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 42 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 42 of 140)
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pui'poses :

(g) Making payment for any personal propert.v, sale, use, lease or other tax
levied on Software. EDP Systems or EDP Equipment marketed by it to a cus-
tomer without passing such tax on to such customer ;

(h) Entering into or continuing to enforce any agreement pertaining to the
lease of an EDP System or EDP Equipment or the license of Software which
cannot lie cancelled by the lessee by giving 90 days prior written notice to IBM
or Small EDP Systems Company respectively ;

(i) Declining to sell or lease or causing a delay in the delivery of any equip-
ment or the providing of services to a customer because of the customer's acqui-
sition of equipment or services from another supplier ;

(j) Disparaging or falsely representing any product, service or capability
of any other Person ;

(k) Threatening or attempting to exert an unfavoralile influence with respect
to the employment of any Person because of his interest in the equipment or
services of any Person other than IBM or Small EDP Systems Company
respectively ;

(1) Interfering with any contract involving the purchase or lease of any equip-
ment or services of any other Person ;

(m) Rearranging in any instance the delivery schedules for its Software. EDP
Systems or EDP Efpiipment for the purpose of offering to grant a delivery prefer-
ence in an effort to deter a sale, lease or license of Software, EDP Systems, EDP
Equipment, Communications Equipment or services of any other Person ;

(n) Participating in or inducing the drafting of specifications for Software.
EDP Systems, EDJP Equipment or Communications Equipment for the purpose
of persuading a prospective customer to acquire Software. EDP Systems. EDP
Equipment or services from IBM or Small EDP Systems Company respectively
to the exclusion of those of comparable kind and quality of other Persons ;

(o) Declining to lease (as distinguished from a sale) its EDP Systems. EDP
Equipment or Communications Equipment to any Person who is in competition
with IBM or Small EDP Systems Company ;

(p) Declining to license its Software to customers of Persons in competition
with IBM or Small EDP Systems Company, respectively, with full rights to
sublicense to subsidiaries and affiliates ;

(q) Purchasing products and services from other persons on the condition or
understanding that such purchase depends on past or future purchase by that
person of products or services from IBM or Small EDP Systems Company re-
spectively or from otherwise promoting the sale of IBM or Small EDP Systems



5313

Company products or services through reciprocal dealing or other utilizatiim of
the pui'chasing power of IBM or Small EDP Systems Company respectively;
no list or other compilation which identilies suppliers and provides information
with respect to their sales to IBM or Small EDP Systems Company shall lie uti-
lized by or made available to any ofiicer or employee of IBM or Small EDP
Systems Company who has a sales responsibility ; and no list or other compila-
tion which identifies customers and provides information with respect to their
purchases from the IBM or Small EDP Systems Company shall be utilized by
or made available to any officer or employee who has a purchasing responsibility.

(r) Proposing or offering to a customer or prospective customer the avail-
ability of or efficacy of any conversion aides or other devices which are designed
to enable the EDP Systems or EDP Equipment of IBM Group or Small EDP
Systems Company to emulate or simulate the operation of EDP Systems or EDP
Equipment of other manufacturers, and from in any way enhancing its existing
technical capability to emulate or simulate EDP Systems and EDP Equipment
manufactured by other Persons.

(s) Attending or participating in or furnishing financial and other support to
any meeting of organization of EDP System users or prospective customers if
the attendance or membership of such group is restricted in any way according
to EDP Systems of any particular manufacturer(s).

XXXI.

IBM Group and Small EDP Systems Company are hereby each enjoined and
restrained from claiming, directly or indirectly, any damages in any pending or
future patent litigation for an act of infringement of Existing Patents alleged to
have occurred prior to the date of entry of this Final Judgment.

XXXII.

IBM Group and Small EDP Systems Company are hereby enjoined and re-
strained during the period of ten years to commence with the date of entry of
this Final Judgment from acquiring from any Person (i) any patent issued by
the United States or any other nation relating to any EDP System, EDP Equip-
ment, Communications Equipment or Software, (ii) an assignment of an appli-
cation for a patent relating to any EDP System, EDP Equipment, Communica-
tions Equipment or Software, filed in the United States or any other nation, (iii)
any exclusive license or other exclusive right with respect to any such patent or
patent application and (iv) any immunity from suit for infringement of any such
patent or any patent issued under any such application unless such immunity is
granted under the same terms to other Persons requesting such immunity, pro-
vided, however, that the foregoing provisions of this Article shall not be appli-
cable to patents or applications for patents relating to the invention of any
person made during the course of his employment as a bona fide employee of
IBM Group or Small EDP Systems Company or to patents relating to the
inventions of professional research consultants who were employed by IBM
Group or Small EDP Systems Company to engage in activities which are the
basis for such inventions.

XXXIII

IBM Group and Small EDP Systems Company are enjoined and restrained
during the period of ten years to commence with the date of entry of this Final
Judgment from acquiring from any Person Technical Information unless such
Technical Information is made available on the same terms to aU Persons
engaged im research or develojiment with respect to, or the production, sale or
lease of EDP Systems, EDP Equipment, Communications Equipment, or Soft-
ware.

XXXIV

IBM Group and Smnll EDP Systems Company are hereby enjoined and re-
strained from becoming a party to, performing or utilizitig any right providwl by,
any contract, agreement, arrnngement. understanding, plan or program pursuant
to which there bad been made available to IBM Group or Small EDP Systems
Company any license or other rights with respect to any patent issued by the
United States or any other nation or any application for any such patent at lower
royalty rates or other consideratiom that have been or would be made avail-
able to any Person engnged in the research, development, production, sale or
lease of EDP Systems, EDP Equipment, Communications Equipment or Soft-



5314

ware, or any such license or other rights which would not have been made avail-
able to all such other Persons.

XXXV

IBM Group and Small EDP Systems Company are hereby ordered and di-
rected to grant to any Person resident or domiciled in the United States who is
engaged in research or development with respect to, or the production, manu-
facture, sale or lease of EDP Systems, EDP Equipment, Communications Equip-
ment or Software, or to any Subsidiary of any such Person, who malves a writ-
ten application therefor, an unrestricted, non-exclusive, non-discriminatory and
royalty-free license to make, have made, use, lease and sell under and for the
full unexpired term of amy one or more Existing Patents and in addition, to
make available to such licensee, witliout the payment of any other fee or other
consideration, all Technical Information relating thereto.

XXXVI

IBM Group and Small EDP Systems Company are hereby ordered and di-
rected to grant to any Person resident or domiciled im the United States wlio is
engaged in research or development with respect to. or the production, manu-
facture, sale or lease of EDP Systems, EDP Equipment. Communications Equip-
ment or Software, or to any Subsidiary of any such Person, who makes a writ-
ten applicatioin therefor, an unrestricted, non-exclusive, non-discriminatory and
royalty-free license to make, have made, use. lease and sell under and for the
full unexpired term of any one or more Future Patents and, in addition, to make
available to such licensee, without the payment of any other fee or other con-
sideration, all Technical Information relating thereto.

XXXVII

IBM Group and Small EDP Systems Company are hereby enjoined and re-
stricted from making any sale or other disposition of any Exist) ug Patent or
any Future Patent which would preclude or adversely affect their right to
grant licenses pursuant to Article XXXV or Article XXXVI unless each Person
to whom there is any such sale or disposition files, in advance of such sale or
disposition, with this Court his agreement that any such sale or disposition is
subject to the foregoing and that he will do whatever may be required, includ-
ing the execution of all necessary instruments, to insure that licenses in accord-
ance with the foregoing will be granted to such such applicant.

XXXVIII

1MB Group and Small EDP Systems Company are hereby ordered and di-
rected upon written request from a licensee, pursuant to a license granted under
Article XXXV or Article XXXVI, to grant to such licensee, and without the
payment of consideration by such licensee, a non-exclusive grant of immunity
from suit with respect to any corresponding patent issued by a nation other
than the United States, or any application with respect to any such patent, of
IBM Group.

XXXIX

IBM Group and Small EDP Systems Company are hereby enjoined and re-
strained from effecting any requirement that, as a condition to the grant by
it of a license pursuant to Article XXXV or Article XXXVI, the licensee cross-
license or otherwise license any patent to IBM Group or that there be granted
to IBM Group any patent, or application for patent, of the licensee which is
relevant, as an improvement or otherwise, to the patent of IBM Group licensed
to the licensee.

XL

No Person who is a licensee, pursuant to Article XXXV or Article XXXVI,
is precluded from contesting the validity or scope of any patent of IBM Group
or Small EDP Systems Company. Nothing contained in this Final .Judgment
sha.l be consti-ued to impute the validity of any patent of IBM Group or Small
EDP Systems Company.

XLI

Except for the following, no license granted by IBM Group or Small EDP
Systems Company pursuant to Article XXXV or Article XXXVI shall contain
any condition, restriction or covenant :



5315

(1) The covenant of IBM Group or Small EDP Systems Company to
grant the license for the licensee to make, have made, use, lease and sell
under the patents for the full unexpired term of the patent and to make
available to the licensee all Technical Information relating thereto ;

(2) The license may be nontransferable ;

(3) The license must provide that the licensee shall have the right to
terminate the license at any time after the first year of the term of the
license.

XLII

IBM Group and Small EDP Systems Company are hereby ordered and directed
either (i) to file patent applications vpith respect to all inventions made by it or
on its behalf at any time during the period of ten years to commence on the date
of entry of this Final Judgment, or (ii) to publish and distribute the technical
details of such inventions so as to convey to those skilled in the art an under-
standing thereof and an ability to effectively practice the invention.

XLIII

(a) "Eligible Applicant" is defined for purposes of this Article to be any per-
son (i) vi'ho is engaged in research or development with respect to, or the pro-
duction sale or lease of, EDP Systems, EDP Equipment, Communications Equip-
ment or Software, (ii) who makes written request that he be furnished the
Technical Information and the opportunity to utilize the other rights provided by
Section (b) of this Article, and (iii) who at the time of making such request
makes payment to IBM Group of the sum of .$.5,000.

(b) During the period of ten years to commence on the date of enti*y of this
Final Judgment, IBM Group and Small EDP Systems Company are ordered
and directed (i) to furnish Technical Information to each Eligible Applicant
and (ii) to make available to each Eligil)le Applicant at the principal place of
manufacture or IBM Group and Small EDP Systems Company respectively tech-
nically qualified employees to disclose such additional Technical Information
that will enable the Eligible Applicant to manufacture EDP Systems, EDP
E(iuipment and Communications Equipment and to produce Software, and (iii)
to permit each Eligible Applicant to visit the research, development, quality
control, testing, production and other facilities of IBM Group or Small EDP
Systems Company respectively to observe and l)e advised with respect to any-
thing pertinent to or that may l)e of assistance in obtaining an adequate under-
standing of Technical Information, provided, however, that such visitation rights
shall be subject to the following :

(1) Not more than three officers, employees or other representatives of
Eligible Applicant shall be permitted to participate in each visit.

(2) Eligible Applicant shall not be authorized to make more than four
visits in any calendar year.

(3) Each visit shall be at a time reasonably convenient to IBM Group or
Small EDP Systems Company.

XLIV

For a period of ten years from the date of entry of this Final Judgment, IBM
Group and Small EDP Systems Company are respectively enjoined from acquiring
the whole or any part of the capital stock or any part or all of the EDP System,
EDP Equipment or Software assets, other than products purchased in the normal
course of business, or (a) any firm engaged in the production, sale or lease of
EDP Systems, EDP Equipment or Software; (b) any direct supplier of raw ma-
terials to firms engaged in the production, sale or lease of EDP Systems, EDP
Equipment or Software; or (c) any direct customer of firms engaged in the
prnductidu. sale or lease of EDP Systems, EDP Equipment or Software.

XLV

During the period of ten years following the date of entry of this Final
Judgment, IBM Group and Small EDP Systems Company are hereby ordered
and directed to dedicate to the public any and all copyright subject matter useful
for any purpose with respect to the maintenance, operation and/or use of any
EDP System or EDP Equipment and is enjoined and restrained from copy-
righting any such subject matter.



5316

XLVI

IBM Group and Small EDP Systems Company are hereby enjoined and
restrained from ;

(a) Utilizing their respective Software marketing programs, including
services offered in support thereof, to tie-in or otherwise influence, directly
or indirectly, the marketing of their respective EDP Equipment or EDP
Systems ;

(b) Utilizing their respective Software marketing programs, including
services offered in support thereof, to discourage, directly or indirectly, their
respective EDP customers or potential customers from acquiring EDP
Systems of another manufacturer or supplier ;

(c) Imposing any restriction that Software, licensed by them respectively,
be utilized on a specific central processor produced them respectively ;

(d) Making application for, obtaining, or acquiring during the period
of ten years from the date of entry of this Final Judgment, any patent
or copyright on Software ;

(e) Making any claim or demanding the payment of any royalty, fee. or
other consideration based on the testing of their respective Software on any
EDP System or EDP Equipment.

XLVII

IBM Group and Small EDP Systems Company are hereby enjoined and
restrained from placing any restriction on the use that may be made of
Software purchased from them respectively. Without limiting the generality
of the foregoing, they shall not place any restriction on any purchaser of their
respective Software relating to its use on any EDP System or EDP Equipment
and relating to the right of such purchaser to sell or otherwise transfer such
Software to others without restriction.

XLVIII

IBM shall dedicate to the public any and all of its Existing Patents and
Copyrights on Software.

XLIX

IBM is hereby ordered and directed to distribute to its shareholders and/or
otherwise divest itself in a manner which is in the best interests of such share-
holders of a sufficient amount of its cash and marketable securities assets (now
totaling in excess of $2,300,000,000) so as to reduce such holdings to a level
adequate to sustain the ordinary requirements of its business and to avoid
the creation of extraordinary surplus ; in furtherance thereof, IBM is directed
to submit a plan for such distribution and/or divestiture to this Court within
thirty days from date of entry of this Final Judgment.



Jurisdiction is retained by this Court for the purpose of enabling any of
the parties to this Final Judgment to apply to this Court at any time for such
further orders and directions as may be necessary or appropriate for the con-
struction or modification of any of the provisions hereof, for the enforcement
of compliance herewith, and for the punishment of violations hereof.

The provisions of this Final Judgment shall not be deemed to have any effect
on the prior Judgments entered in this Court on December 26, 1935, January 29,
1936 and January 25, 1956 in United States v. International Business Machines
Corporation, except that the snid Small EDP System Company formed
pursuant to Article IX above shall be deemed to be a specific party, in addi-
tion to IBM, subject to the provisions of said prior judgments to the same ex-
tent as is IBM.

Senator IIart. Our next witness will be Mr. Christopher Layton.
Mr. Layton has come from Brussels for this hearing, and. we feel
privileged that he will participate.

He is the director responsible for data processing in the EEC.

I think there is evidence that heightens interest and concern and
desire that we mutually share our opinions.

Mr. Layton ?



5317

STATEMENT OF CHRISTOPHER LAYTON, DIRECTOR RESPONSIBLE
EOR DATA PROCESSING, COMMISSION OF EUROPEAN COMMU-
NITIES

:Mr. Laytox. Mr. Chairman, first may I thank you and your com-
mittee for giving me this opportunity to express, on a personal basis
and not as an official representative of the Commission, the European
view on tlie great issue you are examining : The structure of the world
computer industry.

This is an industry which, as your chairman said, is not merely a
key growth industry but the nervous system of a modern economy.
And that goes for Europe as well as the United States.

First, a word of history.

The concepts and the intellectual effort which gave birth to the
computer industry were, as in so many fields of science, a joint prod-
uct of American and European minds. This pioneering work of
Neumann or the ERA group in the United States was matched in
Europe by the work of Zuse in Germany or of the teams in Britain
which developed Atlas.

By contrast, there is no doubt that the first major effective industrial
and commercial exploitation of data processing took place in the
United States. There were several reasons : The higher level of incomes
in the United States in the 1950's and 1960's, and the existence of a
continental market; the existence of continentwide businesses and
management methods better able us to make use of systematic data
processing; the major stimulus provided by Federal Government pro-
curement and the ambitious technical requirements of defense and
spp'-e programs.

All these elements together helped to create a situation in which
energetic American companies led the way in exploiting data process-
ing commercially in the United States and then brought their capa-
bilities to Europe, Today, over 80 percent of the computers in use
in Europe are based on American technology. And some 60 percent
of the European market is in the hands of a single company — IBM. So
the structure has many parallels with what you see here in the United
States.

Europeans do not begrudge these achievements. Indeed, we respect
them and seek to emulate them. Our economies benefit from the trans-
fer of technology and skills which they involve.

Histoiy has, however, left effects which inevitably cause us concern.
Tn no other industry is a single firm so dominant. Though IBM has
made an immense contribution to the commercial application of data
processing, its position "enables it to determine the pattern of prices
and standards, to dictate the pace of commercial innoA-ation and the
pattern of the market" — to use the Commission's words. Europeans,
both as usei-s and competitors, naturally seek to encourage and promote
viable, alternative competitive firms.

A second natural concern of Europeans is that they should have
some stake of their own in this key industry of the future. By this I
mean that at least some company or companies that have an overall
systems capability should be European controlled and owned.

Here you may ask why and what does this mean.

The role of data processing in government and administration, in de-
fense, in science, in education, in industrial management — all this



5318

means that this is an industry which does have political importance.
Europeans do not seek to exclude U.S. owned and controlled companies
in Euroipe — indeed, they welcome them — but they do seek a share in
this key industry. In an expanding market, there is room for both.
^ For these reasons, three of the largest European countries — Britain,
France, and Germany — -have with relatively modest resources made
eiforts to keep a national industry alive.

They have done this by giving some financial support to the researcli
and development programs of three companies : Siemens in West Ger-
many, Compagnie Internationale d'Informatique in France, and Inter-
national Computers Ltd. in Britain. This help was expected to be
worth a total of some $450 million over the 4 years 1971 to 1975. It was
thus substantially smaller in scale than the U.S. Government funding
of R. & D. in the computer industry through defense and space pro-
grams. The OECD estimated this government funding in the United
States at some $300 million in 1965.

These efforts have kept alive a European-owned part of the industry,
but their limited scale is shown by the fact that in 1972 the four largest
European firms together still only had some 6 percent of the world
market in terms of installed capacity.

One should add that some of the European nations, conscious that
the effective application of data processing to public needs is as im-
portant as the existence of a strong industry, ha\'e also been fostering
this aim by specific programs in the field of applications.

Joined as they are in the European Community, which aspires
toward a complete economic and monetary union, it has been natural
for the European countries to seek to pursue these objectives by a joint
effort. They have been spurred on by the innnense economics of scale
achieved in this industij, not only in research, development, and pro-
duction, but in worldwide marketing and applications capability and
in financial strength.

A first industrial step to pool limited resources has been taken by the
formation of the Unidata group between Philips. Siemens, and CIL
This group is now establishing a joint marketing effort and developing
a common new range of computers.

A first political step toward a common industrial policy was taken
on June 25 of this year when the Council of jNIinisters of the European
Communities passed a resolution, document E197o-74 — I will give
you a copy of this for the record— with two main themes :

[The document referred to appears as exhibit 1 at the end of ^Ir.
Layton's oral testimony.]

Mr. Layton. The need to encourage, by collaboration, the European
industry, and collaboration in the ever-growing area of the application
of data processing to public needs.

To pursue these objectives, policies in the fields of standards, pro-
curement and other help for the industry were to be given a Community
orientation, and the Commission was asked to make proposals for joint
support for projects of common interest and of international character
in the fields of applications as well as of selected transnational indus-
trial development projects.

In the medium term the aim is to evohe an overall program for the
development of data processing in the Community with the central
aim of insuring, by the early 1980's, a viable European industry.



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 42 of 140)