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Avoid Suicide by Litigation: Learning Lessons from SCO and Intel - Page 2

Rob Enderle

Intel's Cross-License Storm

 

Intel appears to be stepping out from under its cross-license agreements, first with AMD and most recently with NVIDIA. It was already engaged with AMD in what Intel has identified as the most expensive litigation of its type in history. Cross licensing is a practice designed to be a defense against excessive litigation. When used properly, it focuses the competitors involved into competing on product and typically takes litigation off the table as either an offensive or defensive competitive weapon. It is a tactic that also focuses the companies involved on the expertise they have and allows them to play the game for which they were trained. When these agreements break down, as they are around Intel, the result is typically massive and complex litigation until either one party fails or management again comes around to the idea that this method of competing is counterstrategic and excessively expensive for the likely benefits achieved. Part of the expense is that instead of focusing the market on the firm's products and/or services, it focuses it on the litigation. At best, it creates a drag on sales. At worst, it can delay product and, should the litigation go in an unexpected direction, result in a long-term adverse effect on image and profitability.

 

Wrapping Up

 

Litigation is a weapon that should largely be used defensively, managed by experts, and only as a final resort. There are few firms that do it offensively well and even the strongest, like Oracle, use it sparingly. Cross licensing has a purpose: assuring the right focus for the firm. Companies that forget this tend to regret it. As economic conditions degrade, litigation will appear more attractive. I'm suggesting that you avoid the seductive call of this seemingly easy path. It's not easy and it could have the exact opposite outcome from the one you want. Just remember SCO effectively committed suicide by litigation.


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