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February 2000

HP says new broker suit protects 3000 customers

Lawsuit follows HP moves in 1999 case that's still moving through court system

HP filed another lawsuit against defendants accused of illegal sale of HP 3000 systems, a civil action that HP 3000 officials say is designed to protect the value of used systems.

The lawsuit filed in US district court contains allegations that bear a strong resemblance to HP’s 1999 civil suits filed against brokers Hardwarehouse and Abtech. HP continues to maintain in its suits that the HP 3000 has more value than HP 9000 systems, accusing US Computer Corp. of spinning the gold of HP 3000s from the relative straw of HP’s Unix systems.

HP’s suit alleges that US Computer and owner Bill Conley used HP’s SS_CONFIG program to illegally modify HP servers. In a section repeated directly from its 1999 suits, HP’s latest lawsuit states that “HP 3000 servers have substantially more features and functions than the HP 9000 servers, and are accordingly more valuable and sold for a higher price.” HP made claims in its latest suit that Conley and US Computer profited by selling converted 3000 servers for that higher price without paying HP for licensing and software on the servers.

No criminal charges had been filed against Conley or US Computer as of press time. HP’s suit claims that “officers discovered an unauthorized and compromised copy of SS_CONFIG” during a search of the US Computer facility in 1998. The suit does not describe these individuals who found the pirated software as law enforcement officers, such as FBI agents or local police. The investigations have been conducted through the High-Tech Crimes Task Force, a group of California police and sheriffs.

One of the HP investigators who has been key in the broker inquiries has been Tim O’Neill. “He’s not a law enforcement official, and his part is to help the High-Tech Crimes Task Force understand what they are seeing, and help them in their investigation,” said Christine Martino, Worldwide Marketing Manager for the HP 3000 division (CSY).

The lawsuit’s HP 3000 issues revolve around the alleged misuse of SS_CONFIG, a program capable of changing user license levels, adding HP 3000 software, and changing the personality of an HP server from 9000 to 3000. In the new suit, HP claims that Derrick Eisenbeis sold SS_CONFIG without copy protection for “a wire transfer of $15,000.” Eisenbeis was also named as a defendant in HP’s 1999 suit against Hardwarehouse.

Specific language describing the conversion of 9000s into 3000s is not in HP’s latest suit, as it was in the 1999 suit. Eisenbeis was accused in last year’s suit of using SS_CONFIG on behalf of Hardwarehouse. This year’s suit accuses Conley of reconfiguring 3000 servers for Hardwarehouse. Eisenbeis allegedly has told HP, according to HP’s latest suit, that he modified “20 or 30 computers for Conley and US Computer.” Eisenbeis was indicted for interstate transport of stolen goods in connection with the 1999 lawsuit.

Value an issue

CSY’s Martino said the division wants the latest lawsuit to serve as a reminder that HP will protect the value of its licensing rights, even on used equipment.

“HP has gotten aggressive and is staying aggressive about this,” Martino said. “This wasn’t a one-shot thing that we did eight months ago when the first lawsuits came out.”

The marketing manager is one of four people in CSY who are regularly briefed on the progress of the lawsuits and investigations. The others are general manager Winston Prather, controller Betty Yee and license transfer manager Kathy Pierson.

“The level of our involvement is simply to provide data when we’re asked for it. There have not been many people in the division involved at all,” Martino said.

She added that she believes the illegal activity as alleged in the HP lawsuits “is hurting all of us in the community, and you have to be careful of who you buy from. We have an authorized channel that is very rich. And I’m not saying all brokers are bad, and you shouldn’t buy from them. But all the illegal activity has taken place in the unauthorized portion of the channel. Customers need to think about protecting themselves now, with this stuff happening.”

More value, but less comparing

Even though HP is direct about stating the HP 3000’s value outweighing HP 9000s in lawsuits, CSY isn’t eager to make such direct comparisons in non-legal settings. Martino said that political considerations inside HP will keep the advantages of the 3000 over HP Unix systems modest.

“It’s true,” she said, “but you probably wouldn’t see us say that in print. We get into that political thing of doing direct comparisons with other products. What we’re trying to do is step away from that comparison and defensive kind of posture, and say ‘Here’s the value we bring. It’s real customers solving real business problems.’ We don’t have to do all these comparisons.” Martino said she was sure the customers were comparing systems, “but we need to keep our nose clean. The way we compare is through a compelling value proposition.”

Impact on HP

Now that HP has eliminated two used 3000 hardware options, its current suit proposes to do more of the same. “It affects HP, our partners and our customers,” Martino said of the illegal activity it proved in its 1999 cases against Hardwarehouse and Abtech. “We have authorized partners who are losing business. It also affects street prices to some degree. Customers could buy a system that was tampered with and not be able to get support on it. Or have it confiscated by the FBI; this did happen.” She confirmed that such a 3000 has been seized at State Farm Insurance, one of the largest HP 3000 installed sites.

HP has received repayment from its two former employees implicated in one of the 1999 suits, Martino added. “We received $200,000, and they still owe more,” she said. Abtech’s executives have also been paying on the settlement their company agreed to. Meanwhile, one Hardwarehouse defendant’s case still hasn’t been tried, and another is cooperating with authorities while he has establishing a new broker business.

“We’ve lost tens of millions of dollars of revenue,” Martino said. “We got hurt by this, and we’ll minutely benefit from any good that comes out of the lawsuits.”

One other benefit is that HP will be publishing a document that outlines the process for license transfers of HP 3000. Martino said “it will be nice to have it on one piece of paper, so there will be yet another source for this information.” HP’s Pierson will be assembling the document, which HP promised to forward to the NewsWire.


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