DET_C\476962.30 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN COMPUWARE CORPORATION, a Michigan corporation, Plaintiff, Case No. 02-70906 v. Hon. George Caram Steeh Magistrate Judge Capel INTERNATIONAL BUSINESS MACHINES CORPORATION, a Delaware corporation, Defendant. DANIEL JOHNSON (CSB No. 57,409) STUART MEYER (CSB No. 136,394) FENWICK & WEST LLP Two Palo Alto Square Palo Alto, CA 94306 Telephone: (650) 494-0600 Facsimile: (650) 494-1417 Attorneys for Plaintiff DAVID A. ETTINGER (P26537) HONIGMAN MILLER SCHWARTZ AND COHN, LLP 2290 First National Building 660 Woodward Avenue Detroit, MI 48226-3583 Telephone: (313) 465-7368 Facsimile: (313) 465-7369 Attorneys for Plaintiff COMPLAINT FOR COPYRIGHT INFRINGEMENT, MISAPPROPRIATION OF TRADE SECRETS, INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS, UNLAWFUL TYING, MONOPOLY LEVERAGING, ATTEMPTED MONOPOLIZATION, TORTIOUS INTERFERENCE WITH BUSINESS EXPECTANCY, UNFAIR COMPETITION AND UNFAIR TRADE PRACTICES DEMAND FOR JURY TRIAL
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DET_C\476962.30
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
COMPUWARE CORPORATION,a Michigan corporation,
Plaintiff, Case No. 02-70906
v. Hon. George Caram Steeh Magistrate Judge Capel
INTERNATIONAL BUSINESSMACHINES CORPORATION,a Delaware corporation,
Defendant.
DANIEL JOHNSON (CSB No. 57,409)STUART MEYER (CSB No. 136,394)FENWICK & WEST LLPTwo Palo Alto SquarePalo Alto, CA 94306Telephone: (650) 494-0600Facsimile: (650) 494-1417Attorneys for Plaintiff
DAVID A. ETTINGER (P26537)HONIGMAN MILLER SCHWARTZ ANDCOHN, LLP2290 First National Building660 Woodward AvenueDetroit, MI 48226-3583Telephone: (313) 465-7368Facsimile: (313) 465-7369Attorneys for Plaintiff
COMPLAINT FOR COPYRIGHT INFRINGEMENT, MISAPPROPRIATION OFTRADE SECRETS, INTENTIONAL INTERFERENCE WITH CONTRACTUAL
RELATIONS, UNLAWFUL TYING, MONOPOLY LEVERAGING, ATTEMPTEDMONOPOLIZATION, TORTIOUS INTERFERENCE WITH BUSINESS
EXPECTANCY, UNFAIR COMPETITION AND UNFAIR TRADE PRACTICES
tying, monopoly leveraging, denial of an essential facility and attempted monopolization under
the Sherman Act, 15 U.S.C. §§ 1 & 2, tortious interference with business expectancy, unfair
competition, and unfair trade practices.
JURISDICTION AND VENUE
4. This Court has jurisdiction under 15 U.S.C. §§ 4, 15 and 26, 28 U.S.C. §§ 1331,
1337, 1338(a) and 1338(b) and supplemental jurisdiction under 28 U.S.C. § 1367. This Court
also has subject matter jurisdiction under 28 U.S.C. § 1332 because plaintiff Compuware is
incorporated and has its principal place of business in Michigan, defendant IBM is incorporated
in Delaware and has its principal place of business in New York, and the amount in controversy
exceeds $75,000, exclusive of interests and costs.
5. Venue is proper in this district under 28 U.S.C. §§ 1391(b), (c) and 1400(a) and
15 U.S.C. §§ 15 and 22. IBM is found within this judicial district, transacts substantial business
within this judicial district, and has agents in this judicial district. IBM has sold substantial
volumes of products contained in the relevant market into this judicial district and maintains
offices in this judicial district. This Court has personal jurisdiction over defendant IBM because
IBM transacts business within this district and the State of Michigan.
PARTIES
6. Plaintiff Compuware is a Michigan corporation with its principal place of
business at 31440 Northwestern Highway, Farmington Hills, Michigan.
7. Compuware is informed and believes and thereon alleges that defendant IBM is a
Delaware corporation with its principal place of business at Armonk, New York.
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INTERSTATE COMMERCE
8. Compuware and IBM are substantially engaged in interstate and foreign
commerce and in activities substantially affecting interstate and foreign commerce, selling their
products and services to purchasers located throughout the United States and the world.
Compuware and IBM have also purchased substantial products and services in interstate
commerce which are used in the sale and/or licensing of the products at issue in this complaint.
9. As alleged below, Compuware is informed and believes that IBM has engaged in
copyright infringement and antitrust violations, and related causes of this action, that have been
within the flow of, and have substantially affected, interstate and foreign trade and commerce.
IBM’s practices at issue here are being undertaken as part of a global strategy directed by, and
with the benefit ultimately inuring to, IBM in the United States. If not enjoined, IBM’s practices
will impair the flow of interstate and foreign commerce by reducing the quality of, and
increasing the price of, the products sold in the mainframe software tools markets described
below and otherwise restraining competition as further described below. The effect of these
practices on Compuware is worldwide, with the ultimate injury inuring to Compuware in the
United States.
GENERAL ALLEGATIONS
10. As explained in more detail below, IBM dominates the mainframe market and
many of the markets involving software products that are needed to serve the mainframe
“environment.” Independent Software Vendors (ISVs) such as Compuware develop and provide
software “tools” that work in this environment. Customers, in order to maintain and use their
mainframe computers develop programs (software tools) to diagnose and eliminate any software
or hardware problems. These software tools work with IBM’s hardware and software. ISVs
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developing these tools must have access to IBM technical information in order to develop and
service customers in the IBM environment.
11. Much of the hardware and software needed to operate in this IBM environment is
developed by IBM. Further, IBM has its own division, IBM Global Services, that operates the
computer systems of, and performs programming for, thousands of corporations, making
decisions for many of them as to the software tools they will purchase. For these reasons, it is
impossible for a third party to supply mainframe software without the cooperation of IBM.
Mainframe Market
12. One relevant market in this case involves “high end” mainframe computers.
These computers are large, powerful computers used for processing very high volumes of
information. Most of the world’s largest corporations and government entities rely on these
mainframe computers for their high volume and mission-critical data processing needs, including
matters such as billing, accounting, order entry, record keeping and transaction processing.
There is no reasonable substitute for mainframe computers for these functions, since no other
type of computer can process the required information as rapidly, reliably and economically.
13. The vast majority of mainframe computers have been manufactured by and sold
by IBM, including, particularly, its z Series 900 and S/390 systems. In excess of 85% of high
end mainframe computers currently being utilized and maintained worldwide are IBM
computers.
14. IBM’s two most significant mainframe competitors, Amdahl and Hitachi, have
exited the mainframe market within the last three years. IBM’s remaining mainframe
competitors sell relatively few mainframes, primarily to particular geographic niches (Bull in
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France, Fujitsu and NEC in Japan, and FSC in Germany) or to particular kinds of customers
(Unisys). IBM does not face any across the board competition for mainframe customers.
15. Entry into the manufacture and sale of mainframe computers is extremely
difficult. Development of a new mainframe computer takes many years and requires a very
substantial volume of sales to justify the investment. Customer acceptance of such products is
extremely slow, since mainframe computers are used for many mission-critical functions, and no
customer would purchase a mainframe computer if there were any doubt about its reliability.
Moreover, any new mainframe which did not utilize an IBM operating system could not succeed
unless customers were willing to switch operating systems, which would involve substantial
additional barriers, as explained below. There has been no new entry into the mainframe market
for at least 20 years. For all these reasons, IBM possesses monopoly power in the high end
mainframe market.
Operating System Market
16. Another relevant market in this case is the market for operating systems for high
end mainframe computers. The operating system is a software system that controls the
operational resources of the computer and allows application software to run on the computer.
Virtually all operating systems compatible with IBM mainframe computers are sold by IBM.
The most common operating systems in use on large mainframe computers are IBM’s OS/390
and z/OS operating systems with thousands of customers worldwide.
17. As with computer hardware, a new operating system for a mainframe is
extraordinarily complex and takes many years to develop. Because of the mission-critical nature
of the work performed on IBM mainframes, it is extremely unlikely that a customer would
choose an operating system that has not been thoroughly developed, tested and proven over
DET_C\476962.30 7
many years. Additionally, customers are extremely reluctant to utilize an operating system that
has not been developed by IBM, because of concerns that such a system might not be fully
effective or would be incompatible with present or future IBM mainframe computers.
18. Even more importantly, a new competitor would be very unlikely to be able to
match the “applications” advantages of IBM operating systems. Thousands of software products
(referred to as “application software”) have been developed by ISVs to work on the IBM
operating systems. These products make programming on the IBM mainframe much easier and
more efficient. For any new operating system to be considered a reasonable substitute for IBM’s
systems, an equally wide variety of comparable application software would need to be developed
to make the use of the system competitive with IBM’s products. This would be extremely
unlikely, since any new operating system would not possess the volume of business that would
provide an incentive for ISVs to write many application programs for use on the new system.
19. An even greater application advantage arises from the “customized” applications
developed to work on the IBM operating systems by the firms using those systems. Purchasers
would not switch from the use of mainframes and mainframe operating systems due to small but
significant changes in price (and have not done so) because of their very substantial investments
in the training of their own programmers on the mainframe operating systems and the millions of
dollars invested in customized computer programs that work on these operating systems. A firm
would have to duplicate those multimillion dollar investments if it chose to use a new operating
system and the computer that would run it.
20. For these reasons, entry into the production and sale of operating systems for use
on high end mainframe computers is extremely difficult. There has been no new entry into the
mainframe operating system market for at least 10 years. Because of its entrenched market
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position and disproportionate market share, IBM possesses monopoly power in the sale of
operating systems for use on high end mainframe computers.
Compilers and Utilities Software
21. In addition to operating systems, IBM provides other software used by large
numbers of the major corporations utilizing mainframe computers. This software includes
products permitting use of the COBOL, C/C++ and PL/I computer languages; database
management; and high volume online transaction processing software. Each of these kinds of
software represents another relevant market in this case.
22. COBOL and C/C++ are the dominant computer languages used for high volume
business processing applications around the world. PL/I is a language, developed by IBM,
which is used widely by large businesses in Europe, Canada and Japan. These languages enjoy
many millions of users, including most of the world’s major corporations, which use them for
programming on their mainframes. It is estimated that the core business applications of large
companies running mainframe computers worldwide are written in COBOL, and comprise at
least 100 billion lines of code, written by between 2 and 3 million programmers.
23. Most of these major users have utilized COBOL, PL/I or C/C++ for many years –
decades for COBOL. Such users conduct many computer operations in these languages and
have multimillion dollar investments in programming and personnel training in the use of each of
these languages. A decision by one of the corporations to adopt other programming languages in
place of one of these languages would require the corporation to undertake a tremendously
expensive replacement of custom programs and retrain its programmers. Moreover, because of
the thousands of application programs developed in each of these languages, each of these
languages is especially effective. For these reasons, users have a very substantial investment in
DET_C\476962.30 9
the use of each of these languages on IBM mainframes, and customers would not stop the use of
any of these languages even if costs increased by a small but significant amount relative to other
alternative computer languages. IBM’s terms and policies relating to such software have been set
long after most users have made their investments in these programming languages.
24. Particular software products are necessary for users to program in these languages
on IBM mainframes. This software includes “compilers” -- programs that translate the human-
readable source code of each program (such as a COBOL source program) into machine readable
object code that is an executable program. There is no substitute for using such compilers in
developing COBOL, PL/I or C/C++ programs on a mainframe computer, and the software
containing such compilers with respect to each of these languages (“utilities software”) therefore
each represents a relevant market in this case.
25. IBM sells virtually all the software including compilers permitting the use of
COBOL, C/C++ and PL/I on IBM mainframe operating systems. The few competing products
have seen sales decline significantly, and are now rarely used. Users of COBOL, PL/I and
C/C++ on mainframes need IBM’s updated releases of COBOL, PL/I and C/C++ compilers to
properly operate their IBM mainframe computers. IBM therefore possesses monopoly power in
the markets consisting of each of these utilities software releases.
The Database Market
26. IBM also possesses monopoly power with respect to other software products that
it provides for use on IBM mainframes. One such product is DB2 for z/OS and OS/390
(“DB2”). DB2 competes in the market for high volume database management software used on
mainframe computers, which is another relevant market in this case. Such software is necessary
to rapidly and economically organize and access data used on a mainframe computer in high
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volume applications. Virtually all large organizations utilizing mainframe computers purchase
such software, because there is no reasonable substitute for it. Entry into this market is difficult
because users have a significant investment in the software and the application development
barrier to entry described above also exists with respect to this software. There has been no
competitive entry into this market in at least ten years.
27. Through DB2 and its other database products such as IMS/DB, IBM possesses
monopoly power in the market for high volume database software used on mainframes.
According to IBM, DB2 for OS/390 supports key data applications for 80% of the Fortune 1000
companies.
The “Real-time” Transaction Market
28. Another relevant market is the market for high volume transaction-processing
software for use on mainframe computers. Such software is critical for firms engaged in high
volume “real time” transactions such as online ordering, bill-paying and banking. There is no
technically viable alternative for such software in performing these functions.
29. IBM offers its CICS product as the critical software to conduct high volumes of
online, interactive transactions. IBM states on its web site that CICS handles greater than
30 billion transactions per day, and that each day more than $1 trillion in transactions are
processed in CICS. In fact, the use of CICS increased by more than 50% from 1998 to 2000.
IBM also states that more than 30 million people use CICS, and that thousands of software
companies support it with specific applications. IBM claims that CICS provides “unmatched
scalability, performance, reliability, security and data integrity . . . .”
30. There is no significant competition for CICS in the market. Moreover, successful
competitive entry into the market would be very difficult and time-consuming. As is the case for
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the relevant markets discussed above, there is a substantial application development barrier to
entry into the high volume on line transaction processing software market, because of the
thousands of applications developed for use with CICS and the likely reluctance of most ISVs to
develop new applications for a competing product without a substantial volume of business.
Customers are also very unlikely to switch from CICS, given their substantial investments in
employee training and the development of computer programs to work on CICS. For these
reasons, IBM, through its CICS software, possesses monopoly power with respect to high
volume online transaction processing software.
Mainframe Software Tools Markets
31. Three other relevant markets are the markets for particular application
development software, which aid computer programmers and system administrators in
performing certain functions on their mainframes (the “mainframe software tools markets”).
32. The first relevant mainframe software tools market includes software that can be
used for reviewing, finding, editing and manipulating databases and data files for use on
mainframe computers. This is called the file and data management tools market.
33. The remaining mainframe software tools markets are comprised of software
products sold to mainframe users to help them analyze their computer problems, design and
develop their application development software, and test that software. These markets are as
follows:
a. Debugging tools for use on mainframe computers. These productsprovide automated functions which allow a software developer to moreefficiently find and correct problems in the program that he or she iscreating.
b. Fault diagnosis tools for use on mainframe computers. These productshelp mainframe computer users deal with problems that may stop theprogram from running, often referred to as “abends”, “dumps” or“crashes”. Fault diagnosis tools identify the location in the program where
DET_C\476962.30 12
the fault occurred, and provide diagnoses regarding the source of theproblem.
34. Each of the categories of mainframe software tools (file and data management
tools, debugging tools, and fault management tools) is a relevant market because each tool
performs unique and important functions on an automated basis for customers utilizing
mainframe computers. No other products can perform these functions effectively, and small but
significant changes in the prices of these products would not cause significant numbers of
customers to shift to other products. Nor would producers of other software products develop
and sell products in one of the mainframe software tools markets in response to a small but
significant change in price. As a result, most users of IBM mainframes purchase products in
each of these mainframe software tools markets.
Geographic Market
35. The relevant geographic market in which all the foregoing products compete is
worldwide.
Compuware’s Mainframe Software Tools
36. Compuware deve lops, markets and supports an integrated line of computer
software products and professional services designed to improve the productivity of information
technology departments of businesses worldwide. Among other products, Compuware offers
testing and implementation software products that focus on improving the productivity of
programmers and analysts in application testing, test data preparation, error analysis and
maintenance of systems running on IBM and IBM-compatible mainframes. The Compuware
software product families and associated user manuals pertinent to this action (which are sold in
the mainframe software tools markets) are as follows (hereinafter collectively referred to as
“mainframe software tools”):
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37. File and Data Management Products. Compuware’s File-AID® family of file
and data management products gives programmers immediate and direct access to the data
needed for test and production work. File-AID products provide for quick, straightforward
creation of test data, the automated movement and conversion of large volumes of data between
platforms, and a controlled method of examining and correcting production data. These products
function across all the principal data access methods and database management systems
employed on IBM and IBM-compatible mainframe computers, including VSAM, ISAM,
sequential files, IMS and DB2.
Fault Diagnosis Products. Compuware’s Abend-AID® family of fault diagnosis
products comprise automatically invoked, knowledge-based systems that intercept system error
messages from the abnormal end (“abend”) of live program executions, pinpoint the location and
cause of the failure, and recommend corrective action. By using these tools, programmers
reduce the time required to analyze failures and increase the accuracy of analysis. Compuware
offers fault diagnosis tools for both batch processing and on line environments and for the IMS,
IDMS and DB2 database management systems.
Interactive Analysis and Debugging Products. Interactive debugging products enable
programmers and analysts to identify and resolve errors in complex software efficiently and
accurately. These products enable a programmer at a terminal using either test or production
data to step through the program being debugged one statement or statement group at a time.
When an error is detected, the products permit immediate correction of both program logic and
data, which can then be followed by further step by step testing and debugging until the program
is error free. Compuware’s Xpediter family of interactive debugging products supports both
batch processing and on line environments and is linked with certain of Compuware’s fault
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diagnosis and file and data management tools to provide a comprehensive debugging
environment.
Compuware’s Proprietary Rights
38. Compuware’s mainframe software tools contain a substantial amount of material
that is wholly original to Compuware and its predecessors in interest and is copyrightable subject
matter under the laws of the United States. Compuware has complied in all respects with the
Copyright Act of 1976, 17 U.S.C. § 101, et seq. and all other laws governing copyright.
Compuware is, and at all relevant times has been, the owner of the copyrights in its mainframe
software tools, and holds, inter alia, the following certificates of registration granted by the
Copyright Office.
Registration Date Title
TX-2-975-052 10/23/90 CICS Abend-AID for Release 4.1.