by Maureen O’Gara

IBM replied Monday to the antitrust charges hurled at it last month by Neon Enterprise Software and what’s interesting is not what’s there – which contributes nothing to the discussion outside of adding “parasite” to the list of dirty names it calls Neon – so much as what’s not there.

Typically in these cases there would be your basic knee-jerk motion to dismiss these charges.

Neon was certainly prepared for months of foot-dragging legal debate over dismissal but IBM eschewed that course, opting instead to go straight to trial (straight of course being a relative term among lawyers).

IBM’s unconventional strategy suggests that it reckoned it could lose a motion to dismiss based on its conduct in the market as cited in Neon’s suit and didn’t want to risk getting that customer-unsettling black eye. Mainframe users might get unruly if its case looked weak.

Instead it’s going to try to win the case and bury these guys in the courts, which is what Neon already claims IBM has done in the market.

Neon wants the case heard early next year, which means starting discovery in the US and Europe next month, taking scores of depositions and assembling acres of documents.

Of course IBM has to respond to Neon’s proposed schedule first, which it hasn’t done. A schedule has to be filed with the Texas court hearing the case before the end of the month.

Neon amended its pre-Christmas unfair competition suit against IBM last month to include claims of monopoly maintenance in violation of the Sherman Antitrust Act and conditioning sales to mainframe users on their promise not to buy from a competitor in violation of the Clayton Antitrust Act.

If IBM loses it could be forced to disgorge a billion dollars or more of its profits on software licensing fees for violating the Lanham Act and hundred of million of dollars more in damages – which, under antitrust rules, could be trebled.

Neon named names in its amended suit and claimed IBM threatened retaliation against Honda, FedEx, Daimler-Benz US, Swisscom, Sainbury’s HuK Coburg, Home Depot, Wells Fargo and Experian if they used its zPrime software to offload legacy DB2, CICS, IMS and z/OS workloads onto the so-called mainframe specialty processors that they buy from IBM thereby saving themselves billions of dollars in exorbitant monthly licensing fees.

Neon says IBM threatened to sue these users, jack up their mainframe fees or curtail its maintenance and support. It also allegedly threatened to cancel a reseller’s contract if it handled zPrime. Among other things Neon claims lost sales.

IBM, which has countersued for damages of all descriptions and an injunction, claims Neon’s technology is “illegal” and that mainframe users are contractually restricted from running anything but IBM-authorized workloads on the zAAP and zIIP specialty processors Neon makes use of.

IBM’s problem is it doesn’t charge for running workloads on these widgets, which are just mainframe central processors masquerading under a different name.

They were dreamed up to keep mainframe users from running off and using commodity servers for their XML and Java apps and to accelerate DB2 and although IBM stands on its Machine Code License as well as so-called IBM Customer Agreements (ICAs) and “Purchase Supplements” Neon claims that neither IBM nor any of its customers can produce any workload-restricting contracts.

The Machine Code License says customers can’t use a mainframe’s dormant or “built-in capacity” beyond what IBM has authorized. Hence, it can’t run zPrime.

Neon calls it bunk and has asked IBM to produce the list of forbidden workloads, and since it hasn’t concludes there is none and that that’s why IBM is trying to undo its legal oversight by asking users – who want to buy new specialty processors – to sign retroactive agreements that would foreclose their right to use zPrime. Neon calls that an antitrust violation.

For IBM’s reply see http://openmainframe.org/downloads/legal-documents/2010-03-08_IBM_Amended_Answer_And_Counterclaims.pdf.