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Piracy trial against IBM opens

By Sarah Karush

Associated Press

DETROIT -- Lawyers for IBM and Compuware on Tuesday picked a jury to settle Compuware's three-year-old piracy and antitrust claims.

Opening statements were scheduled today in U.S. District Judge George Caram Steeh's court room in Detroit.

The trial could put an end to an expensive legal battle for Detroit-based Compuware Corp., a much smaller company than its Armonk, N.Y. rival. A Compuware win could improve the competitive environment for the company, which makes software for the mainframe computers that IBM builds.

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Compuware spokeswoman Lisa Elkin said Tuesday that talks for a possible settlement are continuing.

Compuware sued International Business Machines Corp. in March 2002 for unspecified damages, claiming IBM had copied its software products and was reselling them under the IBM nameplate. Compuware also accuses IBM of violating antitrust laws by tying the sale of certain products, including high-end mainframe computers, to the sale of mainframe software that competes with Compuware's products. Compuware says IBM's pricing policies make it economically unfeasible for customers to choose which company's software they want to buy for IBM's mainframes.

IBM denies the charges and its lawyers have called Compuware's claims an attempt to block competition. The company has said that Compuware, which for years had been the sole producer of certain types of mainframe software, was damaging the overall mainframe business through its high prices.

IBM also filed six counterclaims of patent infringement on its software by Compuware. Those claims are to be addressed in a separate case.

As a smaller company with a bigger focus on mainframe software, Compuware has more riding on the case in the near term. For its last fiscal year, Compuware had revenues of $1.26 billion, more than 40 percent of which came from its mainframe software business. In contrast, IBM posted annual revenues of $96.5 billion, 16 percent of which came from software.

But if Compuware is successful, IBM could see similar lawsuits from other companies whose markets it has entered, said Kevin Buttigieg, an analyst with A.G. Edwards &; Sons Inc.

Zaineb Bokhari, an analyst with Standard &; Poor's Equity Research, said Compuware's mainframe software business has suffered in recent years, in part because of competitive pressure from IBM, but also because customers bought additional capacity in the run-up to Y2K.

If Compuware loses at trial, "this would either maintain or worsen the current competitive environment," Bokhari said. "IBM, according to Compuware, has been out there cutting prices, and they enjoy a natural advantage in the mainframe business because they're able to bundle their software with their hardware."

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But, she said, even a loss would have one positive aspect: "The distraction will be gone, and the legal costs will go away as well."

So far, Compuware has spent $85 million on the case, Elkin said.

Compuware General Counsel Thomas Costello said he expects the trial to last about six weeks.

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