14246 Federal Register / Vol. 64, No. 56 / Wednesday, March 24, 1999 / Notices notice, or Notice to potential customers in June 1998 and the terms of the receipt of comments from interested upon request: 3 minutes; Notice posted consent order—embodied in the consent members of the public. The Agreement where customers make deposits: 15 agreement—that would settle these is for settlement purposes only and does minutes; Notice of changes in policy: 20 allegations. not constitute an admission by Intel that hours; and Annual notice of new ATMs: DATES: Comments must be received on the law has been violated as alleged in 5 hours. or before May 24, 1999. the Complaint or that the facts alleged Number of respondents: 989 state ADDRESSES: Comments should be in the Complaint, other than member banks directed to: FTC/Office of the Secretary, jurisdictional facts, are true. Small businesses are affected. Room 159, 600 Pennsylvania Avenue, I. The Complaint General description of report: This NW., Washington, DC 20580. The Complaint alleges that Intel has information collection is mandatory (12 FOR FURTHER INFORMATION CONTACT: John U.S.C. 4008). Because the Federal monopoly power in the worldwide Horsley or Richard Parker, FTC/H–3105, market for general purpose Reserve System does not collect any 600 Pennsylvania Avenue, NW., information, no issue of confidentiality microprocessors. According to the Washington, DC 20580, (202) 326–2648 Complaint, Intel’s market dominance is exists. If during a compliance or (202) 326–2574. examination a violation of the reflected in a market share SUPPLEMENTARY INFORMATION: Pursuant Expedited Funds Availability Act is approximating 80 percent of dollar to section 6(f) of the Federal Trade noted, then the information regarding sales, together with high entry barriers Commission Act, 38 Stat. 721, 15 U.S.C. such violation may be kept confidential including large sunk costs of design and 46 and § 3.25(f) of the Commission’s (5 U.S.C. 552(b)(8)). manufacture, substantial economies of Rules of Practice (16 CFR 3.25f), notice Abstract: The third party disclosure scale, customers’ investments in is hereby given that the above-captioned requirements are intended to alert existing software, the need to attract consent agreement containing a consent consumers about their financial support from software developers, and order to cease and desist, having been institutions’ check-hold policies and to reputational barriers. filed with and accepted, subject to final The Complaint alleges that Intel help prevent unintentional (and costly) approval, by the Commission, has been sought to maintain its dominance by, overdrafts. Most disclosures resulting placed on the public record for a period among other things, denying advance from a policy change must be made of sixty (60) days. The following technical information and product thirty days before actions is taken, or Analysis to Aid Public Comment samples of microprocessors to Intel within thirty days if the action makes describes the terms of the consent customers (‘‘original equipment funds available more quickly. Model agreement, and the allegations in the manufacturers’’ or ‘‘OEMs’’) and forms, clauses, and notices are complaint. An electronic copy of the threatening to withhold product from appended to the regulations to provide full text of the consent agreement those OEMs as a means of coercing guidance. package can be obtained from the FTC those customers into licensing their The Board’s Regulation CC applies to Home Page (for March 17, 1999), on the patented innovations to Intel. all depository institutions, not just state World Wide Web, at ‘‘http:// A microprocessor is an integrated member banks. However, under www.ftc.gov/os/actions97.htm.’’ A circuit that serves as the central Paperwork Reduction Act regulations, paper copy can be obtained from the processing unit (or CPU) of computer the Federal Reserve accounts for the FTC Public Reference Room, Room H– systems. Microprocessors are sometimes burden of the paperwork associated 130, 600 Pennsylvania Avenue, NW., described as the ‘‘brains’’ of computers with the regulation only for state Washington, DC 20580, either in person because they perform the major data member banks. Other agencies account or by calling (202) 326–3627. processing functions essential to for the Regulation CC paperwork burden Public comment is invited. Comments computer systems. Advance technical on their respective constituencies. should be directed to: FTC/Office of the information about new microprocessor Board of Governors of the Federal Reserve products is essential to Intel’s OEM System, March 18, 1999. Secretary, Room 159, 600 Pennsylvania Avenue, NW., Washington, DC 20580. customers, who design, develop, Jennifer J. Johnson, Two paper copies of each comment manufacture, and sell computer system Secretary of the Board. should be filed, and should be products such as servers, workstations, [FR Doc. 99–7144 Filed 3–23–99; 8:45 am] 1 accompanied, if possible, by a 3 ⁄2-inch and desktop and mobile personal BILLING CODE 6210±01±F diskette containing an electronic copy of computers. Computer design and the comment. Such comments or views development require the effective will be considered by the Commission integration of multiple complex FEDERAL TRADE COMMISSION and will be available for inspection and microelectronics components (including copying at its principal office in microprocessors, memory components, [Docket No. 9288] accordance with section 4.9(b)(b)(ii) of core logic chips, graphics controllers, Intel Corporation; Analysis to Aid the Commission’s Rules of Practice (16 and various input and output devices) Public Comment CFR 4.9(b)(6)(ii). into a coherent system. To achieve such system integration, a computer OEM AGENCY: Federal Trade Commission. Analysis of Proposed Consent Order To requires product specifications and Aid Public Comment ACTION: Proposed consent agreement. other technical information about each The Federal Trade Commission has component, such as the electrical, SUMMARY: The consent agreement in this accepted for public comment an mechanical, and thermal characteristics matter settles alleged violations of Agreement Containing Consent Order of the microprocessor. OEMs also need federal law prohibiting unfair or with Intel Corporation (‘‘Intel’’) to advance product samples, errata, and deceptive acts or practices or unfair resolve the matters charged in an related technical assistance in order to methods of competition. The attached administrative Complaint issued by the perform system testing and debugging, Analysis to Aid Public Comment Commission on June 8, 1998. The thereby assuring the high performance describes both the allegations in the Agreement has been placed on the and reliability of new computer complaint that the Commission issued public record for sixty (60) days for products.

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Intel promotes and markets its information, part samples, and other v. Grinnell Corp., 384 U.S. 563, 570–71 microprocessors by providing customers technical support pending a judicial (1966); Barry Wright Corp. v. ITT with technical information about new resolution on the merits of the claims in Grinnell Corp., 724 F.2d 227, 230 (1st Intel products in advance of their the lawsuit. Cir. 1983) (Breyer, J.) (citing 3 P. Areeda commercial release, subject to formal The alleged conduct tends to reinforce & D. Turner, Antitrust Law, ¶ 626 at 83 nondisclosure agreements. Such Intel’s domination of the general (1978)). information sharing has substantial purpose microprocessor market in at Such conduct harms consumers, not commercial benefits for Intel and its least three ways. First, the alleged only because competition brings lower OEM customers. Customers benefit conduct tends to give Intel preferential prices, but also because competition is because the information enables them to access to a wide range of technologies a powerful spur to the development of develop and introduce new computer being developed by many other firms in new, better, and more diverse products system products incorporating the latest the industry. To the extent that firms and processes. Unjustified conduct by a microprocessors as early and efficiently desiring to compete with Intel are monopolist that removes the incentive as possible. Intel benefits because a unable to obtain comparable access to to such competition by depriving larger group of OEMs can sell new such a wide range of technology, they innovators of their reward or otherwise computer systems incorporating Intel’s can be seriously disadvantaged, thus tilting the playing field against new newest microprocessors as soon as the making it more difficult for them to entrants or fringe competitors thus has new microprocessors are introduced to challenge Intel’s dominance. Second, a direct and substantial impact upon the market. because patent rights are an important future consumers. The Complaint charges that Intel means of promoting innovation, In the absence of a legitimate business suspended its traditional commercial coercion that forces customers to license justification that outweighs these relationships with three established away rights to microprocessor-related concerns, such conduct constitutes a customers—Digital Equipment technologies on unfavorable terms to violation of Section 2 of the Sherman Corporation, Intergraph Corporation, diminish the customers’ incentives to Act, 15 U.S.C. 2, and therefore Section and Compaq Computer Corporation—by develop such technologies, and thus 5 of the Federal Trade Commission Act, refusing to provide advance technical harms competition by reducing 15 U.S.C. 45. In issuing Complaint, the information about, and product samples innovation. Finally, Intel’s conduct Commission found reason to believe of, Intel microprocessors. Intel did so, tends to make it more difficult for an that such a violation had occurred. according to the Complaint, to force OEM to serve as a platform for II. Terms of the Proposed Consent Order those customers to end disputes with microprocessors that compete with Intel concerning the customers’ asserted Intel’s. Intel’s actions ensure that Intel The Proposed Order would remedy all intellectual property rights and to grant can act as a conduit for technology of the concerns embodied in the Intel licenses to patented technology flows from one OEM to another. That is, Complaint. The substantive prohibition, developed and owned by those an OEM that seeks to enforce its Section II.A., prohibits Intel from customers. In at least one of the cases, intellectual property rights against other withholding or threatening to withhold the Complaint alleges that Intel also Intel customers may face retaliation certain advance technical information acted to create uncertainty in the from Intel, as the Complaint alleges from a customer or taking other marketplace about the customer’s future Compaq did when it sued Packard-Bell specified actions with respect to such source of supply of Intel for patent infringement. The result is information for reasons relating to an microprocessors. that OEMs find it more difficult to intellectual property dispute with that The computer industry is differentiate their computer systems customer. It also prohibits Intel from characterized by short, dynamic product from their competitors through patented refusing or threatening to refuse to sell cycles, which are generally measured in technology. As a result, an OEM seeking microprocessors to a customer for months. Time to market is crucial. to use non-Intel microprocessors is less reasons related to an intellectual Indeed, the denial of advance product able to offset the lack of an Intel property dispute with that customer. information is virtually tantamount to a microprocessor by the strength of its This provision is designed to prevent denial of actual parts, because an OEM own reputation for offering superior Intel from restricting access to customer lacking such information technology in other areas. For all of microprocessor products, or advance simply cannot design new computer these reasons, continuation of this technical information relating to such systems on a competitive schedule with pattern of conduct would likely have products, as leverage in an intellectual other OEMs. An OEM who suffers injured competition by entrenching property dispute against a customer that denial of such information over a period Intel’s dominant position. is receiving advance technical of months will lose much of the profits The Complaint also alleges that Intel’s information from Intel at the time the it might otherwise have earned even exclusionary conduct was not dispute arises. The Proposed Order does from a successful new computer model. reasonably necessary to serve any not impose any kind of broad Continued denial of advance technical legitimate, procompetitive purpose. ‘‘compulsory licensing’’ regime upon information to an OEM by a dominant Exclusionary conduct by a monopolist Intel. So long as it is otherwise lawful, supplier can make a customer’s very that is reasonably capable of Intel is free to decide in the first existence as an OEM untenable. significantly contributing to the instance whether it chooses to provide As a result of the commercial pressure maintenance of a firm’s dominance or not provide information to customers, exerted by Intel’s conduct, Compaq and through unjustified means has long been and whether to provide more Digital quickly entered in to cross- understood to give rise to serious information or earlier information to license arrangements with Intel. competitive concerns. See, e.g., Lorain specific customers in furtherance of a Intergraph was able to resist that Journal Co. v. United States, 342 U.S. joint venture or other legitimate activity. pressure because it succeeded in 143, 154 n.7 (1951); Eastman Kodak Co. Moreover, the Order is limited to the obtaining a preliminary injunction from v. Image Technical Services, 504 U.S. types of information that Intel routinely a federal district court requiring Intel to 451, 483 & n.32 (1992); Aspen Skiing gives to customers to enable them to use resume and continue supplying Co. v. Aspen Highlands Skiing Co., 472 Intel microprocessors, not information Intergraph with advance product U.S. 585, 596 .19 (1985); United States that would be used to design or

VerDate 23-MAR-99 10:36 Mar 23, 1999 Jkt 183247 PO 00000 Frm 00036 Fmt 4703 Sfmt 4703 E:\FR\FM\A24MR3.154 pfrm02 PsN: 24MRN1 14248 Federal Register / Vol. 64, No. 56 / Wednesday, March 24, 1999 / Notices manufacture microprocessors in provision of AT information six months Intel’s customers. If the information or competition with Intel. before the commercial release date of a product is not being provided to other In short, Paragraph II.A. secures to microprocessor is sufficient to enable customers, then the refusal to provide it Intel customers the right to seek full and the customer to design and develop new to a customer with which Intel has an fair value for their intellectual property, systems based on that microprocessor in intellectual property dispute does not free from the risk of curtailment of a competitive and timely way. AT provide the kind of leverage that the needed advance technical information Information does not include detailed challenged conduct provides. or product. With one exception, Intel microprocessor design information or • Paragraph B.7. makes clear that, will be required to continue providing other information not generally apart from the specific requirements and information and product while the provided to Intel’s customers. prohibitions, the Proposed Order does customer seeks any of a range of legal • ‘‘Intellectual Property Dispute’’ is not otherwise limit Intel’s intellectual and equitable remedies available to it, defined in Paragraph I.D. to include not property rights. such as damages (trebled or otherwise only situations in which a customer In light of the rapidly changing nature increased in appropriate cases), directly or indirectly asserts or threatens of the industry, Intel’s obligations under reasonable royalties, and attorneys fees to assert patent, copyright or trade secret the Proposed Order would terminate in and costs. These remedies will generally rights against Intel, but also to situations ten years. The Commission appreciates be sufficient to protect the customer in in which a customer asserts such rights that this same industry dynamic makes its exercise of its intellectual property against another Intel customer, or where it important for it to address disputes rights. a customer has refused a request by Intel over Intel’s compliance with the Order The exception involves situations to license or otherwise convey its expeditiously, should any such disputes where a customer maintains the right to intellectual property rights. arise. seek an injunction against Intel’s • Paragraph II.B.1. states that the Parts III, IV, and V of the Proposed manufacture, use, sale, offer to sell or Proposed Order does not prohibit Intel Order set out various procedural importation of its microprocessors. The from seeking legal or equitable remedies requirement, such as notice to affected Order contemplates that Intel may based upon its own intellectual persons and annual compliance request a customer to waive that remedy property, provided that it continues to reporting. Paragraph III.A. permits Intel and give the customer a reasonable supply AT Information to the customer. to provide notice of the Order to opportunity to make a simple written • Paragraph B.2. and B.3. make clear recipients of AT Information through a statement to that effect. If the customer that the Proposed Order does not conspicuous notice placed, for thirty refuses, Intel will not be required by this prohibit Intel from withholding AT days after final entry of the Order, as the Order to continue providing information Information or making decisions about first item on the ‘‘In the News’’ portion or product with respect to the product supply based on otherwise of the ‘‘developers’’ page of Intel’s microprocessors that the customer is lawful business considerations World-Wide Web site. Because seeking to enjoin. unrelated to the existence of the recipients of AT Information must This part of the Order strikes an intellectual property dispute. For frequently visit that area of Intel’s appropriate balance, on a prospective example, Intel retains the right to Website in order to receive information basis, between the interests of Intel and withhold information from a customer needed in their business, a notice its customers. If a customer chooses to that has breached an agreement displayed at that location will ensure seek an injunction against Intel’s regarding the disclosure or use of the notice to all affected persons. After the microprocessors, it cannot, under the information. initial thirty-day period, Intel will provisions of this Order, be assured of • Paragraph B.4. provides that the maintain a link from the ‘‘developers’’ continuing to receive advance technical Proposed Order does not require Intel to page to the Order, so that new information about the very same provide AT Information or customers will also have access to the microprocessors that it is attempting to microprocessors to facilitate the design Order. The other provisions of these enjoin. If an Intel customer nevertheless or development of a type of system that paragraphs are standard provisions of wishes to seek injunctive relief against the customer has not designed or the type typically included in Intel’s manufacture, use, sale, offer to developed or demonstrated plans to Commission orders of this kind. sell or importation, it remains free to do design or develop within the preceding so, but without the protections in this year. III. Opportunity for Public Comment Order. In all other circumstances, Intel • Paragraph B.5. makes clear that the The Proposed Order has been placed is required to continue supplying Proposed Order does not prohibit Intel on the public record for 60 days in order technical information and product from restricting the use of AT to receive comments from interested under the Proposed Order. Information to the customer’s design persons. Comments received during this The Proposed Order contains a and development of computer systems period will become part of the public number of other definitions and that incorporate the microprocessor to record. After 60 days, the Commission provisos to ensure that it will achieve its which the AT Information pertains. For will again review the Agreement and purposes while not sweeping more example, if a recipient of AT comments received, and will decide broadly than needed to remedy the Information is in the business of whether it should withdraw from the competitive concerns alleged in the designing competing microprocessors, Agreement or make final the Order Complaint: the Proposed Order would not prevent contained in the Agreement. • ‘‘Advance Technical Information’’ Intel from using reasonable firewall By accepting the Proposed Order (or ‘‘AT Information’’) is defined in provisions to prevent that recipient from subject to final approval, the Paragraph I.C. to encompass all using the information in that competing Commission anticipates that the information necessary to enable a business. competitive issues described in the customer to design and develop, in a • Paragraph B.6. provides that the complaint will be resolved. The purpose timely way, computer systems Proposed Order does not require Intel to of this analysis is to invite and facilitate incorporating Intel microprocessors. disclose information or supply public comment concerning the The Proposed Order establishes a microprocessors that are not otherwise Proposed Order. It is not intended to rebuttable presumption that the available for disclosure or supply to constitute an official interpretation of

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World Wide Web, at ‘‘http:// Corporation Nevertheless, I fully expect to have an www.ftc.gov/os/actions97.htm.’’ A opportunity to formulate and paper copy can be obtained from the The Commission has accepted for communicate my views on the consent FTC Public Reference Room, Room H– public comment an Agreement agreement, and I anticipate issuing 130, 600 Pennsylvania Avenue, N.W., Containing Consent Order (the those views—as an aid to public Washington, D.C. 20580, either in ‘‘Agreement’’) that settles the charges comment on the settlement—as soon as person or by calling (202) 326–3627. made by the Commission against Intel possible during the 60-day comment Public comment is invited. Such in an administrative complaint (the period. When my statement is ready for comments or views will be considered ‘‘Complaint’’). The Complaint alleged issuance, I will ask the Commission’s by the Commission and will be available that Intel unlawfully used its monopoly Office of Public Affairs to release it and for inspection and copying at its power in the market for general will also post it on the Commission’s principal office in accordance with microprocessors, to coerce computer website (www.ftc.gov). Section 4.9(b)(6)(ii) of the Commission’s and other peripheral manufacturers to Rules of Practice (16 CFR 4.9(b)(6)(ii)). license intellectual property rights to [FR Doc. 99–7211 Filed 3–23–99; 8:45 am] Intel. The Complaint further alleged that BILLING CODE 6750±01±M Analysis of the Proposed Consent Order Intel engaged in this conduct in order to and Draft Complaint to Aid Public maintain its monopoly position. Comment On June 8, 1998, I voted to issue a FEDERAL TRADE COMMISSION The Federal Trade Commission Complaint in the above-captioned [File No. 9810329] (‘‘Commission’’) has accepted for public action because I was concerned that comment from Medtronic, Inc. these allegations, if true, threatened to Medtronic Inc.; Analysis to Aid Public (‘‘Medtronic’’ or ‘‘proposed harm competition and opportunity for Comment Respondent’’) an Agreement Containing innovation in the general Consent Order (‘‘the proposed consent AGENCY: Federal Trade Commission. microprocessor market. This threatened order’’). The proposed Respondent has ACTION: harm would thereby deprive consumers Proposed consent agreement. also reviewed a draft complaint of the price and innovation benefits of SUMMARY: The consent agreement in this contemplated by the Commission. The a truly competitive marketplace. Today, matter settles alleged violations of proposed consent order is designed to I vote to accept the Agreement for federal law prohibiting unfair or remedy likely anticompetitive effects public comment because I believe the deceptive acts or practices or unfair arising from the acquisition of Avecor Agreement can address these concerns methods of competition. The attached Cardiovascular, Inc. (‘‘Avecor’’). Both by preserving competition and Analysis to Aid Public Comment Medtronic and Avecor are medical providing opportunities for innovation describes both the allegations in the technology companies that compete in by preventing Intel from using draft complaint that accompanies the the manufacture and sale of non- intellectual property disputes to limit consent agreement and the terms of the occlusive arterial pumps, perfusion access to advance technical information consent order—embodied in the consent devices used in heart/lung machines. or microprocessor products that it agreement—that would settle these The proposed consent order remedies routinely provides customers. allegations. the acquisition’s anticompetitive effects I particularly wish to commend the by requiring Medtronic to divest DATES: Comments must be received on Commission staff and Intel for working Avecor’s non-occlusive arterial pump or before May 24, 1999. together to craft an agreement that assets (‘‘Avecor Pump Assets’’) as a effectively serves the public interest in ADDRESS: Comments should be directed viable, on-going product line. Medtronic the context of the important to: FTC/Office of the Secretary, Room has entered into an agreement to divest characteristics of the high technology 159, 600 Pa. Ave., N.W., Washington, the Avecor Pump Assets to Baxter computer industry. By eliminating the D.C. 20580. Healthcare Corporation (‘‘Baxter’’). possibility of anti-competitive FOR FURTHER INFORMATION CONTACT: Medtronic, which is headquartered in withholding of product and Stephen Riddell or Mark Menna, FTC/ Minneapolis, Minnesota, is engaged in information, the Agreement preserves H–2105, 600 Pennsylvania Avenue, the research, development, manufacture the benefits of competition while N.W., Washington, D.C. 20580, (202) and sale of medical devices, including creating a climate for new ideas. This 326–2721 or (202) 326–2722. implantable devices, such as creative solution will benefit consumers SUPPLEMENTARY INFORMATION: Pursuant pacemakers and defibrillators, which and industry alike. to Section 6(f) of the Federal Trade regulate heart rhythm; tissue and Commission Act, 38 Stat. 721, 15 U.S.C. mechanical heart valves; coronary Statement of Commissioner Orson 46 and Section 2.34 of the Commission’s stents; and perfusion devices for heart/ Swindle in the Matter of Intel Rules of Practice (16 CFR 2.34), notice lung machines. Medtronic’s perfusion Corporation is hereby given that the above-captioned devices include non-occlusive arterial As is already widely known, one of consent agreement containing a consent pumps. Medtronic’s Bio-Pump is the the Federal Trade Commission’s most order to cease and desist, having been market leader in non-occlusive arterial significant antitrust adjudications in filed with and accepted, subject to final pumps. Avecor, also headquartered in years was resolved on the eve of trial approval, by the Commission, has been Minneapolis, Minnesota, is engaged in with the signing of a consent agreement placed on the public record for a period the research, development, manufacture by complaint counsel and respondent of sixty (60) days. The following and sale of perfusion devices, including,

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