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Further support for "tortured" logic.....

Wall Street Journal, Tuesday, May 17, 1988

Paul B. Carroll

New York - International Business Machines is demanding
retroactive payments for patents it says companies have
used in selling IBM compatable personal computers over 
the past several years.

The move has shocked the clone makers which had assumed that 
IBM's lack of objection had assured them of clear sailing, 
and could squeeze the more marginal clone companies. The 
decision could also delay the introduction of some clones
of IBM's PS/2 line of personal computers. In addition, 
the move reintroduces the prospect of messy litigation in 
the personal computer market at a time when IBM's decision 
to license the patents for its PS/2 line had been quieting 
that talk.

"IBM is saying, in effect, "Sure, we'll let you license our
PS/2 patents, but let's make sure that we're all squared away
on what you owe us for patents on the original PC, XT and
AT.' " said one industry executive, who asked not to
be identified. For many companies, that would involve payments
of at least 1% of sales back to 1982 or 1983, in a business in
which manufacturers profit margins total just a few percentage
points. Clone makers have sold billions of dollars of these 
products, and it would be hard to say how much money would be 
involved in retroactive patent payments on them; IBM declined 
to estimate how much it could recieve from such payments.

IBM, in confirming statements from industry executives about 
the patent payments, said clone companies shouldn't have been 
surprised. The Armonk NY office equipment maker has made no
secret of its intention to protect it's computer patents.

An IBM spokesman said the company would accept payments 
totalling 1% of sales for sales made through last 
April 1, assuming the clone companies settle up with IBM by year 
end. If a settlement isn't reached this year, the spokeman said, 
IBM could raise the rate. IBM also said that sales made after 
April 1 would be subject to the 5% maximum royalty that
IBM recently said will apply to PS/2 patents.

The spokesman said IBM would sue, if necessary, to protect it's
patent rights.

It wasn't immediately clear just how many companies would
be affected by IBM's decision, but the effect is likely to be
broad. In the rush to get clones into the marketplace, many
companies proceeded without checking to be sure that they
steered clear of IBM's patents.

Big clone makers, however, are much less likely to be affected
than the smaller ones, because they have patents that IBM uses
and thus have cross licensing agreements that limit any 
payments they owe IBM. 

Patent lawyers also say that, in any case, clone makers 
would be able to invoke a legal principle called laches. In
effect, that means that clone makers can say that they have
managed their business on the assumption that because IBM
hadn't challenged them by now it wasn't going to challenge
them. The lawyers say that IBM would probably still be
able to insist on some sort of payment, though IBM might
have to mitigate it's demands. 

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Fear, Uncertainty, and Doubt.

or, Welcome to Rancho IBM.

:-)   :-)   :-)   :-)