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INNOVATION DATA PROCESSING v. IBM

March 30, 1984

INNOVATION DATA PROCESSING, INC., Plaintiff,
v.
INTERNATIONAL BUSINESS MACHINES, CORP., Defendant



The opinion of the court was delivered by: ACKERMAN

 This is an antitrust action commenced by plaintiff Innovation Data Processing Inc. (Innovation) on April 22, 1983. On that date, Innovation filed its complaint accompanied by an order to show cause seeking to enjoin defendant International Business Machine Corporation (IBM) from marketing and shipping to its customers a new piece of computer software called Multiple Virtual System/System Product System Installation Productivity Option Release 3.8J ("IPO"J"). In its complaint, plaintiff Innovation alleges that IPO"J" constitutes a "tie-in" in violation of Section 1 of the Sherman Act, 15 U.S.C. Section 1, and Section 3 of the Clayton Act, 15 U.S.C. Section 14. Innovation asserts that the "tying" product is the IPO"J," and the "tie-in" product is an IBM software program product known as Data Facilities Data Set Services (DFDSS or Data Set Services program). Innovation claims that the alleged tie was implemented by IBM for the purpose of impeding Innovation's ability to market its own program product, called Fast Dump Restore, (FDR) which competes with IBM's DFDSS program.

 Plaintiff's application for a temporary restraining order was heard by my colleague, Judge Sarokin, on April 26, 1983. After hearing oral argument on the application, Judge Sarokin denied the requested relief, ruling in part as follows: "Insofar as the application for a temporary restraining order is concerned, pending a hearing on the preliminary injunction I am going to deny that application. I cannot, based on what is presently before me, conclude that the plaintiff has a likelihood of success on the merits. There is a serious question in my mind, and I think it is evidenced in the discussion we have had -- we have all had today, as to whether or not this is indeed a condition imposed by IBM, or whether as (IBM counsel) Mr. Mullen just suggested, that customers are acquiring this license out of choice because they find it to be essential and beneficial to their own operations. But I cannot possibly resolve that factual issue on the record that is now before me.

 "I am satisfied that in this interim period, assuming that within a month or possibly two months, at the most, I'll be able to resolve the matter, that plaintiff is not entitled to injunctive relief on the ground that it can prove irreparable injury. There is no substantial evidence before me of any irreparable injury . . ."

 Following this ruling, the parties commenced discovery of each other in anticipation of a hearing on plaintiff's motion for a preliminary injunction. No such hearing was held, however, because after taking all of the discovery it had requested from IBM, plaintiff voluntarily withdrew its motion for a preliminary injunction on April 30, 1983. This matter is presently before me on plaintiff's motion to strike defendant IBM's third affirmative defense of release, and defendant IBM's motion for summary judgment.

 I turn first to consider IBM's summary judgment motion. Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment is not to be granted unless after all reasonable inferences have been drawn in favor of the non-moving party, there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. See DeLong Corp. v. Raymond International, 622 F.2d 1135 (3d Cir.1980). On a motion for summary judgment supported by affidavits and depositions, "an adverse party may not rest upon the mere allegations or denials, of his pleadings, but must set forth specific facts showing that there is a genuine issue for trial." First National Bank of Arizona v. Cities Service Co., 391 U.S. 253 at 288, 88 S. Ct. 1575 at 1592, 20 L. Ed. 2d 569 (1968). See also Sound Ship Building Co. v. Bethlehem Steel Co., 533 F.2d 96 at Page 99 (3d Cir.) cert. denied, 429 U.S. 860, 97 S. Ct. 161, 50 L. Ed. 2d 137 (1976). While "summary procedures should be used sparingly in complex antitrust litigation," Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 82 S. Ct. 486, 491, 7 L. Ed. 2d 458 (1962), this does not rule out the granting of a Rule 56 motion under appropriate circumstances. See Sound Ship Building Co. v. Bethlehem Steel Co., 533 F.2d 96, 99-100 (3d Cir.), cert. denied, 429 U.S. 860, 97 S. Ct. 161, 50 L. Ed. 2d 137 (1976), (summary judgment granted on antitrust claim). As Justice Marshall stated in First National Bank v. Cities Service Co., 391 U.S. 253, 290, 88 S. Ct. 1575, 1593, 20 L. Ed. 2d 569 (1968): "While we recognize the importance of preserving litigants' rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an antitrust complaint setting forth a valid cause of action be entitled to a full-dress trial notwithstanding the absence of any significant probative evidence tending to support the complaint."

 Applying these standards to the matter before me I have determined to grant IBM's motion for summary judgment as the plaintiff's per se tying claim, but to deny it as to the plaintiff's claim that the general standards of the Acts have been violated.

 The undisputed facts relevant to this motion are as follows: IBM produces and markets a wide range of computer products, including hardware, such as central processing units and disk and tape storage devices and software, such as operating system programs. It is the latter that is involved in this action.

 An "operating system" is a set of computer programs which guide and control the basic function of a computer. These operating system programs also provide the necessary link between the physical "hardware" and the various applications programs "software", designed to perform specific tasks, such as accounting, word-processing, payroll or even video games.

 The IBM operating system involved in this lawsuit is called the Multiple Virtual System, or "MVS," and is IBM's largest and most complex system of operating system programs. It is designed for use with very large or "high-end" IBM or IBM plug-compatible (PCM) computers, and the various programs which together constitute the MVS. The MVS collectively contain more than five million lines of computer instructions. IBM does not license MVS or any other operating system, at a single-price, aggregated fee. Rather, a customer must separately license the various separate underlying operating system programs which would together make up that particular user's MVS.

 It is undisputed that IBM's customers are not required to license all or any particular combination of these programs. Instead, they may choose to license any one or more of them at their option, and may even order operating system programs designed by IBM competitors in place of, or in addition to, IBM's programs. Plaintiff Innovation's FDR offering and its optional enhancement COMPAKTOR and Automatic Backup and Recovery constitute such an alternative or supplemental program.

 The specific operating system program at issue in this case is IBM's competitive equivalent to the FDR, the DFDSS program, which was introduced in 1980. Both DFDSS and FDR are known as "dump-restore" programs, which enable a computer user to transfer information to (the "dump" function) and from (the "restore" function) computer disks and tapes. DFDSS is also capable of the process of loading other MVS operating system programs into a computer system for the first time.

 This process, along with that of loading new or revised versions of MVS into a computer program is very complex and delicate. Generally, such installation entails the transfer of the MVS programs from the source computer tapes on to data storage disks, which are housed within the user's computers system in storage devices known as disk drives. In the past, defendant IBM has supplied its customers with an operating system for which IBM did not charge and which could be used in that installation process.

 More recently, IBM customers were given the option of licensing from IBM at a fee the DFDSS program which represented an improvement over the program which IBM had provided at no fee, or of licensing at a fee some other version of an IBM dump/restore ...


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