Franklin and Apple Settle Suit

Franklin and Apple Settle Suit

The New York Times

January 5, 1984

The Franklin Computer Corporation agreed yesterday to pay Apple Computer $2.5 million in damages for copying crucial elements of Apple's most popular personal computer. The settlement marks a victory for computer manufacturers battling inexpensive copies of their own designs.

Franklin, a privately held company based in Cherry Hill, N.J., also agreed to stop marketing an operating system that it admitted was a copy of an Apple design. Such systems tell a computer how to store and retrieve data.

Franklin said it would substitute another system, of its own invention, that it said would still make it possible for Franklin machines to use the programs and information designed for Apple computers.

'Message Has Gone Out'

''We think it was a total victory,'' said Jack Brown, a copyright and patent attorney who represented Apple in the case. ''The message has gone out that companies involved in copying will simply not be tolerated.''

The settlement ends a highly publicized dispute that had enormous stakes for companies like Apple and the International Business Machines Corporation, whose machines have spawned scores of imitators hoping to take advantage of the enormous number of programs written for them.

While the case was finally settled out of court, computer manufacturers said, it set precedents that will make it far easier to fight such model infringement in the future.

At the outset of the action, it was not clear whether Franklin, which admitted to copying the operating systems, was even violating the law.

When Apple first took Franklin to court in 1982, a Federal District judge ruled that the operating system was not distinct from computer hardware, which can only be protected by a patent, not a copyright.

Lower Court's Opinion

And the judge, who refused to block Franklin from marketing its Apple- compatible computers, the ACE 1000 and ACE 1200, also indicated that programs stored on chips, known as read-only memories, or ROM's, may also not be copyrightable.

But four months ago, the Federal Court of Appeals in Philadelphia overturned that decision, ruling that copyrights ''are not confined to literature in the nature of Hemingway's 'For Whom the Bell Tolls.' ''

Yesterday's settlement means an end to all litigation between Apple and Franklin, including Franklin's appeal of the Philadelphia ruling to the United States Supreme Court.

Franklin officials said yesterday they were relieved that the litigation was over. ''It put a tremendous strain on our management,'' said Avram C. Miller, Franklin's president and chief operating officer. ''We hope this agreement removes any stigma surrounding the company.''

April 1 Compliance Deadline

Under terms of the agreement, Franklin, which posted about $70 million in sales in 1983, must stop selling the operating system copied from Apple by April 1. Mr. Miller said Franklin's new system ''was very difficult to design,'' but that consumers ''would not be able to tell the difference'' between the programs when the machine is in operation.

The agreement also sets up an arbitration system to resolve further copyright disputes between the two companies.

The victory for Apple was the third in recent weeks in its effort to stem the flow of imitation Apple products.

In December, the International Trade Commission, acting on an Apple complaint, isued an exclusion order to prevent Apple look-alikes made in Taiwan from entering the United States. Also last month, a Federal District Court in San Francisco issued a temporary restraining order against the Xtra Computer Corporation, which Apple said was marketing a machine that violated the same copyrights that Franklin admitted to infringing.

CORRECTION-DATE: January 6, 1984, Friday, Late City Final Edition

An article in Business Day yesterday about Apple Computer misstated the name of a company that was ordered last month to stop selling computers that infringe on Apple copyrights. It was the Extra Computer Corporation.