Name-calling about name-calling, that's the story in the Federal District Court for West Texas. Neon Enterprises and IBM are really going at each other, litigating away, all over a lousy few billion dollars. The few billion is what Neon could cost IBM if its zPrime software catches on, says a source at Neon, declining attribution.
zPrime lets mainframe shops move work around inside a mainframe so that it lives in the low rent district instead of on Park Avenue. With zPrime, IBM's zIIP and zAAP specialty processors can do a lot of work that customers without Neon's product (or Neon's know-how) otherwise would run on general-purpose engines. Customers can save a lot of money this way, apparently much more than IBM expected when it came up with the idea of zIIP and zAAP engines. Mainframe specialty processors are ordinary mainframe engines dressed in microcode mufti and unmetered; once a customer buys the engine, there is no extra cost for using it. By contrast, all the work done by general-purpose mainframe engines is measured and the amount clocked by IBM determines the price a customer pays for running the jobs.
Neon irritates IBM in two ways: One is obvious, as the zPrime package helps users cut costs, thereby reducing IBM's take. The other is that zPrime reduces IBM's account control. Together, the two annoyances brought Big Blue to a boil.
IBM had tried to put a lid on Neon by telling customers that zPrime broke some contractual rules. It asserted that anyone who used the package was cheating IBM and that in the end these users would end up with punishing bills. But Neon told prospects it was not doing anything wrong let alone illegal and said it would indemnify customers against IBM's threatened sanctions. Neon also took IBM to court on December 14, alleging Big Blue's disparaging remarks were so nasty that they violated the Lanham Act, which, among other things, gives owners of trademarks and brands remedies for obloquy. (This was a very creative bit of lawyering, say some observers.)
Neon updated its complaint on February 17, adding antitrust claims.
On January 17, six weeks after Neon's oriignal lawsuit was filed, IBM fired back. It answered Neon's complaint and launched a countersuit. IBM says zPrime gets IBM customers to illegally cheat Big Blue out of big bucks. And IBM didn't just speak up, it shouted, bringing in the awesome Evan Chesler, presiding partner of Cravath, Swaine & Moore, who will serve as counsel to the Houston firm Yetter, Warden & Coleman.
Neon's lead attorney, Chris Reynolds of Reynolds, Frizzell in Houston, didn't retreat. In fact, the following Monday, February 1, Reynolds was back in court with an answer to IBM's counterclaim and a document that contrasts Neon's legal position with that of IBM on a paragraph-by-paragraph basis.
Reynolds and a couple of his partners have gone against Cravath in the past, successfully. But law comes down to cases. There is no way to look at past events and forecast the outcome of a courtroom fight between teams led by two razor sharp litigators.
If there's any history to be examine, it is story of a product called Fast400, which let customers do with an IBM AS/400 something akin to what they can do on a mainframe with zPrime.
(In its February 1 response, Neon's legal team refers to a number of documents from the Fast400 case, and we have made them available here. The documents include Jim Stracka's Response to IBM's Supplemental Motion to Dismiss; Jim Stracka's Response to IBM's Motion for Leave to File Second Amended Answer, Defenses and Consideration Filed January 31, 2005; Response of Jim Stracka and Leif Svalgaard to IBM's Motion to Strike the Expert Report of David Nimmer; and James Stracka's Original Answer to International Business Machines Corporation's Second Amended Counterclaims. Another exhibit, Neon's comparison of IBM's counterclaims and its answer, is linked above but we repeat that link here.)
After a bit of legal adventurism that included getting the FBI to arrest Jim Stracka, the entrepreneur behind Fast400, on an extortion charge, IBM ultimately settled the matter. Basically, IBM paid to get rid of Fast400 and for the people behind the product to vow omerta. Once Fast400 was withdrawn from marketing, the extortion charge vanished like a fart on a breezy day. Mr. Stracka appears to be wealthy; today, his most visible activity is an indulgent venture in the world of golf. What happened to the users who had bought Fast400? They were all allowed to run the program forever on the machine where they installed it. They saved many times the $1,000 they paid for Fast400. And they lived happily ever after. con
