T3 girds loins for IBM legal fight

Microsoft money steels clone mainframer

Clone mainframe maker T3 Technologies - one of the last few non-IBM alternatives for running Big Blue's mainframe software - says that it doesn't anticipate settling its IBM lawsuits in Europe and in the United States. In other words, it won't pull a Platform Solutions.

Platform settled its IBM litigation after being acquired by IBM last year.

In the wake of a second lawsuit from T3, launched in Brussels back on January 20, IBM told use it had not seen T3's EU complaint. But it has certainly seen it by now.

"Nonetheless, IBM is confident that it is no violation of competition laws for IBM to rightfully seek to prevent another company from violating IBM’s intellectual property rights," told us last week. "IBM has spent great time and expense developing its technology and will defend its intellectual property rights vigorously."

Like Platform Solutions, which was sued by IBM in November 2006 for violating IBM's patents and otherwise infringing on IBM's business, T3 very much wants to sell clone mainframes. Amdahl (long since absorbed into Fujitsu) and Hitachi have all but given up on the mainframe hardware business. Aside from PSI's products, Fundamental Software's Flex-ES emulation software - which allows IBM's mainframe operating systems, middleware, and compilers to run atop Itanium and other processors - was one of the few remaining alternatives in the market.

So when IBM sued PSI, PSI sued IBM right back. A year later, Microsoft, Intel, Blueprint Ventures, Goldman Sachs, Interwest Partners, and InvestCorp kicked in $37m in capital PSI's way, which ostensibly was for its mainframe expertise but which everyone knows was to also help PSI continue its lawsuit. T3 joined the PSI lawsuit as an obviously interested and aggrieved party in November 2007, only to see PSI settle its suit and get acquired by IBM back in July 2008.

Server maker Hewlett-Packard, which very much wanted to port mainframe workloads to its Integrity machines, tried to buy PSI for nearly $200m, but it walked away when IBM launched its suit against PSI.

T3 has continued its lawsuit in the States, and the complaint brought against IBM in the European Commission's Directorate General for Competition in Brussels put pressure on Big Blue on both sides of the pond.

Steven Friedman, president at T3, is back from Brussels and was happy to chat about the situation and to put the kibosh on the idea that T3 got some Microsoft money just so it can sue IBM in the hopes of being acquired, just like PSI.

"Microsoft made an investment in T3 last November, and it is not something that we have hidden," Friedman said. "We told IBM about it, and we told the E.U. about it. All of the issues with IBM predate the investment. The investment was made for a variety of reasons, including providing some mainframe expertise to Microsoft. We're doing a lot of hard work for Microsoft."

Friedman did not disclose how much Microsoft money we're talking about here.

You can understand why Friendman might want to sue IBM. Back in November 2006, when it could resell IBM mainframes and sell Flex-ES boxes, T3 had 50 employees and was selling its own tServer mainframe clones as well as Flex-ES machines sold under the Liberty brand. These machines had over 600 customers, and if you include the IBM mainframe accounts T3 sold iron into, it had over 1,000 customers. (About 200 of these companies are located in 15 of E.U. member states). Today, T3 has a dozen employees, clone mainframes that customers don't want to go near, and mounting legal bills.

So, T3 intends to stay the course in its legal fight with IBM, much as PSI said it would and as Unix operating system vendor SCO is still attempting to do in its lawsuit against Big Blue concerning intellectual property and licensing issues relating to IBM's AIX operating system.

"We are preparing for trial. We are prepared to see this through to the end, in the United States and in the European Union," Friedman says. As for the potential of IBM settling the issue of clone mainframes once and for all by acquiring T3, Friedman said: "It is hard to comment on something like that."

Well, it is not that hard. The odds favor some sort of settlement before either complaint goes to trial. The quickest way for IBM to settle this case is to throw some money at the issue and keep the antitrust regulators out of it. Because IBM most definitely has a monopoly on mainframe operating systems and middleware, the mainframe can surely be identified as a relevant market by a clever lawyer, and IBM does not want to have to sign another consent decree like it did in 1956 and 1969 to get the government off its back.

The genius of both PSI and T3 is to play Microsoft off against IBM, and if history repeats itself, then T3 will get money both coming and going. And IBM will have that much tighter a grip on the mainframe market, which is more or less stable these days and which still gives IBM billions of dollars of profits a year.

Bootnote: This story erroneously stated that PSI sold the FLEX-ES mainframe emulation product. This was created by Fundamental Software and sold through various channels. ®