11, A33-34. See A355-90.
Intel chose to present no facts or testimony either at the evidentiary hearing or in post-hearing submissions requested by the court to refute any of this evidence of monopoly power.
Intel Induces Intergraph To Drop Its Competitive Processor And Adopt Intels Processor. Intergraph was formed in Huntsville, Alabama in 1969. By 1997 Intergraph had grown to become a worldwide supplier of high performance computer workstations, used primarily for high-quality computer-aided graphics. Intergraph has over 8,500 employees and has invested significant resources in research, engineering, and design of its computer-related products, including graphic subsystems that provide high-quality graphics. A11-13. See A309-12, A391-92.
Intergraph owns three significant patents for cache memory technology (the "Clipper Patents") used in microprocessors. From 1987 to 1993 Intergraph incorporated its "Clipper" microprocessor and technology into its computer products and workstations. Clipper was a RISC-based processor utilizing the Unix operating system. Based on assurances, representations, and commitments from Intel that its CPUs had the necessary computing power and speed for Intergraphs high-performance workstations and that Intel would supply its CPUs to Intergraph on fair and reasonable terms, Intergraph decided to switch to Intels CPU utilizing Microsofts advanced Windows NT operating system. Intergraph began a major and expensive two-year development and engineering effort to convert to Intels CPUs and to convert its technical software applications to Microsofts system. Intergraph ceased further development of its own Clipper CPU, eliminating it as a competitor of Intels CPUs. A12-15, A314-19, A392-93.
Intergraph Now Has No Practical Alternative To Intels Processors. Due to massive financial, design, and time constraints, it is now practically impossible for Intergraph to switch to any alternative CPU. The district court found that Intel had induced Intergraph to abandon the Clipper CPU, eliminating Intergraph as a competitor in the high-end microprocessor market and locking-in Intergraph so that Intel was now its sole source supplier of CPUs and related technical data. A14-15. See A109-11, A307-10, A315-19, A335-36. As detailed in the FTC action responding to Intels attempt to acquire control of the Alpha processor from Digital, discussed hereafter, the entire computer industry utilizing the Windows NT operating system -- not just Intergraph -- is heavily dependent on Intel as the source of high-performance CPUs. See 63 Fed. Reg. 24544-47 (May 4, 1998).
Intel And Intergraphs Harmonious And Mutually Beneficial Relationship. In Intels words, there were "several years of harmonious dealings" between the parties. Intel Br. 8. Indeed, in 1995 Intergraph was selected as an Intel "Validation Partner" in the development and release of Intels Pentium Pro processor. Intergraphs workstations were featured in the "rollout" of the Pentium Pro at Intel press conferences and trade shows and were specifically highlighted in Intels 1995 Annual Report. A18. See A368.
Intel and Intergraph regularly exchanged engineering, design, and technical information, and other mutually beneficial assistance. A24, A393. Intergraph introduced Intel to new markets, such as the workstation and digital media markets, and to new customers. A53, A319-23. The district court found that throughout this relationship there was no evidence that Intergraph had ever misused or mishandled confidential Intel data provided to it for producing Intel-based products. A17-18, A29, A71. See A397-99. Intergraph consistently produced high-quality and high performance workstations utilizing Intels processors, benefiting both companies. In March 1997 Intel assured Intergraph in writing that it would be treated as "a strategic customer in current and future programs." A19, A267, A270-71, A276-78, A283-84.
Intels Change In Policy From An "Open" To A "Closed" System. In 1992, when Intel induced Intergraph to drop its Clipper CPU in favor of Intels CPU, Intel had an "open" architecture system that allowed competitive CPUs to be put in sockets in place of Intel CPUs. Intel also freely provided customers with the related technical information they needed to design products utilizing Intel CPUs. A9, A15-16, A321-27. The district court found that by 1997, however, Intel had converted to a "closed" architecture utilizing proprietary sockets, electrical buses, and technical interfaces that gave Intel the right to "wield absolute power" over who could participate in the computer industry based on Intel CPUs. A7-9. The district court also found that Intel deliberately moved to a "closed" and restrictive system with respect to product information, insisting that customers sign comprehensive nondisclosure agreements ("NDAs"), purportedly terminable at will for any reason, before receiving such material. A16-17, A397-98. The district court found that Intel used the threatened or actual termination of these NDAs as "a contractual weapon" to coerce customers to accede to Intels demands. A19, A28.
Intels Misuse Of Monopoly Power To Coerce Intergraph To Relinquish Its Patent Rights. Intel has incorporated Intergraphs Clipper technology into its own microprocessors. In 1996 Intel unilaterally inserted a new provision in its NDAs for new development programs that would give Intel a royalty-free license to all of Intergraphs patented technology. Intergraph asked Intel to remove this provision, but Intel responded that it was non-negotiable and refused to allow Intergraph to participate in any new Intel development programs until Intergraph signed it. A19, A327-28.
In 1997 Intergraph asserted its Clipper Patents against some of Intels customers. Intergraph did not assert the patents against Intel, even though it had the right to do so, because Intel was the sole source supplier of the CPUs and product information needed for Intergraphs business survival. Nevertheless, Intel took coercive action to force Intergraph to relinquish its Clipper Patents to Intel for free: First, as noted, Intel refused to allow Intergraph to participate in any new development programs. A19, A330-32. Then, in August 1997, Intel summarily and unilaterally canceled all of Intergraphs existing NDAs and demanded the return of all confidential information provided to Intergraph. A21, A272. Intel also drastically curtailed its technical and marketing support of Intergraph, refusing to supply information to allow Intergraph to fix a known "bug" within an Intergraph Intel-based computer board, and removing all joint marketing materials from Intels trade show facilities. A29-30 & n.39, A280-81, A328-30, A333-35, A341-45. After Intergraph filed this patent enforcement action in November 1997, Intel filed two retaliatory lawsuits in California, necessitating the district courts issuance of a temporary restraining order to prevent further litigation harassment by Intel. A21 n.36.
The district court found that there was no business reason for Intergraph to accede to Intels demand for a royalty-free cross-license, because Intergraph did not need a license of any Intel patents. A21. Intel presented no evidence that it made any good-faith offer to license Intergraphs Clipper Patents. Intel insisted that its terms be accepted and cut off Intergraph when they were not.
Intels Unconscionable Termination Of Nondisclosure Agreements And Repudiation Of Contractual Commitments. The district court found "no rational or legitimate business reason" for Intels unilateral cancellation of the NDAs with Intergraph. A23, A29. See A48. The court found that Intels action was retaliatory, designed to coerce Intergraph into relinquishing its patent rights and to have a "chilling effect" on other computer companies dependent on Intel for microprocessors. A28-29. The district court found that Intel continued its abusive conduct even after the preliminary injunction hearing, refusing to provide basic software codes and other information to Intergraph, prompting the court to comment that it "is impressed with the manner in which Intel apparently plays hard ball with those who cross it." A31 n.41. The court also found that the NDA cancellations constituted a repudiation of Intels March 1997 contractual commitment to treat Intergraph "as a strategic customer in current and future programs." A19-20.
The district court found that these actions were unconscionable, given that Intel knew Intergraph had no practical alternatives to Intels CPUs and product information and could not survive without timely access to them. A24-26. Moreover, the court held that Intergraph was entitled to specific performance of Intels contractual commitments, because Intels CPUs are "unique" and there is no alternative source of competitive CPUs. A57-65. See A303-10.
Intels Expansion Of Its Monopoly To The Graphic Subsystem And Workstation Markets. The court found substantial evidence that Intel has entered the graphics subsystem market in direct competition with Intergraph and other companies by acquiring graphics chip makers, incorporating graphics technology into its own CPUs, and manufacturing its own motherboard graphics subsystems, and that Intel intends to dominate these markets in the future. An internal "Intel Graphics Roadmap," submitted under seal to the district court, fully supports these findings. A413-23. See A26-27, A109-11, A296-307, A347.
The district court also found that Intel had won the "platform war" between RISC-Unix and Intel-Windows workstations, that Intel-Windows now outsells RISC-Unix by about two to one, and that industry researchers project that Intels share of technical workstations will surge to 86% by the year 2000. A15 n.26, A348-90. The district court found that by withholding advance CPU samples and essential product information from Intergraph, Intel restrained Intergraphs ability to compete in the graphics subsystem and workstation markets, and restrained actual and potential competition in those markets. A10, A23-24, A26-27. See A110-10c. There is substantial evidence of obvious and clear injury to competition generally and substantial evidence of the dangerous probability that Intel will completely monopolize these downstream markets in which it competes directly with Intergraph.
Harm To Competition, Innovation, And The Public Interest. The district court found that Intels actions harmed competition and innovation in many ways. First, the court found that Intels conduct would irreparably damage and potentially destroy Intergraph, a major competitor in the graphics subsystem and workstation markets, significantly impairing competition, innovation, and consumer choice. A27, A30. Second, the court specifically found that Intels actions had a "chilling effect" on the computer industry generally, sending a stern warning to any computer company that dared to challenge Intels appropriation of their intellectual property. A28. This served to deter competition, perfect Intels monopoly of the microprocessor market, and destroy incentives to competitors or others to innovate in microprocessor technology. Third, the district court noted that Intel had taken similar actions against Digital and that the FTC was investigating a pattern of similar anticompetitive conduct by Intel, corroborating the district courts conclusions on the broader adverse impacts of Intels conduct on competition and innovation generally. A28. Fourth, the district court properly noted that technology in the computer workstation industry changes rapidly, and cited industry projections that Intel will control 86% of the technical workstation market by the year 2000. A15 n.26. See A400. The district court found that Intel had unlawfully maintained its monopoly in the microprocessor market and was misusing that monopoly power to extend its monopoly and impair actual and potential competition in the adjacent markets Intel is entering. A26-27.
Subsequent Federal Trade Commission Proceedings Challenging Intels Misuse Of Monopoly Power. The district court noted that Intel had also withheld crucial technical and design information from Digital when that company -- like Intergraph -- asserted patent rights to microprocessor technology used by Intel. A28. The district court also took judicial notice that in a pending settlement with Digital, Intel was taking over production of the competing Alpha microprocessor, further entrenching Intels monopoly power. A34. The courts consideration of these actions by Intel in assessing the antitrust issues and antitrust harm was prescient. Shortly after the district court granted the preliminary injunction, the FTC filed two legal proceedings challenging this conduct on antitrust grounds, substantiating the district courts findings of Intels monopoly power and misuse of that power to illegally maintain its monopoly.
The first FTC action is a proposed complaint and consent decree in In the Matter of Digital Equipment Corp. See 63 Fed. Reg. 24544 (May 4, 1998). The consent decree settles alleged antitrust violations found by the FTC. Id. The complaint alleges a relevant market nearly identical to that adopted by the district court here -- high-performance, general-purpose microprocessors capable of running Microsofts Windows NT operating system -- of which Intel controls about 90%. Id. at 24545-46. The FTC further alleges that Intel has monopoly power in this relevant market based on the identical facts relied on by the district court below: (1) Intels high market share; (2) the "lock-in" effect that prevents customers from switching to different microprocessor architectures; (3) "network externalities" that increase barriers to entry because the vast majority of customers have adopted Intels microprocessor; (4) huge entry barriers to design a microprocessor and build a fabrication plant; and (5) the decline and lack of competitive strength of other microprocessors. Compare id. at 24545-46 with A33-34. Because of Intels monopoly power, the proposed consent decree requires Digital to find alternative manufacturers of the Alpha microprocessor to try to keep Alpha viable as the one remaining high-performance processor capable of competing with Intels microprocessors. See 63 Fed. Reg. at 24546-47.
The second FTC action is In the Matter of Intel Corp. (Docket No. 9288), an administrative complaint filed on June 8, 1998, alleging that the FTC has "reason to believe" that Intel has engaged in a pattern of conduct violating the FTC Act, 15 U.S.C. § 45(b), by withholding technical information and taking other coercive actions against three customers and technology rivals -- Digital, Compaq, and Intergraph -- that have attempted to enforce their patents in microprocessor technology used by Intel. Intels actions against Intergraph that are the subject of the present case are detailed in the FTC complaint as a major basis of the agencys action. Complaint ¶¶ 22-37. The FTC alleges that Intel has illegally maintained and "cemented" its monopoly power in the relevant microprocessor market and harmed competition, innovation, and the public interest. Id. ¶¶ 38-42.
Because (1) the FTC must have "reason to believe" there is a violation before filing such complaints, (2) the FTC complaints deal with the same conduct by Intel on which the district court relied, and (3) the district court specifically considered the FTC investigations that culminated in these proceedings in reaching its conclusions, see A28, A72, this Court can and should look to the FTC actions as additional support for the district courts conclusions that Intergraph is likely to prevail on its antitrust claims at trial, and that the public interest is served by the preliminary injunction. Allis-Chalmers Mfg. Co. v. White Consol. Indus., 414 F.2d 506, 522-24 (3d Cir. 1969) (antitrust preliminary injunction granted in part based on post-hearing FTC complaint challenging same conduct), cert. denied, 396 U.S. 1009 (1970). See also Massachusetts v. Westcott, 431 U.S. 322, 323 n.2 (1977) (public records may be judicially noticed); In Re Shell Oil Co., 992 F.2d 1204 (Fed. Cir. 1993) (taking judicial notice of agency action); Rothenberg v. Security Management Co., 667 F.2d 958, 961 n.8 (11th Cir. 1982) (Court of Appeals is "free to take judicial notice of subsequent developments in cases that are a matter of public record and are relevant to the appeal").
We do not, of course, contend that the FTC allegations must be taken as true. But the fact that the federal agency charged with policing competition has seen fit to take these actions in response to the same conduct found by the district court should go a long way to establishing that the court did not clearly abuse its discretion in finding that Intergraph was likely to succeed on one or more of its claims, and in particular that the public interest -- not just Intergraphs interest -- supported injunctive relief.
The Preliminary Injunction Is A Limited, Stand-Still Remedy To Preserve The Status Quo. The preliminary injunction entered by the district court is carefully crafted and limited to preserve the status quo pending trial. The district court specifically stated that it did not intend to grant any "special status" to Intergraph or require "unusually favorable treatment." A74. The court described the relief granted as limited to the "nuts and bolts" of Intel supplying products and information to Intergraph at the same time and in proportionate quantities as supplied to Intergraphs competitors. A74. The district court invited Intel to come forward with further information if it believes the practical effect of the injunction "is to grant Intergraph rights beyond the status quo that existed prior to the contract breakdown." A74.
Intel portrays the order as a draconian "mandatory injunction" requiring Intel to disclose its "core intellectual property." Intel Br. 8. Far from it. The injunction merely requires Intel to provide the sort of product use information it previously provided to Intergraph and currently provides to other Intel customers, subject to the same restrictions. A79. Intel is not required to disclose its "core intellectual property," such as the design or engineering of its CPUs. Impeaching its own lawyers arguments, Intel officials have repeatedly and publicly affirmed the injunction has "no practical effect" on Intel. Chuck Mulloy, Intel Spokesman for Legal Affairs, quoted on ZDNN, "Intergraph Scores Against Intel," April 13, 1998.
This Court applies the applicable law of the Eleventh Circuit, and its predecessor the Fifth Circuit before October 1, 1981, see Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc), in reviewing the preliminary injunction. Eleventh Circuit law is clear that a preliminary injunction "will be reversed only where there is a clear abuse of discretion." Haitian Refugee Center, Inc. v. Nelson, 872 F.2d 1555, 1561 (11th Cir. 1989), affd, 498 U.S. 479 (1991); accord Revette v. International Assn of Bridge, Structural & Ornamental Iron Workers, 740 F.2d 892, 893 (11th Cir. 1984) (per curiam). Appellate review of the district courts decision to grant a preliminary injunction is "extremely narrow in scope," and the merits of the controversy are not reviewed beyond the extent necessary to determine the presence or absence of an abuse of discretion. Carillon Importers, Ltd. v. Frank Pesce Intl Group Ltd., 112 F.3d 1125, 1126 (11th Cir. 1997) (per curiam); Revette, 740 F.2d at 893.
The rationale for the limited scope of appellate review of preliminary injunctions was explained by the Eleventh Circuit:
The district courts factual findings cannot be overturned unless clearly erroneous, Honduras Aircraft Registry, Ltd. v. Government of Honduras, 129 F.3d 543, 546 (11th Cir. 1997), cert. denied, 1998 WL 174764 (U.S. June 26, 1998); Fed. R. Civ. P. 52(a) ("Findings of fact ... shall not be set aside unless clearly erroneous"), even if the appellate court would have reached different findings had it been sitting at trial. CPG Products Corp. v. Pegasus Luggage, Inc., 776 F.2d 1007, 1011 (Fed. Cir. 1985) (applying Eleventh Circuit law).
The preliminary injunction should be affirmed because the district court did not abuse its discretion in entering it. Intel does not, and cannot, mount any colorable challenge to three of the four factors supporting the injunction: the clear irreparable harm to Intergraph, which would be driven out of business in the absence of the injunction; the clear balance of harms and equities in favor of the injunction, which demands no more of Intel than that it continue dealing with Intergraph -- pending trial -- as it has for several years; and the public interest served by the injunction, a consideration confirmed by the FTCs recent actions against Intel.
Instead, Intel devotes nearly its entire brief to an attack on the remaining factor -- likelihood of success on the merits. Even then Intel focuses almost exclusively on only two of the several antitrust bases of liability relied on by the district court (monopoly leveraging and attempt to monopolize), largely ignoring even clearer bases of antitrust liability also relied on by the court, including illegal maintenance of monopoly, denial of access to essential facilities, unlawful refusal to deal, misuse of monopoly power in the context of the "lock-in" of Intels technology and information, and coercive reciprocity. As demonstrated below, the district court relied on an unbroken line of United States Supreme Court decisions, several Eleventh Circuit cases, and other antitrust precedents supporting each of Intergraphs claims under well-established doctrines of antitrust liability. Intergraph needed to establish likelihood of success on only one of these antitrust claims, or its state law claims, to obtain the preliminary injunction.
Intel argues that it has an absolute right to refuse to disclose its "core intellectual property" to Intergraph, but that is not at issue. The preliminary injunction only requires Intel to provide access to product information -- not its core CPU design technology -- which Intel was already providing to Intergraph and others in the normal course of business. In addition, neither the antitrust nor intellectual property laws condone a monopolist utilizing intellectual property for anticompetitive purposes, or extending its monopoly beyond the lawful monopoly conferred by the intellectual property. As this Court has explained, "[w]hen a patent owner uses his patent rights not only as a shield to protect his invention, but as a sword to eviscerate competition unfairly, that owner may be found to have abused the grant and may become liable for antitrust violations when sufficient power in the relevant market is present." Atari Games Corp. v. Nintendo of America, 897 F.2d 1572, 1576 (Fed. Cir. 1990).
Intel also downplays the drastic actions it has taken against Intergraph, contending it has done no more than lower Intergraphs status from a "preferred" to a "regular" customer. Intel Br. 3. The district court found that whatever labels were used, Intels action was tantamount to putting Intergraph out of business, since Intergraphs entire business and reputation were built on providing the most advanced, state-of-the-art computer products based on Intels CPUs.
Intel also argues that it can lawfully refuse to deal with Intergraph, because Intergraph had the audacity to insist upon its patent rights when Intel demanded that it yield them. None of the cases cited by Intel in support of this argument, however, involved a monopolist or enforcement of intellectual property rights. Intergraph had a lawfully protected and congressionally mandated right to commence a civil suit to protect its inventions. See 35 U.S.C. § 281; Atari Games, 897 F.2d at 1576; Loctite Corp. v. Ultraseal, Ltd., 781 F.2d 861, 876 (Fed. Cir. 1985) (patent system rooted in Constitution "serves a very positive function in our system of competition, i.e., the encouragement of investment based risk," and a patentees infringement suit is presumptively in good faith). Intel now grudgingly concedes that "Intergraph may have had a right to assert and sue on a good faith belief of infringement ." Intel Br. 12. The district court found that Intels coercive retaliation, on the ground that it would not do business with those who sue it, was not a rational or legitimate business justification, given (1) Intels monopoly power as the sole source supplier of CPUs and related product information essential for Intergraphs survival, and (2) the evidence that others in the computer industry, such as IBM, do not follow the practice of cutting off customers or suppliers simply because they are adverse parties in patent disputes. A25-26, A29. See A291-93.
Intel masquerades as a "protector" of intellectual property, when in fact Intel is violating Intergraphs intellectual property rights and misusing its monopoly power to force Intergraph and other computer companies to relinquish their intellectual property rights, so that Intel can illegally maintain and enhance its monopoly. That is what the district court found below; it is also the primary basis of the FTCs recent administrative complaint against Intel, which alleges a similar pattern of conduct directed at other firms as well. The district court properly invoked the antitrust laws not only to protect the microprocessor technology market from Intels predatory conduct, but also to protect and vindicate rights guaranteed by the patent laws. That the antitrust and patent laws serve common goals has been clearly recognized by this Court: "The two bodies of law are actually complementary, as both are aimed at encouraging innovation, industry and competition." Atari Games, 892 F.2d at 1576; Loctite Corp., 781 F.2d at 877.
The overarching point, as the district court properly ruled, is that the antitrust laws impose special and affirmative duties on monopolists of a sort that may not be imposed on ordinary competitors, to protect against misuse of monopoly power. "Where a defendant maintains substantial market power, his activities are examined through a special lens: Behavior that might otherwise not be of concern to the antitrust laws -- or that might even be viewed as procompetitive -- can take on exclusionary connotations when practiced by a monopolist." Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 488 (1992) (Scalia, J., dissenting), citing 3 Phillip E. Areeda & Donald Turner, Antitrust Law § 813, at 300-02 (1978).
Finally, as the district court emphasized, the antitrust laws specifically authorize preliminary injunctions to prevent threatened antitrust violations and to protect potential as well as actual competition. 15 U.S.C. § 26; Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 112 n.8 (1986) (an antitrust plaintiff "does not have to wait until he is ruined in his business before he has his remedy"). The courts do not have to wait for Intel to succeed in extending its monopoly in the microprocessor market to downstream markets before acting.
Intel mounts a blunderbuss attack on virtually every aspect of the district courts decision. But that courts 80-page opinion is well-reasoned and based on facts that are in most respects undisputed and on well-established law. The district court properly identified and analyzed the familiar preliminary injunction factors, asking whether Intergraph had shown (1) a substantial likelihood of success on the merits of one or more of its claims, (2) a substantial threat of irreparable injury in the absence of injunctive relief, (3) that the threatened harm to it outweighs the harm an injunction may cause the defendant, and (4) that the grant of an injunction will not disserve the public interest. A3. See Lucero v. Trosch, 121 F.3d 591, 599 (11th Cir. 1997). Because each factor weighed strongly in favor of an injunction, the district court clearly did not abuse its discretion in granting one. Indeed, Intel utterly failed to present any facts or evidence at the evidentiary hearing or afterward to rebut Intergraphs claims. See Atlas Powder Co. v. Iveco Chemicals, 773 F.2d 1230, 1233-34 (Fed. Cir. 1985) (defendant cannot complain about district courts decision on likelihood of success when it failed to present evidence on issue despite opportunity to do so).
The purpose of a preliminary injunction is to preserve the status quo and prevent irreparable injury until a full trial on the merits can be held. The district court carefully considered that purpose here and specifically found that "the issuance of preliminary injunctive relief is necessary to preserve [this courts] ability to render a meaningful decision on the merits. " A68, quoting United States v. Alabama, 791 F.2d 1450, 1459 (11th Cir. 1986), cert. denied, 479 U.S. 1085 (1987).
The district court did not need to find that the evidence guarantees a verdict in plaintiffs favor to grant the injunction. Levi Strauss & Co. v. Sunrise Intl Trading Inc., 51 F.3d 982, 985 (11th Cir. 1995). See University of Texas v. Camenisch, 451 U.S. 390, 395 (1981) ("A party ... is not required to prove his case in full at a preliminary injunction hearing"). The evidence presented at a preliminary injunction hearing is necessarily less complete than at a full trial:
Intel contends that the district court improperly applied a "sliding scale" analysis "flatly rejected" by the Eleventh Circuit. Intel Br. 14. Neither point is correct. The district court specifically held that a sliding scale approach was not necessary to support the preliminary injunction. It found Intergraph was "substantially likely to establish on the merits one or more of its claims," and that "[w]hile not necessary to the Courts conclusions, this is particularly so in light of the severity of the injury that Intergraph faces in the absence of injunctive relief." A69 (emphasis added).
Moreover, the Eleventh Circuit has not "flatly rejected" the "sliding scale" approach. The former Fifth Circuit repeatedly recognized and applied that approach, whereby a strong showing on one or more of the factors can compensate for a less compelling showing on others. E.g., Texas v. Seatrain Intl, S. A., 518 F.2d 175, 180 (5th Cir. 1975) ("[a] sliding scale is utilized"); Siff v. State Democratic Executive Comm, 500 F.2d 1307, 1309 (5th Cir. 1974) ("a sliding scale must be applied"); see also Clark Constr. Co. v. Peña, 895 F. Supp. 1483, 1489 (M.D. Ala. 1995) (applying "sliding scale" under Eleventh Circuit law). These cases are binding precedent in the Eleventh Circuit and cannot be overturned except by a subsequent en banc decision of the Eleventh Circuit. Bonner, 661 F.2d at 1207-09; Holmes v. United States, 876 F.2d 1545, 1548 (11th Cir. 1989).
The district court also based its preliminary injunction, in part, on Section 16 of the Clayton Act, the special antitrust injunction statute that provides for injunctive relief "against threatened loss or damage by a violation of the antitrust laws." 15 U.S.C. § 26. See A3, A50-52. The statutes legislative history shows a strong congressional policy favoring preliminary injunctive relief to prevent antitrust injury before it occurs and to prevent serious harm to competition pending trial on the merits. Cargill, Inc., 479 U.S. at 113 n.8; California v. American Stores Co., 495 U.S. 271, 282 n.8 (1990) ("Indeed, the evident import of Congress reference to threatened loss or damage is not to constrict the availability of injunctive remedies against violations that have already begun or occurred, but rather to expand their availability against harms that are as yet unrealized."); 2 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law § 360, at 193 (rev. ed. 1994)("an injunction is available before any actual loss or damage -- speculative, duplicative, or otherwise -- occurs; § 16 requires only that injury be threatened ").
Intel argues (Br. 14) that Intergraphs burden was heavier because it sought a "mandatory" injunction, but this artificial distinction is not recognized by the Eleventh Circuit. See Mansfield Hardware Lumber Co. v. Johnson, 242 F.2d 45, 48 (5th Cir. 1957) ("[T]he injunction, though mandatory in form, did nothing more in fact and in law than preserve the status quo."). See also Canal Auth. of Fla. v. Callaway, 489 F.2d 567, 576 (5th Cir. 1974):
Furthermore, in American Stores, the Supreme Court explained that the label attached to an antitrust injunction is not important:
Nor does the Eleventh Circuit apply any heightened standard for a preliminary injunction in an antitrust case, as Intel contends (Br. 14). See Canal Authority, 489 F.2d at 572 (applying standard test in antitrust case); DFW Metro Line Servs. v. Southwestern Bell Tel. Co., 901 F.2d 1267, 1269 (5th Cir.) ("The traditional prerequisites for injunctive relief are applicable to antitrust cases."), cert. denied, 498 U.S. 985 (1990).
Remarkably, Intels brief completely fails to address the district courts factual finding that Intergraph would suffer irreparable injury in the absence of an injunction. A34-36. Nor does Intel even attempt to refute the district courts conclusions that Intels actions were "likely to cause harm to Intergraph that would thwart this courts ability to provide meaningful relief at the conclusion of this action, should Intergraph prevail on its claims," A37, and that injunctive relief was necessary "to preserve [this courts] ability to render a meaningful decision on the merits." A68 (quotation omitted).
The district court found that Intergraph is technologically and economically "locked-in" to Intels microprocessors, advance chip samples, and essential advance product information, and that having these products and information no later than its competitors is "essential to Intergraphs competitive survival." A11, A24, A34. Based on all the evidence before it, the court further found that disruption in the supply of Intels products would adversely affect Intergraphs relations with its customers, employees, shareholders, creditors, distributors, and suppliers, and that -- in the absence of injunctive relief -- Intergraphs reputation for technical excellence and business good will would be irreparably injured, with a serious danger that development and manufacturing efforts at Intergraph would be shut down, threatening the loss of thousands of jobs. A11, A24, A35-36. See A281, A284, A287, A307-10, A336-39, A394, A401-02, A411, A424, A451. "[T]hese are harms that, in the opinion of the court, cannot be recompensed merely by the payment of money because jobs, reputation, and good will, once lost, may never be regained." A11. Intel has not shown clear error in any of the factual findings underlying these rulings. A69 n.46.
Courts frequently view loss of jobs, good will, and reputation as irreparable injury supporting the issuance of a preliminary injunction. See, e.g., Ferrero v. Associated Materials, Inc., 923 F.2d 1441, 1449 (11th Cir. 1991); Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 19 (1st Cir. 1996); American Hosp. Supply Corp. v. Hospital Prods. Ltd., 780 F.2d 589, 595 (7th Cir. 1986). The district court here properly concluded that a "preliminary injunction is necessary and appropriate to restore the status quo so that Intergraph will not be driven out of business or severely impaired pending trial." A52-53.
The district court found that Intel, in contrast, would suffer no harm from the injunction, and that therefore the balance of harms factor "weighs heavily in favor of issuing the injunction." A37. As the court concluded, if the injunction were issued "Intel will be required to do nothing more than what it willingly, and apparently profitably, did with Intergraph for several years." A37. The fact that the injunction merely continues a relationship begun voluntarily strongly supports its issuance. See National Screen Serv. Corp. v. Poster Exchange, Inc., 305 F.2d 647, 650 (5th Cir. 1962) (preliminary injunction requiring continuance of business relationship); International Bhd. of Boilermakers v. Local Lodge D238, 865 F.2d 1228, 1236 (11th Cir. 1989) (injunction upholding contractual provisions to which defendant had freely agreed).
Intel tried to convince the district court, and now this Court, that providing its intellectual property and products to Intergraph would cause it harm. That assertion was rejected by the district court, which found no evidence that Intergraph had failed in any way in the past fully to honor and comply with its obligations under agreements designed to safeguard Intels intellectual property. A17-18, A29, A71. In addition, the terms of the injunction specifically require Intergraph to maintain the confidentiality of all Intel information it receives, pursuant to the previous NDAs between the parties. A79. As the FTC alleged in its administrative complaint, "[s]ubject to such restrictions, ... Intel makes such information widely available to customers, including manufacturers of personal computers, workstations, and servers." Complaint ¶ 12. The balance of harms clearly supports issuance of the injunction.
The district court also properly determined that granting the preliminary injunction would serve "the important public interest and policies in enforcement of the antitrust laws." A52. The court noted that the "only effect on the market that this court can foresee, as a result of its mandatory injunction, would be to enhance competition, not to harm competition." A72. See FTC v. University Health, Inc., 938 F.2d 1206, 1225 (11th Cir. 1991) ("The principal equity weighing in favor of issuance of the injunction is the publics interest in effective enforcement of the antitrust laws."). The court also noted that the FTC was investigating Intel for the same anticompetitive conduct alleged in this case and similar conduct directed at other firms, A52, A72 -- an investigation that has since culminated in the filing of a formal administrative complaint -- substantiating the conclusion that the broader public interest was affected because Intels actions were directed at competition generally, not just Intergraph. Finally, the court found that granting the injunction would preserve jobs of Intergraph employees that otherwise would be at risk. A72. Intel presented no evidence of any public harm or disservice from the injunction, and its argument on this point before this Court (Intel Br. 44-48) is essentially limited to the contention that the public will be harmed because Intel will be harmed -- a premise and a conclusion the district court properly rejected.
Intel has dissected Intergraphs various antitrust claims and put them into artificial categories to avoid the antitrust implications of Intels real-world monopoly power, contrary to Supreme Court precedent requiring courts to look at a monopolists overall conduct and its cumulative effects. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962) (plaintiffs "should be given the full benefit of their proof without tightly compartmentalizing the various components and wiping the slate clean after scrutiny of each").
The district court found that Intergraph was likely to succeed in proving violations of both Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. Section 1 prohibits contracts, agreements, or conspiracies in restraint of trade. Section 2 prohibits monopolization, attempts to monopolize, or conspiracies to monopolize. Section 1 prohibits concerted action by two or more actors, whereas Section 2 primarily prohibits unilateral conduct by one company that possesses or is trying to secure monopoly power. Intel -- a monopolist subject to the strictures of Section 2 -- has also used contracts (such as the NDAs, which the district court found were used as a "contractual weapon") and agreements with Intergraphs competitors to restrain trade in violation of Section 1. A28-29. These violations are also further evidence of violation of Section 2, because a monopolist violates Section 2 if he has "maintained his strategic position, or sought to expand his monopoly, or expanded it by means of those restraints of trade which are cognizable under § 1." United States v. Griffith, 334 U.S. 100, 106 (1948); United States v. United Shoe Mach. Corp., 110 F. Supp. 295, 342 (D. Mass. 1953), affd per curiam, 348 U.S. 521 (1954).
Intel Has Monopoly Power In The Relevant Markets. The district court properly ruled that to establish a claim of illegal maintenance of monopoly, Intergraph need only establish that Intel (1) possesses monopoly power in the relevant markets, and (2) has willfully acquired or maintained that power. The district court concluded that Intergraph established a substantial likelihood of proving both elements at trial. A37.
The district court correctly defined two relevant markets in which Intel has monopoly power: (1) high performance CPUs, in which Intel has about a 90% market share, and (2) Intel CPUs, in which Intel has a 100% market share. A38. As the district court noted, "Intels counsel conceded the first relevant market at the Hearing." A38. The FTCs complaint in In the Matter of Digital Equipment Corp. alleges a similar relevant market of high-performance, general-purpose microprocessors capable of running Microsofts Windows NT operating system, and alleges that Intel accounts for nearly 90% of that market. See 63 Fed. Reg. at 24545-46.
Nor is there any doubt that Intels CPUs are themselves a relevant market, given Intels total dominance of the computer industry, making it a de facto industry standard. Single brand products are often found to constitute a relevant market. See, e.g., Eastman Kodak, 504 U.S. at 481-82 (Kodak spare parts are a separate relevant market); U.S. Phillips Corp. v. Windmere Corp., 861 F.2d 695 (Fed. Cir. 1988) (electric rotary shavers constitute a separate relevant market from electric foil shavers under Eleventh Circuit law); U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986, 998 (11th Cir. 1993) (a premium-priced anchor was its own relevant market within broader anchor market), cert. denied, 512 U.S. 1221 (1994); Datagate, Inc. v. Hewlett-Packard Co., 60 F.3d 1421 (9th Cir. 1995) (single brand markets for hardware and software service for Hewlett-Packard computers), cert. denied, 517 U.S. 1115 (1996); Data General Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147 (1st Cir. 1994) (separate market of support services for Data General computers); cf. Atari Games, 897 F.2d at 1576 (a patented product may be "so successful that it creates its own economic market or consumes a large section of an existing market").
Whether Intel is viewed as having 100% of its own CPU market, or 90% of the high-performance, general-purpose microprocessor market, it clearly has monopoly power. United States v. Grinnell Corp., 384 U.S. 563, 571 (1966) (80% market share is a "substantial monopoly" and 87% "leaves no doubt" of monopoly power); U.S. Anchor, 7 F.3d at 999 (60% to 65% market share establishes a prima facie case of market power). In addition to market share, the district court carefully considered all of the other factors relevant to market power, including high entry barriers, network effects that enhance Intels monopoly, the exit of all competing CPUs except Alpha, customer brand loyalty to Intel, the "lock-in" effects, the compatibility and support of Intel CPUs by Microsofts advanced Windows NT operating system -- which has its own monopoly -- and Intels consistently high profits. A4-10, A33-34, A38-40. Compare 63 Fed. Reg. at 24545-46 (similar factors in FTC complaint).
As A Monopolist, Intel Is Subject To Stricter Antitrust Standards. Because Intel is a monopolist, the law imposes upon it affirmative duties to refrain from acting in a manner that unreasonably harms competition. Oahu Gas Serv., Inc. v. Pacific Resources Inc., 838 F.2d 360, 368 (9th Cir.) ("Because of a monopolists special position, the antitrust laws impose what may be characterized as affirmative duties."), cert. denied, 488 U.S. 870 (1988); Olympia Equip. Leasing Co. v. Western Union, 797 F.2d 370, 376 (7th Cir. 1986) ("The monopoly supplier who retaliates against customers who have the temerity to compete with him, by cutting such customers off, is severing a collateral relationship in order to discourage competition."), cert. denied, 480 U.S. 934 (1987). Intergraph need not establish that Intel acquired its monopoly unlawfully; it is enough to show that Intel has misused or maintained that monopoly. "[T]he use of monopoly power, however lawfully acquired, to foreclose competition, to gain a competitive advantage, or to destroy a competitor, is unlawful." Griffith, 334 U.S. at 107. All that is required to prove illegal maintenance of monopoly power is that the monopolist "impaired competition in an unnecessarily restrictive way." Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605 (1985) (monopolist refused to continue joint ticket agreement). See, e.g., Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1209 (9th Cir. 1997) ("It is unlawful ... for a monopolist to engage in conduct, including refusals to deal, that unnecessarily excludes or handicaps competitors in order to maintain a monopoly."), cert. denied, 118 S. Ct. 1560 (1998). Even conduct by a monopolist that is otherwise lawful may violate the antitrust laws where it has anticompetitive effects. Id. at 1207; Greyhound Computer Corp. v. IBM, 559 F.2d 488, 498 (9th Cir. 1977), cert. denied, 434 U.S. 1040 (1978).
Intel asserts that all of Intergraphs antitrust claims are governed by Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), which requires proof of specific intent to monopolize and dangerous probability of success in an attempt to monopolize case. But the district court found that Intel has already monopolized the relevant microprocessor markets, and acted unlawfully to maintain that monopoly. A34, A38-42. Spectrum Sports simply does not apply to these monopolization claims. "To read [Section 2 monopolization] as demanding any specific, intent, makes nonsense of it, for no monopolist monopolizes unconscious of what he is doing." United States v. Aluminum Co. of America, 148 F.2d 416, 432 (2d Cir. 1945) (Learned Hand, J.). Proof that the monopolist has been " attempting to exclude rivals on some basis other than efficiency " suffices to show unlawful maintenance of monopoly. Aspen Skiing, 472 U.S. at 605, quoting Robert H. Bork, The Antitrust Paradox: A Policy At War With Itself 138 (1978).
Intel Presented No Evidence Of Efficiencies Or Legitimate Business Reasons For Its Exclusionary Conduct. The district court found Intel had "no rational or legitimate business reason" for immediately terminating the NDAs with Intergraph and refusing to supply CPUs and related product information to Intergraph in a timely manner. A25, A29. Intel put forth only two "justifications" for its conduct. The first was that Intel did not want to do business with a company that is suing it. This is disingenuous at best, because Intel terminated its NDAs with Intergraph prior to the filing of Intergraphs suit, forcing Intergraph to take that action to assure its business survival. A21. But whether in response to Intergraphs assertion of its patent rights or its suit to enforce them, Intels action is nothing but pure economic retaliation and coercion. Intergraph threatened Intels "core business" (Intel Br. 11) -- i.e., Intels microprocessor monopoly -- with a patent claim Intel could lose. As the district court found, this retaliation against a patent owner for legitimately asserting its patents was not a valid justification for a monopolist to cut off supply of essential products and information to a customer with no alternatives. A44. None of the cases cited by Intel for this "justification involved a monopolist. In House of Materials, Inc. v. Simplicity Patterns Co., 298 F.2d 867, 871 (2d Cir. 1962), for example, the court specifically stated that "it is not alleged that [the manufacturer] monopolized the market or by its refusal to deal attempted to achieve a monopoly," and recognized that "in an appropriate case a court might restrain a defendant from attempting to coerce a plaintiff into discontinuing a lawsuit."
Other courts have granted preliminary injunctions to enjoin retaliatory terminations because the plaintiff instituted antitrust litigation against the defendant. See, e.g., Bergen Drug Co. v. Parke, Davis & Co., 307 F.2d 725, 727 (3d Cir. 1962) ("True enough, the defendant can choose customers, but it should not be permitted to do so in order to stifle the main action, especially where it is apparent that such conduct will further the monopoly which plaintiff alleges defendant is attempting to bring about and which, if proved, would entitle plaintiff to permanent relief."); Shires v. Magnavox Co., 432 F. Supp. 231, 233 (E.D. Tenn. 1976) (defendant tried to intimidate plaintiff to discontinue its antitrust suit by retaliatory termination of franchise agreements; preliminary injunction granted). The same protection of access to the courts should be accorded Intergraph as a patent owner legitimately enforcing its patents.
The second "justification" Intel puts forth for its refusal to deal is protection of its intellectual property. Intel concedes, as it must, that "an intellectual property owner remains subject to the antitrust laws for conduct that is outside the scope of the patent and copyright laws." Intel Br. 28. Nevertheless, Intel claims absolute antitrust immunity on the ground that it does not have to provide its intellectual property to Intergraph. But this misstates the real issue and distorts the facts in two significant respects. First, as the district court found, Intel was already providing its intellectual property to Intergraph for mutually beneficial business reasons. A48. Second, the information provided by Intel was customer user information, and access to it was essential if Intels customers were to produce products compatible with Intels CPUs. A25, A43. Intel regularly provided other customers with the information, subject to restrictions that the district court specifically applied to Intergraph under the injunction. A79. The information was hardly Intels core intellectual property.
Intels statement of applicable law is also erroneous. Neither the antitrust nor intellectual property laws condone a monopolist utilizing intellectual property for anticompetitive purposes. Thus, in Eastman Kodak, the Supreme Court stated that "power gained through some natural and legal advantage such as a patent, copyright or business acumen can give rise to liability if a seller exploits his dominant position in one market to expand his empire into the next. " 504 U.S. at 480 n.29 (quoting Times-Picayune Publg Co. v. United States, 345 U.S. 594, 611 (1953)). In Data General, 36 F.3d at 1187, the court held that "exclusionary conduct can include a monopolists unilateral refusal to license a copyright." Similarly, in Image Technical Servs., 125 F.3d at 1218, the court held that "exclusionary conduct" violating Section 2 of the Sherman Act "can include a monopolists unilateral refusal to license a [patent or] copyright or to sell its patented or copyrighted work." As the court further explained: "Neither the aims of intellectual property law, nor the antitrust laws justify allowing a monopolist to rely upon a pretextual business justification to mask anticompetitive conduct." Id. at 1219.
This Court has also held that antitrust laws apply when intellectual property is used to "eviscerate competition unfairly." Atari Games, 897 F.2d at 1576; Schenck v. Norton Corp., 713 F.2d 782, 786 n.3 (Fed. Cir. 1983) ("That the property right represented by a patent, like other property rights, may be used in a scheme violative of antitrust laws creates no conflict between laws establishing any of those property rights and the antitrust laws."). See also Antitrust Guidelines for the Licensing of Intellectual Property, issued by the U.S. Department of Justice and FTC, April 6, 1995, § 2.2: "As in other antitrust contexts, however, market power could be illegally acquired or maintained, or, even if lawfully acquired and maintained, would be relevant to the ability of an intellectual property owner to harm competition through unreasonable conduct in connection with such property."
In any event, the district court found Intels purported concern about protecting its intellectual property to be pretextual, because Intergraph had never misused Intels intellectual property in the past. A17-18, A29, A47-48, A71. In addition, the order the court crafted specifically required Intergraph to "maintain the confidentiality of all Information" provided by Intel, "in accordance with the terms, conditions and procedures ... previously agreed to by the parties." A79.
When a monopolist, such as Intel, takes action against its own legitimate self-interest -- like cutting off a long-term, valued customer for a pretextual reason -- the conduct is inherently suspect as improper exclusionary conduct designed unlawfully to maintain the monopoly. In Aspen Skiing, 472 U.S. at 610-11, the Supreme Court found no justification for the defendant refusing to continue a profitable joint venture with the plaintiff, because the evidence showed the defendant "was not motivated by efficiency concerns and ... was willing to sacrifice short-run benefits and consumer goodwill in exchange for a perceived long-run impact on its smaller rival." In Otter Tail Power Co. v. United States, 410 U.S. 366, 380 (1973), the Court upheld a monopolization claim over defendants argument that it did not want to deal with plaintiff because of its own "self-interest": "The promotion of self-interest alone does not invoke the rule of reason to immunize otherwise illegal conduct." The Supreme Court ruled the defendant must present evidence that its conduct provided better service, lower costs, or improved efficiency to constitute a possible justification for exclusionary conduct. Id. See also Eastman Kodak, 504 U.S. at 483 n.32 (monopolists right to refuse to deal "exists only if there are legitimate competitive reasons for the refusal").
Intel presented no evidence at the evidentiary hearing or in post-hearing submissions that its conduct promoted efficiency or competition, choosing instead to rest on its asserted absolute right to cut Intergraph off. The absence of any legitimate business justification for Intels conduct -- specifically found by the court, A29 -- is strong evidence of illegal monopolization.
Intel asserts that Intergraph cannot challenge Intels monopolization of the micro-processor market, because Intergraph is not currently a direct competitor in that market. This ignores the dynamics of Intels anticompetitive actions over time, and the serious harm to competition and innovation. The district court found that Intel induced Intergraph to exit the microprocessor market in 1993 through false assurances and commitments. A12-15. See A315-19, A392-93. The court further found that after Intergraph was "locked-in" to Intels microprocessors and could not feasibly re-enter the microprocessor market, Intel cut Intergraph off from essential CPUs and product information and insisted that Intergraph relinquish all its patented cache memory technology (incorporated in Intels microprocessors) to Intel for free. A19-20. See A109-11. Intels coercive use of monopoly power to appropriate all microprocessor technology to itself impairs and chills incentives to compete or innovate in the microprocessor market. It also impedes Intergraph from selling or licensing its technology to rivals or competitors of Intel. This had the obvious purpose and effect of enhancing Intels monopoly in the microprocessor market. Consumers are injured because Intel maintains its monopoly by eliminating innovation or competition that might threaten it. As this Court stated in Loctite Corp., 781 F.2d at 876-77, the patent system "encourages innovation and its fruits: new jobs and new industries, new consumer goods and trade benefits" and complements the goal of the antitrust laws to promote competition. There is therefore a strong "public policy of erecting a barrier against thwarting patentees from asserting legitimate patent rights." Id.
Because Intels actions thwart the purposes of both the antitrust and intellectual property laws, Intergraph has a strong claim for unlawful maintenance of monopoly power by Intel, and a substantial likelihood of prevailing on that claim at trial.
Intel concedes that a monopolist has a duty to deal when "it is using its monopoly power in one market to gain a monopoly in another" or "is attempting to use [its control of an] essential facility to monopolize a downstream market." Intel Br. 10, 11. While these are certainly two circumstances in which the courts have held that a monopolist has an affirmative duty to deal -- and circumstances that the district court found present here, see A44 -- the Supreme Court in five seminal decisions has upheld illegal monopolization claims based on refusals to deal by monopolists in a variety of factual contexts: Eastman Kodak, supra (Kodaks refusal to supply its spare parts to independent service customers and operators); Aspen Skiing, supra (ski lift owners refusal to continue joint ticket venture with a competitor); Otter Tail Power, supra (electric utilitys refusal to "wheel" power from other suppliers over its transmission lines to municipal customers); Lorain Journal Co. v. United States, 342 U.S. 143 (1951) (newspapers refusal to sell advertising to customers who used a competing radio station); Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359 (1927) (Kodaks refusal to sell its products at a dealers discount to plaintiff retailer because Kodak was integrating into the retailer level).
The case against Intel combines all the critical elements from these controlling Supreme Court cases: (1) prior mutually beneficial dealings with the plaintiffs followed by a sudden change to a policy of refusing to deal (Kodak, Aspen Skiing); (2) the monopolists refusal to deal with its customers to achieve an anticompetitive purpose, i.e., the maintenance or expansion of its monopoly (Kodak, Otter Tail, Lorain Journal); (3) control over an "essential facility" plaintiffs needed for their business (Otter Tail (electric transmission line), Aspen Skiing (ski lifts), Lorain Journal (only newspaper in town)); (4) the monopolist expanding into a downstream market in competition with plaintiff and imposing discriminatory terms on plaintiff (Southern Photo); (5) plaintiff is "locked-in" and cannot feasibly escape the monopolists control (Kodak, Otter Tail); and (6) no efficiency or business justification for the refusal (Otter Tail, Aspen Skiing).
The lower courts have also frequently entered injunctions requiring defendants to continue dealing with plaintiffs in antitrust cases. See, e.g., Image Technical Servs., 125 F.3d at 1228 (injunction compelling Kodak to sell copier spare parts and related equipment to plaintiffs for ten years); Acquaire v. Canada Dry Bottling Co., 24 F.3d 401 (2d Cir. 1994) (defendant enjoined from withholding product from distributors); General Leaseways, Inc. v. National Truck Leasing Assn, 744 F.2d 588 (7th Cir. 1984) (defendant preliminarily enjoined from expelling plaintiff from trade association).
In National Screen Serv. Corp. v. Poster Exch., Inc., supra, the Fifth Circuit affirmed a mandatory preliminary injunction in a case remarkably similar to this one. Plaintiff Poster Exchange was a movie accessories dealer that bought its supplies from the defendant for several years and then was abruptly cut off. Plaintiff alleged defendant was using its monopoly as sole manufacturer of movie accessories to exclude competition and to extend its monopoly into different markets. Plaintiff sought a preliminary injunction, alleging it would be eliminated as a competitor and suffer irreparable injury if not able to supply its own customers with accessories available only through defendant. 305 F.2d at 649-50. The district court issued a preliminary injunction that "directed appellant until further notice or order of the Court, to continue business dealings with appellee upon the same terms and conditions which prevailed [previously]. " Id. at 649. This decision was affirmed by the Fifth Circuit:
The district court properly analyzed these Supreme Court precedents, and lower court cases following them, to find there was a substantial likelihood that Intergraph would prevail on its monopolization claim based on an unlawful refusal to deal.
A refusal to deal "may be unlawful because a monopolists control of an essential facility ... can extend monopoly power from one stage of production to another, and from one market into another." MCI Communications Corp. v. AT&T, 708 F.2d 1081, 1132 (7th Cir.) (AT&T refusal to let MCI connect to AT&Ts nationwide network), cert. denied, 464 U.S. 891 (1983); Tic-X-Press, Inc. v. Omni Promotions Co. of Ga., 815 F.2d 1407, 1420 (11th Cir. 1987) (unique arena with substantial economic advantages and lack of viable alternatives gave owner substantial market power); Olympia Equip. Leasing Co. v. Western Union, 797 F.2d at 376 ("a firm which controls a facility essential to its competitors may be guilty of monopolization if it refuses to allow them access to the facility"). The antitrust laws impose on firms controlling an essential facility the obligation to make the facility available on non-discriminatory terms. MCI Communications Corp., 708 F.2d at 1132; Otter Tail Power, supra (injunction granted); Aspen Skiing, supra (injunction granted); United States v. Terminal Railroad Assn, 224 U.S. 383 (1912) (injunction ordering access on equal, non-discriminatory terms).
The district court correctly held that Intels advanced CPUs and the related product information were "essential facilities" such that Intels refusal to supply them to Intergraph -- justified by no legitimate business reason -- was likely to violate Section 2 of the Sherman Act, because those items are not available from alternative sources and cannot be feasibly duplicated, and because competitors cannot effectively compete in the relevant markets without access to them. A42-44, A84-98. See Great Western Directories, Inc. v. Southwestern Bell, 63 F.3d 1378, 1384 (5th Cir. 1995) (affirmed monopolization claim based on denial of reasonable access to "essential facility" of telephone directory listing information); BellSouth Adver. & Publg Corp. v. Donnelley Info. Publg, Inc., 719 F. Supp. 1551, 1566 (S.D. Fla. 1988), affd, 933 F.2d 952 (11th Cir. 1991) (subsequent history omitted) (current updated telephone listings can be an essential facility).
The district court held that Intel has improperly used its monopoly power in microprocessors to extend or leverage its power into the markets for graphic subsystems and workstations. A44, citing Eastman Kodak, 504 U.S. at 480 n.29 ("The Court has held many times that power gained through some natural and legal advantage such as a patent, copyright, or business acumen can give rise to liability if a seller exploits his dominant position in one market to expand his empire into the next."). The district court also relied on cases from the Second Circuit, Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979), cert. denied, 444 U.S. 1093 (1980), and the Sixth, Kerasotes Mich. Theatres v. National Amusements, Inc., 854 F.2d 135, 136-37 (6th Cir. 1988), cert. dismissed, 490 U.S. 1087 (1989), holding that a monopolist violates the Sherman Act by using monopoly power in one market to gain a "competitive advantage" in a second or downstream market.
This "competitive advantage" theory fits Intels conduct like a glove. The district court found that Intel was entering the graphics subsystem and workstation markets in competition with Intergraph while simultaneously denying Intergraph access to the CPUs and product information it needs to compete in those markets. A46. See A109-11 ("Intel Graphics Roadmap"). The Eleventh Circuit has not issued a definitive ruling adopting or rejecting the Berkey Photo line of cases. See, e.g., Florida Seed Co. v. Monsanto Co., 915 F. Supp. 1167, 1173 (M.D. Ala. 1995) (noting the split among the circuits and articulating the monopoly leveraging theory as "using a monopoly in one market to gain a competitive advantage in a second, where the purpose is not to monopolize or attempt to monopolize the second market"); Direct Media Corp. v. Camden Tel. & Tel., 989 F. Supp. 1211, 1218 (S.D. Ga. 1997); Servicetrends v. Siemens Med. Sys., Inc., 870 F. Supp. 1042, 1057 (N.D. Ga. 1994). In these circumstances it certainly was no abuse of discretion for the district court to follow cases from other circuits upholding the "advantage" theory of monopoly leveraging, and to conclude that Intergraph was likely to prevail on such a claim.
Intel largely ignores the "lock-in" analysis relied on by the district court, which is based on the Supreme Courts most recent monopolization decision in Kodak. The district court found that Intel gave assurances to Intergraph to induce it to redesign its workstation program around Intels CPUs, thereby becoming financially and technologically "locked-in" to Intels CPU technology. A13-15. This magnified Intels monopoly power. See Eastman Kodak, 504 U.S. at 477 (antitrust concerns are heightened where "locked-in" customers cannot readily switch to alternative technology).
When a company like Intel controls the standards and interfaces to its microprocessor products, the "lock-in" effects "may render dominance of a firm in control of an interface standard unusually enduring and give reason for careful attention to anticompetitive practices." FTC Staff Report, Anticipating the 21st Century: Competitive Policy in the New High-Tech, Global Marketplace, vol. 1, ch. 9 at 3 (May 1996). Referring to Kodak, the FTC staff also noted that a firm controlling a dominant industry standard may leverage its power into a secondary market of complementary products "by changing, or withholding the key to the creation of, a successful interface between the primary product and complementary products." Id. at 14. This is precisely the sort of anticompetitive conduct the district court found Intel engaged in here.
Intel criticizes the district court for not squarely finding that Intel had a "specific intent to monopolize" the workstation and graphic subsystem markets, required for an attempted monopolization claim under Spectrum Sports. Intel has, once again, narrowly dissected and interpreted the courts opinion, which is replete with findings that Intel not only intends to dominate and restrain competition in these markets, but is taking aggressive actions that will inevitably monopolize them soon, to the extent of controlling 86% of the technical workstation market by the year 2000. A15 n.26. These findings satisfy both the intent and dangerous probability of success elements for an attempt to monopolize claim.
Intel cites Official Airlines Guides, Inc. v. FTC, 630 F.2d 920 (2d Cir. 1980), for the proposition that a monopolist cannot violate the antitrust laws by refusing to deal with competitors in a market in which the monopolist does not compete. Intel Br. 26. But in this case Intels actions have injured Intergraph and competition in markets in which they do compete: the microprocessor market -- in which Intergraph has competing and patented microprocessor technology -- and the downstream markets of graphic subsystems and workstations -- in which Intel is expanding in direct competition with Intergraph. Intel improperly used its monopoly power both to maintain and protect its monopoly in the microprocessor market and to extend that monopoly into downstream markets. Both are antitrust violations. Indeed, in Official Airlines the court distinguished "ordinary monopolization cases where challenged acts or practices were engaged in to benefit the monopolist competitively, either in the market in which the monopoly power existed or in some adjacent market into which the monopolist had extended its operations." Id. at 925-26. That, as the district court found, is this case.
In addition to Section 2, the district court found Intergraph likely to succeed on several Section 1 claims as well. The district court found that Intel had coerced Intergraph to sign NDAs on a take-it-or-leave-it basis, and then unilaterally terminated them as a powerful "contractual weapon" to discipline Intergraph and the industry generally. A27-28. The district court found that this strategy had a "chilling effect" on the entire industry and was used to carry out Intels monopolization scheme. A28.
The court also found that Intels conditioning its continued supply of CPUs and product information on Intergraphs agreement to relinquish its Clipper patents to Intel for free was illegal coercive reciprocity, similar to per se illegal tie-ins. A48-49. See, e.g., Betaseed, Inc. v. U and I Inc., 681 F.2d 1203 (9th Cir. 1982); Spartan Grain & Mill Co. v. Ayers, 581 F.2d 419 (5th Cir. 1978), cert. denied, 444 U.S. 831 (1979). See also Systemcare, Inc. v. Wang Laboratories Corp., 117 F.3d 1137, 1138 (10th Cir. 1997) (en banc) (the concerted action element of Section 1 of the Sherman Act is satisfied where "the seller coerces a buyers acquiescence in a tying arrangement"). In addition, the court found other disciplinary and retaliatory acts against Intergraph, including Intels coercive agreement with a test equipment supplier not to deal with Intergraph, and Intels conspiring with Intergraphs competitors to take away Intergraphs customers. A29-30, A49-50. See DeLong Equip. Co. v. Washington Mills Electro Minerals Corp., 990 F.2d 1186, 1198-99 (11th Cir.) (terminated distributor had valid Section 1 claim against favored distributors and supplier, which cut off plaintiff from supply of vital product needed to compete), cert. denied, 510 U.S. 1012 (1993).
Intel concedes, as it must, that there is a lesser standard of proof for these Section 1 claims, which merely require concerted action that "threatens an unreasonable restraint of trade. " Intel Br. 24. In order to prevail on such a claim, Intergraph must prove: (1) an agreement to enter a conspiracy; (2) designed to achieve an unlawful objective; and (3) actual or potential anticompetitive effects. Times-Picayune Publg Co., 345 U.S. at 622 ; Bolt v. Halifax Hosp. Med. Ctr., 891 F.2d 810, 820 (11th Cir.), cert. denied, 495 U.S. 924 (1990).
Intergraph "need not prove an intent on the part of the co-conspirators to restrain trade or to build a monopoly. So long as the purported conspiracy has an anticompetitive effect, the plaintiff has made out a case under Section 1." Bolt, 891 F.2d at 819-20; U.S. Anchor Mfg., 7 F.3d at 1001. Nor is it necessary for Intergraph to provide evidence of actual, present competition to show a violation of Section 1, so long as "the potential for competition exists." Sullivan v. NFL, 34 F.3d 1091, 1100 (1st Cir. 1994), cert. denied, 513 U.S. 1190 (1995). The district court found that Intel is an actual and serious potential competitor of Intergraph in the graphics subsystem market, that Intel controls essential tools that Intergraph needs to compete in that market, and that the "coerced agreements" with Intergraph and with third parties to inhibit competition by Intergraph violated Section 1. A49-50.
Intel argues that because the preliminary injunction directs Intel to deal with Intergraph, no theory of liability other than those involving a refusal to deal can support the order. Intel Br. 35-36. This novel contention ignores the very purpose of a preliminary injunction, which is to avoid irreparable harm and preserve the position of the parties until the claims can be heard and decided on the merits, not to grant immediate relief on each of those claims. As the district court specifically found, the preliminary injunction was necessary to ensure that meaningful relief would be available for Intergraph after trial on the merits. A37, A68.
The district court correctly found that Intergraph was substantially likely to succeed on its claims that it was entitled to specific performance of the March 1997 Letter Agreement (see A20 n.35) and that Intels purported termination of its NDAs with Intergraph was invalid under the Uniform Commercial Code ("UCC"). A57, A60, A65. Intels arguments that the judge misunderstood Alabama law are unfounded and provide no basis for disturbing the courts conclusions.
The Letter Agreement. The district court found that "Intel made a number of commitments to Intergraph" in the Letter Agreement, signed on Intels behalf by the same individual who signed the NDAs. A19, A53-54. These included promises (1) to treat Intergraph "as a strategic customer in current and future programs" and (2) to afford "additional price reductions." Support as a "strategic customer," in turn, included "product supply, design, quality, manufacturing and marketing." A19-20. These promises were made in response to Intergraphs specific request for assurances that it would "remain a strategic partner and that [it] would get product and [it] would get advanced information and samples." A340.
Intel argues (Br. 37-38) that the court erred in concluding that Intergraph was likely to establish that the Letter Agreement was an enforceable contract, because it lacked essential elements and terms. But nowhere does Intel address the two Alabama Supreme Court UCC decisions upon which the district court relied, A54 n.45, and for good reason. Those cases -- H.C. Schmieding Produce Co. v. Cagle, 529 So.2d 243 (Ala. 1988), and Thermal Sys. of Ala. v. Sigafoose, 533 So.2d 567, 571 (Ala. 1988) -- confirm that Alabama contract law requires only the bare essentials, which were readily satisfied here. Intel looks only to the terms of the Letter Agreement itself, see Intel Br. 37, but the Alabama cases confirm that the district court was correct in considering "surrounding circumstances" in construing the parties agreement. A55.
The district court also correctly rejected Intels effort to bootstrap the termination provision in its NDAs into the Letter Agreement, concluding that the terms of the narrowly drafted NDAs were not addressed to the broad commitments in the Letter Agreement. A54. The NDAs simply provide that furnishing information under an NDA does not in itself create an obligation to supply product or information; they do not purport to consider the ramifications of the Letter Agreement. Far from being terminable at will, the district court found that the Letter Agreement was for a discernible duration, given its specific references to "future programs," which was augmented by Intel documents identifying specific programs through the end of 1999, and the Deschutes and Merced programs, which Intel was then developing. A53.
Having found that Intergraph was likely to establish that the Letter Agreement was an enforceable contract, the district court correctly went on to find that Intergraph was also likely to establish that the contract was for the sale of unique goods -- Intels microprocessors and the related technical information -- and accordingly that Intergraph would be entitled to specific performance under the UCC. See Ala. Code § 7-2-716(1) & Off. Com. 2. A55-57.
Relief from Unconscionable NDAs. The district court correctly determined that Intergraph was likely to establish that the termination clause in the NDAs, on which Intel relied in severing its relationship with Intergraph, was unconscionable under the UCC, both from the outset and in operation. While Intel argues that Fortune 1000 companies cannot claim unconscionability at the time of contracting, its own authority points out the fallacy of such a blanket statement: "Bargaining power is as much a function of market forces as it is of size." Stanley A. Klopp, Inc. v. John Deere Co., 510 F. Supp. 807, 811 (E.D. Pa. 1981), affd, 676 F.2d 688 (3d Cir. 1982) (Table). The question under the UCC turns on whether the party had any meaningful choice in accepting the term, and Intel has not shown that the district courts findings that Intergraph was "locked in" to Intel, with no choice, were clearly erroneous. Intel argues that Intergraph had a meaningful choice prior to switching to Intel microprocessors, Intel Br. 41-42, but Intel did not impose the NDAs until after the switch had been made and the "lock in" complete. A15-16.
Intergraphs situation is thus far different from Intels tendered authority on this subject. Cf. Roberson v. Money Tree of Ala., 954 F. Supp. 1519, 1526 (M.D. Ala. 1997) ("court must be wary of finding a contract unconscionable where the plaintiff is left with a place to go "); Highway Equip. Co. v. Caterpillar, Inc., 908 F.2d 60, 65 (6th Cir. 1990) ("Highway could have switched to selling a competitors equipment"); Jones Distrib. Co. v. White Consol. Ind., 943 F. Supp. 1445, 1460 (N.D. Iowa 1996) ("there were certainly other places the plaintiff could have gone for services"). Here, the primary risks of termination were on Intergraph, which positioned itself as a leading edge provider of products with Intel microprocessors and committed capital and manpower to its agreements with Intel, even though it might take months or years for an Intel chip to move from concept to reality. A clause purporting to allow Intel to terminate these agreements without notice "bears no reasonable relation to the business risks." Jones, 943 F. Supp. at 1460. Those clauses were therefore unconscionable when made.
The court also concluded that it would be unconscionable to permit Intel to exercise the termination clause against Intergraph, even if the clause was not unconscionable ab initio. See Ala. Code § 7-2-309(3) ("an agreement dispensing with notification [of termination] is invalid if its operation would be unconscionable"). Given the commitments Intel made to Intergraph, from the 1993 assurances to the 1997 Letter Agreement, and the "lock in" of Intergraph to Intel, with no alternative sources of supply, the district court did not abuse its discretion in concluding that Intergraph was likely to prevail on its claim that it was unconscionable for Intel to cut it off for, as the court specifically found, no legitimate business reason.
Finally, the court concluded that Intel could not terminate its supply relationship with Intergraph without reasonable notice. Such notice is required under the UCC, the court explained, so that "a supplier may not abandon its purchaser until that purchaser has made suitable, alternative arrangements, which are least disruptive to its business." A63, citing Ala. Code § 7-2-309, Off. Com. 8.
The "reasonableness" of notice is a fact question turning on the length of notice and the impact of termination. The greater the impact of termination -- e.g., where the party being terminated has made significant commitments in reliance on the ongoing relationship with the other -- the longer the time necessary for the notice to be reasonable. See Hamilton Tailoring Co. v. Delta Air Lines, Inc., 14 U.C.C. Rep. Serv. 1310, 1316 (S.D. Ohio 1974) (one-year advance notice of termination not sufficient as a matter of law); Jo-Ann, Inc. v. Alfin Fragrances, Inc., 731 F. Supp. 149, 160 (D.N.J. 1989). Given the factual finding that Intergraph has no alternative to Intel microprocessors and related information, the district court properly concluded that the complete lack of notice by Intel before termination was unreasonable. A65.
Lest it leave any stone unturned in its indiscriminate attack on the district courts decision, Intel briefly contends (Br. 48-49) that the order is not specific enough to satisfy Fed. R. Civ. P. 65(d). The courts five-page order, however, spells out precisely what Intel must do, see A75-A79, which is clear to all involved because it is nothing more or less than continue to do business with Intergraph as it had before the present controversy arose. A37, A71. The Supreme Court has upheld antitrust injunctions of much greater scope and generality than the one entered in this case on similar facts. See, e.g., Otter Tail Power, supra (mandatory injunction that defendant "wheel" electric power over its transmission lines to plaintiff municipalities under terms and conditions to be set by the Federal Power Commission); Aspen Skiing, supra (injunction required defendant to re-enter joint venture with plaintiff and offer a joint ticket for both companies ski lifts); United States v. Terminal Railroad Assn, supra (defendants required to offer essential facility "upon such just and reasonable terms and regulations as will, in respect to use, character and cost of service, place every such company upon as nearly an equal plane as may be with respect to expenses and charges as that occupied by the proprietary companies").
The lone Eleventh Circuit case cited by Intel (Br. 48) is hardly pertinent; it involved "an obey the law injunction," Hughey v. JMS Dev. Corp., 78 F.3d 1523, 1531 (11th Cir.), cert. denied, 117 S. Ct. 483 (1996), and nothing of the sort is at issue here. Significantly, Intel has not sought any clarification of its obligations from the district court. See Combs v. Ryans Coal Co., 785 F.2d 970, 979 (11th Cir.) (rejecting Rule 65(d) specificity claim when appellants "made no attempt to request more specific language [and] chose not to exercise their right to the usual remedy for inadequacies of this sort: a motion for clarification or modification of the court decree"), cert. denied, 479 U.S. 853 (1986).
The district courts exhaustive and careful findings of fact and conclusions of law fully support the preliminary injunctive relief granted pending trial. The district court did not abuse its discretion, and the preliminary injunction should be affirmed.