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Wayback: HP sues insurer for MPE defeats

Fifteen years ago this month, HP was working to prove MPE was a rich asset. The vendor had already shucked off its futures for selling the 3000, saying in 2001 the server would be kaput by 2006. The 2004 lawsuit was a last resort to get money for servers that HP did not sell.

Confused? The marketplace was in the know about HP's attempt to recover $31 million from an insurance policy it took out against losing sales to system counterfeiters. In 1999 HP began its campaign to arrest, or sue out of business, a stable of companies selling 3000s outside of HP's control. The '99 lawsuits were aimed at Hardware House and several other 3000 resellers. Those companies were charged with selling 3000s whose MPE licenses had been faked.

After more than two years of those legal attacks — HP concocted a High Tech Task Force out of a few California law enforcement agencies, raiding suspect companies — the 3000 division walked away from its 3000 sales beyond 2003. As far as HP was concerned, it was still entitled to money it lost from faked sales in the years leading up to 1999. It didn't matter to the vendor that it was ending its 3000 business and putting 3000 software vendors on the ropes. It wanted to be paid for those unlicensed servers sold by third parties. MPE was the prize HP was claiming, since the hardware itself was officially useless without an MPE license. 

Los Angeles legal firm Anderson, McPharlin & Conners went to the 3000 newsgroups in 2004 to beat the community’s bushes, working to discover prices for used HP 3000s sold between 1994 and 1998. Paralegal Laurie Moss said HP wanted to levy a claim for the full software price on every server sold to Hardware House.

During the legal firm’s discovery search, Moss said many 3000 community members who were contacted wanted to help. The Brunswick, Ohio-based reseller Norco, which eventually closed its doors three years later, was eager to tell the truth about the 900 Series systems genuine value.

“You wouldn’t believe how many people said, ‘I sure do wish I could help you in this,’ “ Moss said. The law firm’s attorney Lisa Coplin deposed John Adamson, former owner of Hardware House, in the case, as well as Deborah Balon, an HP resales employee who aided Hardware House. HP settled within a week of the legal firm's discovery depositions. The vendor settled for five percent of its original $10 million claim.

“We were afraid that some of the hardware brokers wouldn’t want to come up against HP,” Coplin said. “One of them, Norco, said, ‘We’ll give you everything we have.’ "

Things also went badly for HP throughout its march on the reseller businesses. One broker was sentenced to house arrest for awhile, but one of the biggest players in the incident had his wire fraud conviction reversed on appeal in the US Ninth Circuit court.

John Adamson's brother Richard was convicted of wire fraud and money laundering in violation of 18 U.S.C. § 1343 and 18 U.S.C. § 1956(a)(1)(A)(i). "He appealed, contending, inter alia, that the district court erred by (1) restricting his cross-examination of a key government witness and (2) broadening the scope of the indictment," said the court documents hosted on the website Leagle.

Richard Adamson's conviction was overturned about six months after HP had announced the end of its 3000 operations. The vendor-authorized top used system reseller also employed a scare tactic about used systems by the Year 2000, warning customers their systems might be seized by the FBI if they were sold fraudulently.

While HP was obviously missing out on hundreds of thousands of dollars when a system got sold without legal HP licenses, its effort to crack down kept thousands of such used servers out of a market that was waiting on an HP hardware refresh. HP had to engineer MPE for Year 2000 compatibility at the same time it was trying to put a new PCI-based server line — the N- and A-Class systems — into a market that needed more horsepower.

Customers who could not justify the cost for licenses on bigger systems had to limp through Y2K. The delay of the faster systems clipped the wings of some 3000 growth during the year 2000. The new PCI systems didn't ship until 2001.

The HP business model that applied serious price hikes to multiuser systems only because they served a greater number of users — 64-user 3000s cost more than the same hardware and software serving 8 users — had help spark the reseller revolt. There was greed and deceit at work, too. At the end of the HP campaign, it only had $1,500,000 in a settlement to show for its crackdown that took more than two years to conclude.