IBM Sues PSI: You Say Emulate, We Say Litigate

Published: December 12, 2006

by Hesh Wiener

On Wednesday, November 29, IBM sued Platform Solutions, asserting PSI had infringed IBM patents and was in breach of the ICA agreement under which PSI licenses IBM software. PSI develops clone mainframe computers based on Hewlett-Packard's Integrity Itanium servers, to which it adds firmware and software; the resultant systems can run IBM mainframe software. IBM asked the court to confirm the propriety of its decision to terminate PSI's software licenses, to block PSI from using IBM's patented technology, and to confirm that IBM's actions are neither anticompetitive nor in violation of antitrust laws. If IBM succeeds, PSI is dead.

IBM filed the complaint, which you can read here, at the Federal Court in White Plains, New York. The courthouse is just minutes form IBM's Armonk headquarters and 3,000 miles from PSI's Sunnyvale, California, home. The form of the complaint is what lawyers call a plea for declaratory judgment, which means, to a layman, that IBM is asking for the court's binding opinion on some legal questions, and wants it as soon as practicable. Other matters, such as the issuance of court orders and any assessment and award of damages, would follow any favorable judgment.

Under the rules that govern federal suits, IBM has, by asking for declaratory judgment, made it pretty much certain that venue will remain in White Plains. This undoubtedly favors IBM; if IBM wanted to file elsewhere, such as in California, it would have done so.

IBM was able to take this legal action for a number of reasons. In intellectual property cases, it is routine (and almost necessary) for a party claiming injury to seek a court opinion before seeking other remedies, such as damages. In addition, a party threatened with a lawsuit can seek declaratory judgment to ward off impending actions that might, if they proceeded as an adversary wishes, by themselves cause significant harm. If a court accepts that this form of complaint is valid, it will almost always comply with any request to fix venue as the complainant wishes. Although it is not the case in this instance, a plea for declaratory judgment is often filed by a little guy that is afraid of being crushed by a big guy.

In the case of IBM v. PSI, IBM says that PSI has, on a number of occasions, threatened IBM with an antitrust suit if IBM didn't accede to PSI's demands that IBM license software for use on its computer systems. That by itself could be the basis of a successful request for declaratory judgment.

Should this matter actually go to trial, IBM has asked that the case be heard before a jury. But that aspect of the complaint is more or less boilerplate, and IBM can drop this demand along the way with no harm to its case. It is a lot more difficult--nearly impossible, in fact--to ask for a jury trial if an action is begun in a way that puts it entirely before a judge.

The case is before a young, no-nonsense judge, Stephen Robinson, 49, who grew up in Brooklyn's Bedford-Stuyvesant neighborhood and went to Cornell University. He took a breather after graduating in 1979, but in 1981 he returned to the shores of Lake Cayuga, this time to go to law school. While passing bar exams in New York and Connecticut, Robinson put in a couple of stints at New York City law firms before signing on as a federal prosecutor in the Big Apple. Four years later, he was back in the commercial sector working for Kroll, the world's largest private investigative agency. That was where the FBI found him. After a couple years, he went private again, this time at Aetna. But the feds wanted him back, and in 1998 he went to work as a prosecutor, this time in Connecticut, where he held the top post. His next step was into a different kind of public service: Robinson became the head of Empower New Haven, a tremendously effective public service organization that's not far from Yale, geographically speaking, but at a considerable distance by other measures. Yet it was in fact a Yalie, President George W. Bush, who put him on the federal bench in 2003.

The law firm IBM hired for the PSI case, Quinn Emanuel, is headquartered in Los Angeles but has offices in New York, San Francisco, and Silicon Valley's Redwood Shores. The firm bills itself as "America's premier business litigation firm," taking a brash posture that contrasts with the much more low-key style of IBM's most prominent outside law firm, Cravath, Swain & Moore.

So far, PSI has not decided who will represent it in this case. One obvious candidate is Morrison Foerster, which PSI has used in the past. Morrison Foerster is in its heart a West Coat firm, like Quinn Emanuel, but it originated in San Francisco, not L.A. Today, it has a thousand lawyers in 18 offices, 16 of them in the USA and one each in Tokyo and Beijing. If Quinn Emanuel is bold, Morrison Foerster is something else entirely; the firm's astonishing URL is mofo.com.

The case itself is, on the surface, pretty simple. IBM says that PSI has infringed its U.S. patents 5,696,709; 5,825,678; 5,953,520; 5,987,495; and 6,801,993. All the patents appear to be for firmware or software rather than any kind of electronic circuit, although it is possible that these patented inventions could be incorporated in the hardware of a chip or processor. The patented technologies are all used by PSI in its mainframe emulation system, according to IBM, but without IBM's permission. IBM says it has not examined any PSI systems to confirm that they include the patented technologies.

IBM also says that its IBM Customer Agreement, the ICA in Big Bluespeak, prohibits "translation" of licensed software and that the emulation technology used by PSI translates mainframe code to Itanium instructions. The ICA does in fact say customers may not "reverse assemble, reverse compile, or otherwise translate the ICA Program unless expressly permitted by applicable law without the possibility of contractual waiver." But the meaning of "translate" in the context of the ICA may not be the same as its meaning in patent 7,092,869 issued to PSI's Ron Hilton, which IBM cites in its complaint. The possibility of different interpretations is a fact of life in intellectual property law, where patent applications may be written in an imprecise way to give the patent holder as much scope and wiggle room as patent examiners will tolerate.

It's doubtful that IBM's mainframe customers will have to worry that they are violating the ICA whenever they use the virtualization capabilities of an IBM processor, although virtualization necessarily involves some kind of translation of computer instructions, as IBM points out in some of the patent material it has already presented to the court.

This doesn't mean IBM or its lawyers are confused, but rather that some aspects of this case will require explanation and interpretation, what lawyers call proper construction, before they make sense. It's a safe bet that whoever PSI hires for its lawyers, and however it chooses to respond to IBM's allegations, the court will have to decide between two sets of persuasively posed interpretations of IBM's ICA and the scope and meaning of some esoteric patents.

As it stands, PSI has to mount a really superb defense. Because if IBM prevails on even a portion of its suit, getting far enough to have a valid basis to refuse software licenses to PSI and any other party that might want to use PSI's systems to run IBM mainframe programs, PSI will have nothing to sell.

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