Judge Tosses Antitrust Lawsuit Against IBM

(CN) - A federal judge in Manhattan has dismissed an antitrust lawsuit accusing IBM of squeezing out its rivals in the mainframe computer market. U.S. District Judge Lewis A. Kaplan said competitor T3 Technologies lacked standing to make the claim.

T3 Technologies had accused IBM of refusing to license its mainframe software to rivals and shutting down support for older and smaller mainframe systems.

IBM has dominated the mainframe market since it came to exist more than 40 years ago.

Mainframes are powerful computers typically used by large corporations and governments to crunch data.

Judge Kaplan dismissed the suit brought by T3 Technologies, who along with fellow mainframe manufacturer Platform Solutions, led the antitrust fight against Big Blue. That was until IBM bought Platform last year for $150 million.

But IBM isn't out of the woods yet. The Department of Justice has opened an investigation into the same allegations, based on a complaint filed by the Computer and Communications Industry Association (CCIA). The trade group alleged that IBM has maintained a monopoly for decades. It cited the T3 case in its suit.

The DOJ has purportedly requested documents from T3 relating to its claims.

In 2001, the Bush administration lifted a 1956 consent agreement between the computer company and the Department of Justice. The agreement was designed to prevent IBM from becoming a monopoly.

The mainframe controversy heated up in 2006, when IBM sued Platform for patent infringement, claiming it created computers that allow users to run IBM's operating systems and software on mainframes manufactured by other companies.

Platform filed a countersuit in 2007, alleging antitrust violations and unfair competition.

T3, now partly owned by Microsoft, was an authorized IBM reseller that sold small mainframes until IBM stopped producing them.

This allegedly forced some IBM customers to buy pricier machines that were more powerful than they needed.

T3 began buying from Fundamental, which built low-level IBM compatible mainframes called tServers.

Fundamental was able to build the tServer in part because it was licensed to use a particular IBM operating system.

IBM declined to renew Fundamental's license in 2006, which allegedly caused "T3's sales of tServers to cease."

It then agreed to buy a comparable server made by Platform called the Liberty Server, an Intel-based machine that emulated IBM's operating system.

T3 said IBM had promised to grant Platform a license to use its operating system, but ultimately refused. Numerous claims and counterclaims were filed until IBM bought Platform and shut down the Liberty.

T3 said it only sold five of them as a result.

But Judge Kaplan ruled that T3 lacks standing to sue, because it was not the "direct target" of the alleged antitrust violations; Platform and Fundamental were the "entities directly harmed."

"A claimant does not have standing simply because it is a competitor of an alleged antitrust violator," the judge wrote.

And, he added, T3 had admitted that its claims against IBM "largely mirror" Platform's counterclaims.

"Denying T3 standing to challenge IBM's conduct therefore 'is not likely to leave a significant antitrust violation undetected or unremedied,'" Judge Kaplan wrote. "In this instance, permitting T3 'to perform the office of a private attorney general' would be unjustified."

The judge added that the extent of T3's losses from its inability to sell the tServer and Liberty were "highly speculative," and estimating damages would be "difficult at best."

T3 filed a similar lawsuit against IBM with the European Commission in January.

IBM is estimated to control about 90 percent of the mainframe market, which is essential for such services as ATM transactions, health records and tax filings, according to the CCIA.

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