United States. Congress. Senate. Committee on the.

The Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) online

. (page 40 of 140)
Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 40 of 140)
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tion (herein referred to as "IBM"), whose names are specified on Schedule A,
(ii) Service Bureau Corporation, a corporation, (iii) Science Research Associates,
Inc., a corporation, and (iv) World Trade Corporation, a con^oratiou, based on
the submissions by such persons and corporations to the jurisdiction of this
Court.

II

For purposes of this Final Judgment :

(a) "IBM Group" is defined to include IBM and/or each Subsidiary (as
hereinafter defined).

(b) "Person" is defined as any individual, partnership, trust, estate, cor-
poration, any other entity establishment under the laws of the United States,
any state thereof, or any "other nation other than the United States (including
but not limited to those designated as a Societe Anonyme, a Gessellschafts mit
Beschrankters Haftung or a Societe a Besponsabilite Limitee) or any com-
bination of the foregoing.

(c) "Subsidiary" is defined to include any corporation, any other entity
established under the laws of the United States, or any state thereof, or any
nation other than the United States (including but not limited to those desig-
nated as a Societe Anonyme, a Gessellschafts mit Beschrankters Haftung, or a
Societe a Responsabilite Limitee) or any combination of the foregoing, (i)
fifty percent (50%) of the voting shares of capital stock of which is owned
or controlled, directly or indirectly, by IBM Group or a Subsidiary (as other-
wise defined in this Section [c] and including any subsidiary of a subsidiary
regardless of the tier of the subsidiary) of any of the following :

(a) IBM Group;

(b) Any successor to IBM Group ; or

(c) Any of the corporations to be created pursuant to the provisions of
this Final Judgment ;

or (ii) with respect to which any of the following has the right or power,
pursuant to contract or otherwise, to exercise management prerogatives :

(a) IBM Group;

(b) Any successor to IBM Group ; or

(c) Any of the corporations to be created pursuant to the provisions
of this Final Judgment.

(d) "Electronic Data Processing System" (herein, referred to as "EDP Sys-
tem") is defined as any apparatus or group of automatically intercommuni-
cating units of apparatus capable of entering, receiving, storing, classifying,
computing and/or recording alphabetic and/or numeric data, which systems
may include one or more central processing units and one or more storage
facilities and has either :

(1) The ability to receive and retain in the storage facilities at least
some of the instructions for the data processing oi>erations required, or

(2) Means, in association with storage, inlierently capable of receiving
and utilizing the alphabetic and/or numeric representation of either the
location or the identifying name or number of data in storage to control
access to stored data.

(e) "Small EDP Systems" is defined as those EDP Systems the monthly rental
or equivalent, including unbundled products and services, if any, of which is less
than $5,(X)0. In addition, said Small EDP Systems shall not include any EDP
System which exceeds a total simultaneous input/output throughput of not more
than two times the performance of IBM's Systems/3 announced as of the date of
entry of this Final Judgment. Regardless of current or future organization or
practices. Small EDP Systems is not synonymous with either the "Tabulating
Machine Business" or "Terminals".

(f ) "Large EDP Systems" is defined as tho.se EDP Systems the monthly rental,
including unbundled products or services, if any, of which is more than $5,000.



5302

(g) "Terminals" is defined as any devices which are remotely interconnected
to BDP systems primarily to facilitate input or output access by computer opera-
tors to such systems ; the said terminal devices include, by way of example, key-
boards, nonpermanent displays, print mechanisms, card and badge devices.

(h) "Electronic Data Processing Equipment" (herein referred to as "EDP
Equipment" ) is defined as any imitary apparatus, machine or device and attach-
ments therefor designed to be used directly or indirectly in or with an EDP
System.

(i) "Communications Equipment" is defined as any data handling apparatus
designed to serve as a communication link, or a control therefor, or part thereof,
between two or more remotely positioned items of EDP Equipment or between
EDP Equipment and/or some data source or data output ; said apparatus to in-
clude, by way of example, data terminals, modems, switching units, data concen-
trators, communication control equipment, and remote batch processors.

(j) "Software" is defined as a combination of computer operation or control
instructions assembled for use in a computer program, or part thereof, a compiler,
assembler, executive or control routine, application package and the like, each
or any of which is primarily adapted for use in controlling the operation of an
EDP System or EDP Equipment.

(k) "Operating Software" is defined as '^Software" which consists of an inte-
grated collection of computer instructions that direct an EDP System's selec-
tion, movement, and processing of programs and data needed to solve problems.

(1) "Applications Software" is defined as "Software" the primary purpose of
which is to control a computer to process a particular problem of the user of the
computer.

(m) "Device Specific Software" is defined as "Software" which is written to
perform application-independent functions, including diagnosis and maintenance,
and which does not include "Applications Software".

;(n) "Functional Utility Software" is defined as '^Software" written to perform
application-independent functions which are called for by the user and/or other
"Software," including functions such as data transcription, routine from one
media to another, sorts, mergers and those arithmetic functions which are not
built into a given central processor, such as decimal arithmetic.

,(o) "Firmware" is defined as any method of deriving the signals called for
in the "Software" definition above to accomplish the functional equivalent of such
"Software" which is generally not accessible to or changeable by the user.

(p) "Tabulating Machine Business" is defined as the business which makes,
uses, leases, sells and/or services tabulating cards, tabulating card machinery
and/or tabulating systems to enter, convert, receive, classify, compute and/or
record alphabetic, numerical and/or statistical data ; which said tabulating
cards are used for storing data and communicating it with and within the
machinery or system ; provided that such business does not make, use, lease,
sell or service EDP Systems, EDP Equipment, Communication Equipment and/or
Software.

(q) "Industrial Property" is defined as inventions, patents, patent applica-
tions, patent licenses, trademarks, applications for trademarks, copyrights, ap-
plications for copyrights, trade names, and Technical Information (as herein-
after defined).

(r) "Technical Information" is defined to include all right, title and interest
of IBM Group or Small EDP Systems Company in and to all technical informa-
tion and all know-how, written or unwritten, with respect to research, develop-
ment, engineering, design, quality control, testing, production and maintenance,
which in any way relates to an EDP system, EDP equipment, Communications
Equipment or Software, including but not limited to, all documents (including
but not limited to schematic drawings, detailed working drawings, specifications
of materials, production methods, quality control procedures, manuals, assembly
drawings, maintenance documentation, software documentation, and any and
all other drawings, specifications and documents of any kind whatsoever) relating
to the foregoing, and including the identification of all Persons who supply to
IBM Group or Small EIDP Systems Company technical information, know-how,
materials, equipment, machinery and facilities.

(s) "Existing Patents" is defined as all patents issued on or prior to the date
of entry of this Final Judgment, by the United States or by any other nation
to IBM Group or Small BDP Systems Company and all patent applications filed
on or prior to such date 'by IBM Group or Small EDP Systems Company in the
United States or any other nation, including all divisions, continuations, reissues
or extensions of such patents and applications which relate to an EDP system,
EDP Equipment, Communications Equipment or Software.



5303

(t) "Future Patents" is defined as all patents Issued within the period of ten
years to commence on the day following the date of entry of this Final Ju^^ent,
bv the United States or by any other nation to IBM Group or Small EDP Sys-
tems Company, and all patent appUcations filed, within the said ten year period,
bv IBM Group or Small EDP Systems Company in the United States or any
other nation, including all divisions, continuations, reissues or extensions of
such patents and applications which relate to an EDP system, EDP equipment.
Communications equipment or Software.

Ill

(a) IBM shall incorporate, under the laws of the State of Delaware, a new
corporation (herein referred to as the "Service Bureau Company"), the name
of which shall be entirely dissimilar to "Service Bureau Corporation, IBM
or "World Trade Corporation", all of the shares of which shall be initially
owned by IBM, and IBM Group shall transfer to said newly formed Service
Bureau Companv all of the shares of the capital stock and all of the assets of
Service Bureau 'corporation and Science Research Associates and all of the
assets of IBM Group, including AVorld Trade Corporation, relating to its service
bureau operations, network services operations, unbundled systems engineering
operations, educational services operations and U.S.A. federal systems assembly
marketing and maintenance operations.

The assets to be so transferred to Service Bureau Company shall include, but
not by way of limitation, Industrial Property, all assets, tangible and intangible,
relating to research, design, development, quality control, testing, marketing
and materials or services procurement activities. Included in the assets to be
transferred by IBM Group shall be an amount of cash adequate to meet the
needs of Service Bureau Company for working capital, capital, and other ex-
penditures up until such time that the earnings of such corporation will be
adequate to meet such needs. Service Bureau Company shall be staffed with
managerial and other personnel to an extent and in a manner reasonably neces-
sary to enable Service Bureau Company to compete in the relevant markets in
which it will be engaged. IBM Group is directed to do everything reasonably
possible to transfer to Service Bureau Company managerial and other personnel,
presently employed by IBM Group, so as to staff Service Bureau Company in the
aforementioned manner.

(b) IBM Group is ordered and directed to take such other actions and enter
into such arrangements that are reasonably necessary to enable Service Bureau
Corporation to effectively compete in the relevant markets in which it will be
engaged during the period following its incorporation.

(c) IBM is hereby ordered and directed to divest itself of all of the shares of
capital stock of Service Bureau Company by distributing such shares to the stock-
holders of IBM. The said divestiture (together with everything else hereinbefore
provided by this Article III) shall be completed by not later than one year from
the date of entry of this Final Judgment.

(d) Those of the directors, oflScers and employees in an executive capacity of
IBM Group whose names are specified on Schedule A are ordered and directed,
upon receipt by them of any shares of the capital stock of Service Bureau Com-
pany, pursuant to the aforementioned divestiture, to promptly divest themselves
of all such shares and are enjoined and restrained from owning, directly or indi-
rectly, at any time, any shares of the capital stock of Service Bureau Company.

(e) IBM Group is enjoined and restrained from acquiring, directly or indirectly,
any shares of the capital stock of Service Bureau Company.

(f) IBM Group is enjoined and restrained from employing, directly or indi-
rectly, an officer or employee in an executive capacity or permitting to serve on
its board of directors any person who at any time has served as a director, oflScer
or employee in an executive capacity of Service Bureau Company.

(g) Sen'ice Bureau Company is enjoined and restrained from employing,
directly or indirectly, an oflScer or employee in an executive capacity or permitting
to serve on its board of directors any person who at any time has served as a
director, officer or employee in an executive capacity of IBM Group.

IV

Service Bureau Company is enjoined and restrained from engaging, directly
or indirectly, in the manufacture, sale or lea.se of EDP Systems, EDP Equipment
or Communications Equipment until such time that the portion of EDP Systems
and EDP Equipment owned or otherwise utilized by Service Bureau Company in



5304

the conduct of its business which has been manufactured, sold, leased or other-
wise furnished by IBM or Small EDP Systems Company (as defined hereinafter
in Article IX) constitutes less than thirty-five percent of the entire EDP Systems
and Equipment owned or utilized by Service Bureau Company ; provided, however,
that in no event may Service Bureau Company engage, directly or indirectly, in
the manufacture, sale or lease of EDP Systems, EDP Equipment or Communica-
tions Equipment during the period of ten years to commence with the date of
entry of this Final Judgment.

For the said ten year period, IBM Group and Small EDP Systems Company
are enjoined and restrained from purchasing, leasing or otherwise acquiring
from Service Bureau Company any service or asset without first having received
the approval of this Court and only upon the same prices, terms and conditions
of sale offered to other manufacturers of EDP Systems and EDP Equipment.



(a) IBM shall incorporate, under the laws of the State of Delaware, a new cor-
poration (herein referred to as the "Components Company"), the name of which
shall be entirely dissimilar to "IBM" or "World Trade Corporation," all of the
shares of which shall be initially owned by IBM, and IBM Group shall transfer to
said newly formed Components Company all of the assets of the Components
Division of IBM, all of the assets of IBM Group utilized in or related to the other
semiconductor and elemental component research, development and manufactur-
ing operations of IBM, and aU of the assets of all comparable component research,
development and manufacturing operations of World Trade Corporation. The
assets to be so transferred to Components Company shall include, but not by way
of limitation. Industrial Property, all assets, tangible and intangible, relating to
research, design, development, quality control, testing, and marketing and ma-
terials or services procurement activities. Included in the assets to be transferred
by IBM Group shall be an amount of cash adequate to meet the needs of Compo-
nents Company for working capital, capital, and other expenditures up until such
time that the earnings of such corporation will be adequate to meet such needs.
Components Company shall be staffed with managerial and other personnel to an
extent and in a manner reasonably necessary to enable Components Company to
compete in the relevant markets in which it will be engaged. IBM Group is di-
rected to do everything reasonably possible to transfer to Components Company
managerial and other personnel, presently employed by IBM Group, so as to
staff Components Company in the aforementioned manner.

(b) IBM Group is ordered and directed to take such other actions and enter
into such arrangements that are reasonably necessary to enable Components
Company to effectively compete in the relevant markets in which it will be en-
gaged during the period following its incorporation.

(c) IBM is hereby ordered and directed to divest itself of all of the shares of
capital stock of Components Company by distributing such shares to the stock-
holders of IBM. The said divestiture (together with everything else hereinbefore
provided by this Article V) shall be completed by not later than one year from
the date of entry of this Final Judgment.

(d) Those of the directors, officers and employees in an executive capacity of
IBM Group whose names are specified on Schedule A are ordered and directed,
upon receipt by them of any shares of the capital stock of Components Company,
pursuant to the aforementioned divestiture, to promptly divest themselves of all
such shares and are enjoined and restrained from owning, directly or indirectly,
at any time, any shares of the capital stock of Components Company.

(e) IBM Group is enjoined and restrained from acquiring, directly or indi-
rectly, any shares of the capital stock of Components Company.

(f) IBM Group is enjoined and restrained from employing, directly or indi-
rectly, an officer or employee in an executive capacity or permitting to serve on
its board of directors any person who at any time has served as a director, officer
or employee in an executive capacity of Components Company.

(g) Components Company is enjoined and restrained from employing, directly
or indirectly, an officer or employee in an executive capacity or permitting to
serve on its board of directors any person who at any time has served as a
director, officer or employee in an executive capacity of IBM Group.



5305

VI

During the period of ten years beginning one year after date of entry of this
Final Judgment, Components Company is enjoined and restrained from selling,
leasing or otherwise furnishing to IBM, IBM Group, or to Small EDP Systems
Company more than 50% of the annual requirements for semiconductors and
other computer components of either IBM, IBM Group, or Small EDP Systems
Company (to which reference is hereinafter made). During the said ten-year
period. Components Company shall not produce, or refuse to sell to others, any
products on the basis that such products are proprietary to IBM Group or
the said Small BDP Systems Company and shall make available to other Persons
who manufacture EDP Systems all products produced for IBM Group or Small
EDP Systems Company at the same prices, terms and conditions of sale that
are available to IBM Group and Small EDP Systems Company ; Provided, how-
ever, that Components Company, in determining its prices, may make due allow-
ance for differences in the cost of manufacture, sale or delivery resulting from
the differing methods or quantities in which such commodities are sold or deliv-
ered to such purchasers, Provided further, however, that no quantity discounts
offered by Components Company are such that, in fact, they can be realistically
utilized only by IBM Group or Small EDP Systems Company.

VII

(a) IBM shall incorporate, under the laws of the State of Delaware, a new
corporation (hereinafter referred to as "OflSce Products Company"), the name
of which shall be entirely dissimilar to "IBM" and "World Trade Corporation",
all of the shares of which shall be initially owned by IBM, and IBM Group shall
transfer to Office Products Company all of the assets of the Office Products
Division, Information Records Division and other word processing, office prod-
ucts and information records research, development, manufacturing and market-
ing operations of IBM and World Trade Corporation. The assets to be so trans-
ferred to Office Products Company shall include, but not by way of limitation.
Industrial Property, all assets, tangible and intangible, relating to research,
design, development, quality control, testing, marketing and materials or serv-
ices procurement activities. Included in the assets to be transferred by IBM shall
be an amount of cash adequate to meet the needs of Office Products Company
for working capital, capital, and other expenditures up until such time that
the earnings of such corporation will be adequate to meet such needs. Office
Products Company shall be staffed with managerial and other personnel to an
extent and in a manner reasonably necessary to enable Office Products Company
to compete in the relevant markets in which it will be engaged. IBM Group is
directed to do everything reasonably possible to transfer to Office Products
Company managerial and other personnel, presently employed by IBM, so as
to staff Office Products Company in the aforementioned manner.

(b) IBM Group is ordered and directed to take such other actions and enter
Into such arrangements that are reasonably necessary to enable Office Products
Company to effectively compete in the relevant markets in which it will be
engaged during the period following its incorporation.

(c) IBM is hereby ordered and directed to divest itself of all of the shares
of capital stock of Office Products Company by distributing such shares to the
stockholders of IBM. The said divestiture (together with everything else here-
inbefore provided by this Article VII) shall be completed by not later than one
year from the date of this Final Judgment.

(d) Those of the directors, officers and employees in an executive capacity of
IBM whose names are specified on Schedule A are ordered and directed, upon
receipt by them of any shares of the capital stock of Office Products Company, pur-
suant to the aforementioned divestiture, to promptly divest them.selves of all
such shares and are enjoined and restrained from owning, directly or indirectly,
at any time, any .shares of the capital stock of Office Products Company.

(f) IBM Group is enjoined and restrained from employing, directly or in-
directly, an officer or employee in an executive capacity or permitting to serve
on its board of directors any person who at any time has served as a director, offi-
cer or employee in an executive capacity of Office Products Company.



5306

(g) OflSce Products Company is enjoined and restrained from employing, di-
rectly or indirectly, an oflScer or employee in an executive capacity or permitting
to serve on its t^oard of directors any person who at any time has served as a
director, oflScer or employee in an executive capacity of IBM Group.

VIII

During the period of ten years to commence with the date of entry of this
Final Judgment, Office Products Company is enjoined and restrained from en-
gaging, directly or indirectly, in the manufacture, sale or lease of Communica-
tions Equipment.

IX

(a) IBM shall incorporate, under the laws of the State of Delaware, a new
corporation (hereunder referred to as "Small EDP Systems Company"), the
name of which shall be entirely dissimilar to "IBM" or "World Trade Corpora-
tion", all of the shares of which shall be initially owned by IBM, and IBM Group
shall transfer to small EDP Systems Company (i) all of the assets of the General
Systems Division of IBM, including, but not limited to, all those utilized in or
related to Small EDP Systems, Tabulating Machine Equipment and Terminal
operations, (ii) that part of the assets of Advanced Systems Division of IBM
utilized in or related to Small EDP Systems, Tabulating Machine Equipment
and Terminal research, development, manufacturing and marketing operations,
and (iii) all the assets of World Trade Corporation utilized in or related to Small
EDP Systems, Tabulating Machine Equipment and Terminal research, develop-
ment, manufacturing and marketing operations. The assets to be so transferred
to Small EDP Systems Company shall include, but not by way of limitation,
Industrial Property, all assets, tangible and intangit>le, relating to research,
design, development, quality control, testing and marketing activities or to the
procurement or furnishing of materials, products and services. Included in the
assets to be transferred by IBM shall be an amount of cash adequate to meet
the needs of Small EDP Systems Company for working capital, capital and
other expenditures up until such time that the earnings of such corporation will
be adequate to meet such needs. Small EDP Systems Company shall be staffed
with managerial and other personnel to an extent and in a manner reasonably
calculated to enable Small EDP Systems Company to compete in the relevant
markets in which it will be engaged. IBM Group is directed to do everything rea-
sonably possible to transfer to Small EDP Systems Company managerial and
other personnel, presently employed by IBM Group, so as to staff Small EDP
Systems Company in the aforementioned manner.

(b) IBM Group is ordered and directed to take such other actions and enter



Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 40 of 140)