Deceit, Theft, Espionage, and Murder in the Storage Industry - Part 3

Part 3 - Espionage and Plug-In Storage

For this story, we go all the way back to 1972, when mainframes roamed the earth.  In those days, the entire computer industry consisted of 6 companies - IBM and the BUNCH (Burroughs, Univac, NCR, Control Data and Honeywell.)  These companies hovered over their customers like protective parents, and effectively blocked out their competitors with highly proprietary hardware and software.

Enter a little Tulsa-based company called Telex.  Telex emerged from the oil and gas seismic industry (they were previously called Midwestern Instruments) with a clever device used for geophysical logging called the M-3000.  The M-3000 was an analog magnetic recorder, or in today's parlance a tape drive.  Watching the emerging success of IBM's mainframe, the folks at Telex thought "hey that newfangled IBM computer uses tape drives, and we make tape drives!"  The result was the first plug-compatible peripheral in history.  Telex had designed an IBM interface and channel controller that would plug directly into any IBM 360.  And to the chagrin of IBM, the darn thing worked and Telex sold it much cheaper than the IBM model.

Not taking this lying down, IBM decided to try and persuade potential Telex buyers not to associate themselves with this upstart company, to the point where they would refuse to service the entire computer if anyone dared attach a foreign device to their precious mainframe.  Telex was in trouble.

Having little choice, Telex sued IBM on January 21, 1972.  Telex complained that IBM violated antitrust laws and used predatory practices designed to force Telex out of business.  The case trudged through the courts and December of 1973, a district court ruled in favor of Telex and awarded them $352 Million.  IBM quickly appealed the decision and launched a counter-suit, alleging that Telex engaged in industrial espionage.  How else, they reckoned, was Telex able to figure out how to connect their alien device to our mother ship?  IBM claimed that "Telex had engaged in unfair competition by inducing present and former IBM employees to breach their duty of loyalty by revealing trade secrets and other confidential information about IBM's business."  And sure enough, early in 1975, a higher court overturned the earlier decision in favor of Telex and ruled for IBM, fining Telex $18.5 Million.

Having had one of the largest antitrust cases in history overturned, Telex decided in July of 1975 to take its case to the United States Supreme Court.  Tensions mounted as the highest court in the land prepared to make its judgement on Telex's petition.  Both companies decided they had too much to lose if a judgement were found against them.  In the 11th hour, both companies agreed to a "wash settlement" where Telex agreed to remove its Supreme Court petition and IBM agreed to discharge its counterclaim.

So after nearly 4 years of legal wrangling, both parties dropped all complaints and no money exchanged hands.  IBM did, however, soften its policy of allowing 3rd party devices to be attached to its mainframe computers.  The infancy of open systems computing had begun...

Next:  Murder in the Storage Industry 

Comments

[Adriaan]

Sadly you missed out NCR in the buNch - the oldest and where I learnt my trade.
It is historic as having it's roots in the same workshop where the Wright brothers built Kitty Hawk - pretty 'high tech' at the time.

[DrDedupe]

oops you are right I missed NCR, the pride of Dayton Ohio. I've added them to the post and apologize profusely. BTW here's a link with some interesting NCR history http://www.ncr.com/about_ncr/company_overview/history.jsp

[Terri]

Okay - you have had me waiting and waiting - where is part 4? Good stuff!

[DrDedupe]

Patience Terri. Like any good writer I am letting the suspense build. "Murder In The Storage Industry" will be revealed soon and believe me you won't be disappointed with this true story.

DrDedupe