In the first legal fallout from its recent decision to end its clone-making agreements, Apple Computer is facing a US$500 million lawsuit by a firm that says its chip-building business was scuttled by Apple's move.
Exponential Technologies filed a suit on Monday claiming that Apple killed the market for its new X704 chip, designed for high-end clones. After refusing to extend licensing agreements for its newest and next-generation operating systems, Apple bought out the clone-making business of one big player, Power Computing. Motorola and IBM later announced they were getting out of the Mac clone game.
The Exponential suit, filed in Santa Clara County, California, Superior Court, also alleges that Apple concealed the fact that it controlled licensing of the specially modified Macintosh read-only memory developed for the X704. That licensing control was hidden, Exponential says, until it was too late for the company to retrieve its position by changing business strategies.
"We had no way to sell to clone manufacturers," said Exponential chief financial officer Stephanie Dorris.
Without access to the X704 Mac ROM, the clone-makers had no way of creating a system that could use the chip. Without the ability to make the X704 work in their machines, clone-makers had no reason to buy the high-speed processor.
In April, Apple pulled out of an agreement with Exponential to buy the X704 for its computers. That left Exponential with nowhere to go with its processors - and $40 million poorer for its Mac development efforts.
"We could have tried reverse engineering the software code of the ROMs as an alternative, but we figured that the time it would take and the cost to do it were too much," Dorris said.
Apple had a big hand in creating Exponential. The Mac-maker invested a total of $4 million in Exponential, starting in April 1995. In addition, Apple held one seat on Exponential's seven-member board of directors.
As of Tuesday afternoon, Apple had yet to be served with the legal papers and would not comment on the suit.
