Intel Corp. and the Federal Trade Commission's lawyers said Monday they've agreed to settle antitrust charges against the world's leading chip-maker, with regulators withdrawing their landmark case just a day before it was to go to trial.
Shares of Intel moved up 3 5/8 to 118 1/4 in morning trading after the news about the tech bellwether cheered investors, who bid up semiconductor and other technology issues.
The FTC had charged Intel (INTC) with using its monopoly power to force three of its customers to turn over their patent rights.
Details about the proposed settlement were withheld pending formal approval by the five-member panel that oversees the FTC. The commission, which is expected to review the settlement within a few days, could accept the proposal, modify it or reject it altogether. In the meantime, all judicial proceedings in the case will be halted.
Craig Barrett, Intel's president and CEO, said the proposed settlement was a "win-win" arrangement that gives Intel value for its intellectual property.
William Baer, director of the FTC's bureau of competition, said the commission is still investigating some "remaining issues" but hopes to resolve them.
Antitrust lawyers saw the Intel case as an aggressive but ultimately fruitless use of the antitrust laws.
In its complaint, the FTC said Intel bullied three of its best customers - Compaq (CPQ), Digital Equipment Corp. (which is now owned by Compaq) and Intergraph (INGR). Each of the three companies had special business arrangements with Intel. In order to design and build computers that were optimized for Intel's microprocessors, Intel gave them access to Intel's trade secrets about how the chips worked and how they were designed. Each company ended up accusing Intel of stealing its patents.
Intel denied using the others' patents, then cut off access to its trade secrets, a potentially fatal blow to the three companies, particularly Intergraph, which won a restraining order against Intel.
Intel denied few of the facts in the FTC complaint but insisted it was within its rights to refuse to give special favors to companies that were suing it.
"The first thing you notice is that it's not about anybody's competitive strategies," said Daniel Wall, an antitrust attorney with McCutcheon, Doyle, Brown and Enerson in San Francisco. "It's something that happened three times in the midst of patent litigation; it's a litigation strategy."
Other observers questioned whether the regulators backing the antitrust litigation had handled their concerns appropriately.
"If I were at the FTC, I wouldn't be pleading intellectual property rights," said Steve Newborn, an antitrust attorney with Rogers and Wells in Washington. "Clearly, there are serious issues, I'm just not sure they're worth pursuing."
Written By Rex Nutting, Washington bureau chief for CBS MarketWatch