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November 30, 1988


By CBR Staff Writer

It’s difficult to see Fujitsu Ltd as anything other than the runaway winner in the decision of the American Arbitration Association over its software copyright dispute with IBM, and about the only real consolations for IBM are that it doesn’t have to give the Japanese company access to the source code of future releases of MVS – and that the payments Fujitsu is ordered to make are not higher. Had Fujitsu been required to pay the $1,100m some wilder commentators suggested, its need to take IBM on head-to-head in its heartland in order to recover the money in increased business would have been even greater. But Fujitsu should see a very significant increase in IBM-compatible mainframe business, because there was never any criticism of the quality of its rewrites of MVS from European users who licensed them – disguised as Siemens’ BS3000 – only worries that IBM might grasp their collar and haul them off to court to answer charges of using pirated software. The dispute effectively cost Fujitsu its agreement under which Siemens remarketed its IBMulators in Europe, and persuaded Siemens to toss what was left of that business into the Comparex AG joint venture with BASF AG. It’s probably too late to unwind that arrangement and to win back Siemens – which still markets Fujitsu supercomputers – but Fujitsu now needs a new European marketing operation for mainframes, and may well try to set up its own from its stronghold in Spain. A striking feature of Tuesday’s revelations is that it appears that Fujitsu has already paid IBM $65m for pre-1983 distribution and use of identified programs, plus six monthly payments from 1983 to 1987 totalling $406.2m for distributing and using these programs and their successors. IBM has managed to lose those payments in the sundry amounts section of its accounts so that no-one knew they had been received. Fujitsu has actually been granted a credit of $33.9m on the 1983 to 1987 payments since the arbitrators reckoned it had paid too much, and a credit of $124.8m for estimated payments toward the paid-up licence since 1987. With the $237.2m to be paid any day now, IBM will have received a total of $833.2m from Fujitsu, and if the $25.7m to $51.3m estimated to be due next year for Fujitsu’s right to inspect new IBM MVS releases is the sort of rate that can be expected into the 1990s, IBM does not stand to make much more money out of the agreement – Fujitsu now has a full paid-up licence to all existing versions. The most bizarre aspect of the ruling is the requirement that Fujitsu establish in Japan a secured facility where it will be able to inspect what new releases of MVS do in order to be able to offer customers an operating system that can run applications written for MVS, communicate efficiently and reliably with MVS systems via a back-to-back gateway; and to access data by means of limited sharing of disks. Fujitsu gets access only to interface information that describes what a program does, not how it does it; the standards require that manuals clearly identify programming service interfaces and explicitly warn customers not to use other information for interface purposes. Fujitsu or IBM may also, outside a secured facility, review unlicensed manuals and conduct machine analysis of object code programs belonging to the other and document the interface information that it intends to use. This information will then be reviewed to assure that it is within the established instructions – and both parties intend to exercise this right. And if either company wishes to derive interface information through the examination of the other’s licensed manuals and source code, they can only do so inside a secured facility subject to strict and elaborate safeguards – and only the specified information can be used for independent software development. And while Fujitsu will establish a secured facility in Japan for review of IBM licensed material and source code, IBM says it does not plan to implement its right to establish such a facility for itself. The secured facility regime will allow Fujitsu to extract

information relating to compatibility of application programs from any new IBM programs released before June 25, 1997. With regard to information needed for networking, communication and data sharing betweeen IBM and Fujitsu systems, Fujitsu will have such access to IBM programs released until January 1, 1994. The arbitrators will also have continuing jurisdiction over all disputes between the two companies until November 29, 2002.

Rulings binding to 2002 The rulings of the arbitrators are binding up to that date, and not challengeable in the courts of either any country – and it is this aspect of the arrangement that has observers feeling that IBM has sold the family silver. Fujitsu has amply demonstrated that it is capable of producing an operating system fully compatible with whatever IBM has to offer, and has every incentive to compete head to head worldwide with IBM, not only on price, but also on the basis that almost by definition, a rewritten operating system will run faster and more efficiently than the original. There is also scope for Fujitsu to extend MVS facilities beyond those IBM offers, provided the extensions are clearly-defined options that users who are worried about straying from the IBM straight and narrow can avoid using without difficulty. IBM’s other Japanese adversary, Hitachi Ltd, is not covered by the terms of the IBM-Fujitsu deal, but does have its own licensed rewrite of MVS. It is not clear whether it intends to now seek similar privileges to those won by its main competitor in the Japanese market.

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