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IBM Controversy Sparks Justice Department Investigation

Posted on: Thursday, 8 October 2009, 14:15 CDT

Recent allegations that IBM Corp. abused its dominant position in the market for mainframe computers are now being investigated by the Justice Department, The Associated Press reported.

IBM rivals claim they've been illegally frozen out of the mainframe market because of IBM's refusal to allow its mainframe operating software to run on non-IBM computers.

They argue that IBM used to license its mainframe software to competitors and operated under an antitrust agreement with the government, but recently stopped doing so in order to neutralize other competition.

Mainframes are well known for their reliability and can cost $1 million or more each. They are behind many everyday transactions such as withdrawing cash from an ATM, which often involves the ATM pinging a mainframe at the bank where the customer's data is stored.

The government has started examining these allegations by sending out formal requests for information about the mainframe market to IBM rivals, according to the Computer and Communications Industry Association, an industry organization that complained to the Justice Department last month about IBM's behavior.

Ed Black, CEO of the trade group, said IBM tells big customers that “if you buy that other stuff, they’re not going to let that stuff talk to our stuff”.

"We think of the Internet as open and innovative, but that's a lock 'em up and keep 'em locked up strategy. That's very unsatisfactory for the customer base," he added.

T3 Technologies Inc., based in Tampa, Fla., lodged a formal complaint against IBM with European antitrust regulators in January and is suing IBM in the U.S. alleging antitrust abuses.

It claims IBM has tried to thwart its expansion into making mainframes by denying it licenses for IBM's mainframe software, something done "for no reason other than to remove all competition from the mainframe market."

IBM released a statement pointing to a decision last week by a judge in the U.S. District Court for the Southern District of New York dismissing T3's complaint against IBM.

IBM said it understood the Department of Justice asked T3 for documents from the litigation, but added it continued to believe there is no merit to T3's claims.

The company said it is fully entitled to enforce its intellectual property rights and protect the investments it has made in its technologies.

However, IBM said it would cooperate with any inquiries from the Justice Department.

A conflict between IBM and Platform Solutions Inc., whose technology was used to run IBM's mainframe operating software on non-IBM computers, was the catalyst for the complaint.

Platform also filed complaints to European regulators about IBM's conduct, until IBM bought Platform last year and the companies dropped their lawsuits against each other. T3 threw its support behind Platform's argument.

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On the Net:

• IBM Corp.
• Department of Justice

Source: RedOrbit Staff & Wire Reports

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