[The following text published by Microsoft Corporation is annotated with appropriate replies by Lewis A. Mettler, Esq., an Attorney and Software Developer.  Mr. Mettler does not represent any party to this action nor any of the major players in the computer software industry.  All views represented are his own and based upon 25 years or more in the computer industry and as being a lawyer.]

                      SETTING THE RECORD STRAIGHT [?]:

Microsoft Statement on Government Lawsuit

          October 1998
 

   EXECUTIVE SUMMARY
 
Today, federal and state regulators are scheduled to file their written evidence in their lawsuit against Microsoft. But the case will look almost nothing like the lawsuit the DOJ filed against Microsoft in May, just five months ago, after nearly two years of investigation. The government has turned its back on its original case because it was supported neither by the facts as revealed in discovery during the summer   nor by the law, as revealed by the Court of Appeals decision for Microsoft in June 1998. Rather than proceed on the case they filed, the DOJ spent the summer looking for new stories that could be transformed into allegations of supposedly anti-competitive
  conduct. These new stories, unconnected to the allegations of the DOJ s original complaint in this lawsuit or to each other, are noisily supported by a few of Microsoft s competitors, but unsupported by factual evidence.
 
In an effort to bolster its lawsuit, the DOJ has repeatedly resorted to leaking out-of-context snippets of information in a manner that has misled both the media and public   a prime example being the misleading leak of a single word from the 45,000-word deposition of Microsoft executive Chris Jones.
 
Microsoft has focused on a single goal since it was formed in 1975: making the best possible products, and offering them at the most competitive prices, to benefit consumers. The DOJ has chosen to ignore the choices made by consumers in an incredibly innovative and competitive free market; the importance of technology to the economy; and the many powerful facts supporting Microsoft s case.

REPLY: Microsoft has changed it goal.  Currently, the most important goal that Microsoft has is to force the sale of their internet browser (IE) upon 100% of their own customers with complete disregard for their individual needs and rights.  Consumers should have the right to pick and choose their OS and pick and choose their applications.  It is Microsoft Corporation that is completely disregarding the rights of consumers to select the products they wish to buy.  The ability to force the sale of unwanted products can only exist in a market without competition for a dominant product. Microsoft knows that it has no practical competition for its consumer OS so it simply "bundles" IE with the OS depriving all consumers of their right to pick and choose applications and at the same time driving up the price of the minimum OS purchase.
 
The accompanying paper sets out some of the facts relevant to the evolving assortment of allegations that the DOJ apparently intends to present at trial. They are summarized below. Many more facts supporting Microsoft s case will be presented at trial.
 
REPLY: The one fact that Microsoft does not contest is that 100% of their customers must purchase IE.  This is clearly a forced sale.  A forced sale that Microsoft continues to press as they litigate this case.  Microsoft is using the court system to assist in its effort to force the sale of the IE product.  Microsoft steadfastly refuses to allow any consumer to do business with Microsoft without purchasing IE first.

Windows 98 is a single, integrated product that benefits consumers
 
The DOJ s claim that Microsoft has  tied  two allegedly separate products, Internet Explorer and Windows, is fatally undermined both by the facts and by the findings of the Court of Appeals in June, when it rejected a claim under the 1995 Consent Decree that was essentially identical to the tying claims in this case. In fact, a large body of case law holds that technically interconnected products are immune from tying claims, as long as the interconnection achieves some technologically beneficial result. And that is what the Court of Appeals found, noting that, among many other advantages, Windows offers clear technological benefits  as compared to an
  operating system combined with a stand-alone browser such as Netscape s Navigator.  The paper sets out the key legal and technological evidence supporting Microsoft s position.
 
REPLY:  Just which "consumers" is Microsoft referring to here?  Are they talking about the consumers who do not have modems?   Are they talking about the consumers who do not connect with a telephone from their computer?  Are they talking about the consumers that prefer to pick and choose their applications before purchasing them?  Are they talking about the consumers who already have a browser and are happy with it?  Just who are they talking about anyway?  The only customers that would benefit from buying a new browser and a new operating system are  those customers who 1) do not currently have a browser; 2) and plan to use an internet browser; 3) and have a telephone line available; 4) and  are purchasing or have a modem; 5) and prefer to purchase their browser from Microsoft Corporation. As to everyone else (the clear majority), being forced to buy IE does not benefit them at all.  For the majority of customers, being forced to buy an unwanted or unneeded product is a direct financial harm. Just being a better product (assuming that is even true) does not justify forcing the sale upon unwilling customers. Even if IE got an award issued by the President of the United States for being the best software program ever, does not justify forcing its sale upon a single customer.

As to the findings of the Court of Appeals, even the attorneys for Microsoft know that the Court of Appeals opinion is not even binding upon the court that issued the opinion as to its factual finding.  You will have to read the white paper by Judge Bork in order to understand the importance of that decision.  It has no bearing on this litigation at all. That decision was based solely upon a procedural matter.

As to any benefits in tieing IE with the OS, they would only apply (if at all) to the few customers that actually prefer to purchase a new browser from Microsoft.  As to everyone else (the clear majority of all Microsoft customers) it is a direct financial harm and of little or no value at all. Should you be forced to buy a GPS unit for your car just because it is integrated with the cell phone? Microsoft thinks you should.

Bundling products is fine if all potential customers actually want both products and they want to buy both of them from Microsoft.  Clearly Microsoft knows this is not the case so they adopted the plan to force the sale of IE by tying it or bundling it with the OS. It is very easy to sell an unwanted product that way.

 
  "Microsoft s Windows  first screen  benefits consumers and PC manufacturers"  or "Microsoft wants to be the only company that can advertise its products and other companies must also advertise Microsoft products?"

The DOJ claims that it is somehow illegal for Microsoft not to grant a license to PC makers to modify Windows any way they like, regardless of customer expectations. In particular, the DOJ claims it is somehow illegal for Microsoft to require PC makers to allow Windows to boot up and display the Windows desktop the very first time a new PC running the operating system is turned on. Microsoft, says the DOJ, should allow PC makers to interrupt the Windows boot-up sequence to make other companies  products the  first screen  that PC users see. In fact, an unaltered boot-up process preserves the operating system as a stable and consistent platform that supports a broad range of compatible applications. And computer users clearly benefit from the fact that PCs produced by a wide variety of firms all provide the same initial user experience. At the same time, however, PC makers and consumers have great flexibility to customize the Windows desktop, as the paper explains, and to prominently feature competing software, such as Navigator.
 
REPLY:  The suggestion that altering the first screen on boot up is going to result in an unstable OS is bogus.  Of course Microsoft wants to be the only company advertising products when the computer first boots.  Microsoft wants to be the only company that sells this space.  Microsoft wants to be the only company that can use this space to leverage deals with OEMs and ISVs.  And, of course, Microsoft wants to have an ongoing monopoly on all consumer oriented computer systems.  All of this is very clear.  Suggesting that a custom display after boot up is somehow going to cause the system to fail is not only bogus and technically false, it is also disingenuous.  No company would ever distribute an alternate boot up sequence if it caused "their machines" to fail.

Microsoft wants a monopoly on the first advertising screen so it can "sell" that space exclusively.  They have no other purpose.  If Microsoft even cared about a reliable OS, they could fix it directly.  Still today, Microsoft operating systems are the most unreliable available.  Even the new 98 version has serious problems.

And, just why does Windows 98 pre-allocate some 90 megabytes of memory during the boot up?  Is Microsoft pre- loading all of its applications so that they look like they boot faster?  Just what is going on here, Microsoft?
 

 " Netscape clearly has no difficulty reaching customers" or "Microsoft is not perfect in precluding all competitor's distributions"
 
The central thesis of the DOJ s lawsuit against Microsoft (as set forth in the complaint) is that Microsoft somehow illegally blocked Netscape s access to four important channels of browser distribution   PC makers, Internet service providers, Internet content providers and online services. The evidence shows, however, that Netscape has had no difficulty at all distributing its browser software. Quite the contrary. Indeed, Netscape claims that 70 million customers use Navigator, its web browsing software, making it the most popular application ever according to Netscape. And Netscape recently announced that from mid-July to end-August alone, consumers
  worldwide downloaded more than 12 million copies of its software, an exceptional rate of product distribution. As Netscape president and CEO Jim Barksdale put it in Wired in March 1996:  The fact that I now have a distribution channel to millions of clients who can download my software with one-button access, that s a great advantage for a very small company.
 
REPLY:   This position taken by Microsoft clearly points out how arrogant, disingenuous and deceitful Microsoft can be in some of its public statements.  Microsoft illegally blocks four very important channels of distribution and they claim to be the "innocent babe" simply  because they failed to be 100% effective?  If anything is shown by the ability of Netscape to still distribute its products despite the illegal acts  conducted by Microsoft , it is that there is  a very clear demand for browser applications and little or no value in bundling them with the OS.   This is also proof positive that most Microsoft customers do not want to be forced to buy, install nor maintain IE.

Microsoft is forcing as many customers as it can to buy, install and maintain IE.  That is absolutely clear.  The fact that they have not been able to completely snuff out the demand for a competing browser offers absolutely no defense to their illegal acts and conduct.  But, Microsoft will preclude Netscape in any way it can and at the same time force its own customers to buy, install and maintain IE.  Both acts are illegal.  Being less than 100% effective is not relevant.

Does Microsoft actually think that they must be 100% effective or they are free of antitrust violations?  Their attorneys certainly know better.  Does Microsoft actually think that it can block a competitor from almost all channels of distribution but if they leave one door open, they are free of prosecution?  Their attorneys certainly know better.

Maybe Microsoft does not control everything yet.  But, they are clearly trying whether or not what they do violates antitrust law.

 "Netscape s own business and strategic failings have contributed to the decline in usage of Navigator" or "Better Products are a defense against antitrust violations?"
 
Microsoft s Internet Explorer technology is winning against Netscape s Navigator browser in the marketplace simply because consumers and software developers prefer it. Netscape fell far behind in browser development after the  version 2  round, and has been trounced in media reviews of the latest versions. As Fortune wrote in October 1997,  [Microsoft Internet Explorer] is fast, efficient and so chock full of improvements that it beats Navigator hands down.  Similarly, years after Microsoft delivered a componentized Web browsing solution (a design approach that appeals to independent software vendors, such as Intuit and America Online, that
  wish to incorporate seamless Web access into their products), Netscape still has not done so. The accompanying paper highlights many such missteps by Netscape   and frank admissions by Netscape executives that they made critical strategic errors.
 
REPLY: This is the worse argument that any attorney could muster up.  No lawyer worth his salt would ever suggest that mistakes or shortcomings by a competitor give a free ride to violate antitrust laws.  Nothing that Netscape has done can in any way provide a legal defense to Microsoft for its antitrust violations.  If anything, an incompetent competitor, would eliminate the need for Microsoft to risk antitrust litigation in an effort to be successful in the market.  An incompetent competitor is not an excuse for violating antitrust laws.

While Microsoft forces 100% of its customers to buy, install and maintain its products, Microsoft is also going to claim that is was "successful" because its products were better?  That claim is impossible to make.  All customers are being forced to buy IE.  Not one has chosen freely to do so.  Product comparisons are not relevant legally or otherwise.  A forced sale is a forced sale.  If everyone must buy it, it was forced not selected.

Does Microsoft really think it can write history this way?  "Everyone has IE because it was better?"  Pay no heed to the fact that everyone was forced to buy it?
 

" Microsoft did not try to persuade Netscape to divide the market  for Web browsing software at a meeting in June 1995" or "A Better Netscape Browser for Windows?"

As the paper shows, the snippets leaked by the DOJ wholly misrepresent the purpose of this routine meeting, which was to explore the possibility of forging a strategic partnership in some areas of the two companies  businesses, while understanding the areas in which they would continue to compete. Such  co-petition  relationships are pervasive in the industry. The meeting was also an opportunity for Microsoft to inform Netscape (a developer writing software for Windows 95) of the features, functions and protocols that would be provided or supported by Microsoft s forthcoming product offerings. And contrary to claims that Netscape felt threatened  by Microsoft, a July 1995 email from Netscape vice president for marketing Mike Homer to a Microsoft manager shows that constructive discussions between the two firms continued after the meeting and throughout summer 1995.
 
REPLY:  If you believe this one, I have a bridge in Arizona I would like to sell you.  Of course Microsoft went to Netscape to help them write a better browser for Windows.
 

 
"America Online chose Microsoft s Internet Explorer Web browsing technology because this was the optimal commercial and competitive decision" or "You  do that for us, we do this for you"
 
The DOJ is relying on out-of-context email snippets to imply falsely that AOL chose Microsoft s Internet Explorer technology for its online service only because Microsoft offered AOL a commitment to place  client software  for AOL s information service in a folder on the Windows desktop. The accompanying paper sets those snippets in context, and makes it clear, in the words of AOL chairman and chief executive Steve Case at the time, why AOL chose Microsoft's  technology:  [The more we learned about the Microsoft technology and their strategy and their commitment to the space, and particularly their modular architecture, we felt it would allow us to better meet the needs of our consumer audience.
 
REPLY:  Of course every sale Microsoft makes is due solely to its quality products.  We should just forget that Microsoft at one time wanted very dearly to make MSN the true competitor to AOL.  Is this just another carving up the market.  "We will not do that if you do this?".  This is a clear example of how a very powerful monopolist can compete unfairly in the marketplace.  Both AOL and Microsoft did away with a prime competitor by this deal.  To even suggest it was based upon superior technology is absurd.

How dumb does Microsoft think the rest of the industry is?  Do they really think that the big picture would be ignored in favor of a slight difference in the quality (if there was one) between the Netscape and Microsoft browsers?

Microsoft might be able to fool the consumer with this line, but not one person in the industry believes it.  The importance to AOL in having Microsoft forgo MSN and the importance to Microsoft in having AOL forgo the Netscape browser is inescapable.
 

 " Intuit chose Microsoft s Internet Explorer Web browsing technology because this was the optimal commercial and competitive decision" or "Forget the million bucks."
 
The DOJ has used a snippet of email from Bill Gates to imply falsely that Microsoft attempted to bribe  Intuit to use Microsoft s Internet Explorer technology instead of Netscape Navigator. As the paper shows, almost the entire July 1996 email is actually taken up by Gates explaining how, in a conversation, he told Intuit s Scott Cook that the primary advantage Microsoft could offer Intuit is the best browser technology, componentized in a way that specifically addressed Intuit's needs. Like AOL, Intuit has itself explicitly confirmed that this was why it chose Microsoft's technology over Netscape s. Quoted in The American Banker on July 17th 1997, Intuit s Debra Kelly said:  Although we could bundle Navigator with our products, we couldn't successfully embed it into the product. With embedded Internet Explorer, users have the ability to download information without leaving Quicken.
 
In the face of compelling evidence refuting its original claims, the Department of Justice has at the last minute added the following new allegations to its case in a bait-and-switch tactic designed to deny Microsoft any reasonable opportunity to prepare a defense. Nevertheless, the facts already available show that these new allegations are also without support.
 
REPLY:  Does Microsoft think that the consumer and the court should ignore an offer of a million bucks?  A million dollars is not a snippet of email.  Remember Microsoft wanted to buy Intuit outright.  Microsoft must really think that domination of the browser market is very important to offer to help out a competitor in this way.  Very important.  It is clear that Intuit was bribed.  It just make you wonder which  suggestions do not make it into the e- mail.  Could Microsoft have offered more?  How does Money play in here?  Is it really so necessary to prevent Netscape from gaining the Intuit account that bribes are offered to key competitors for other products?

"Microsoft has not  bullied  Intel or any other high-tech companies" or "We kindly let them know why NSP would not work"
 
The DOJ claims that Microsoft, in an alleged effort to deter Intel from developing independent operating system related software initiatives, bullied the chip maker into giving up a technology known as  native signal processing,  or NSP. The paper shows that the discussions between Microsoft and Intel related solely to the technical merits of the NSP software, and not competitive considerations between the two firms. Microsoft identified a number of technical shortcomings in NSP, raised these directly with Intel, and elected not to support Intel s technology   primarily because it was incompatible with Windows 95, the release of which was imminent and important to both firms. Intel and Microsoft have built one of the most successful business partnerships in history, a relationship that has been good for consumers and the entire PC industry. At the same time, both Intel and Microsoft have routinely worked with each others  competitors over the past decade. As Intel CEO Craig Barrett said in a September 24th 1998 interview with CNET,  If I looked at the overall relationship, it s probably as strong, or stronger, today as it has been in the past.

REPLY:  Microsoft nor Intel can win here.  Either they are colluding or bullying each other.  Neither is good.    To some extent they have to agree in a multiple of ways.  However, the attitude of Microsoft is what is important in this relationship.   If Microsoft is going to even get close to trying to tell Intel what to do, what chance do you suppose there is for a proper discourse to take place between less powerful direct competitors (i.e. Netscape).  If Microsoft is known to have tried to bully Intel why should anyone believe Microsoft when it claims not to have "brown nosed" Netscape?  Or,  not refused to deal fairly with anyone.  It is the attitude toward other companies which is displayed here.  Intel can take care of itself.  Less powerful companies can not and Microsoft knows that better than anyone.

Microsoft's mode of operation is that if you do not get the deal you want, then do everything you can (regardless of laws) to drive the other company out of business.  Not by offering better products at fair and competitive prices, but by precluding or blocking their ability to sell their products any way you can.  If it means a violation of the law, let the DOJ sue.
 

"Microsoft has worked cooperatively with Apple Computer" or "Apple has no choice but do what we say?"
 
The DOJ recently intimated that Microsoft attempted to persuade Apple Computer not to compete in the market for multimedia playback on the Windows platform. In fact, Microsoft and Apple simply discussed Microsoft s adoption of the QuickTime file format; the sharing of codecs between the companies; the idea that they cooperate on, and integrate, their respective authoring technologies; and working together on multimedia standards for the Internet. All this was aimed at reducing complexity for end-users, making authoring and multimedia tools easier to create, and making it simpler to create and view compelling multimedia content on the Internet. These are the kinds of discussions that go on in the software industry (and other high-tech industries) every day. In the end, Apple decided not to pursue the Microsoft proposal, and the two companies continue to offer their own multimedia formats and media players.
 
REPLY:  Is it not amazing how much power Microsoft tries to exercise over its competitors and those companies it contracts with?  If Microsoft does not like what someone else is doing (be it Intel, Apple, Netscape or anyone else) they try to manipulate and control that other companies products.  In the case of Apple, Microsoft provides a lot of software for the Apple systems.  And, it owns part of the company.  In many ways, Apple is just an extension of Microsoft.  Apple might have been able to hold off Microsoft with QuickTime but IE being pre-installed with the Apple systems was a done deal.

It is clear that Microsoft attempted to persuade Apple not to press with its QuickTime format.  Just because Microsoft failed does not mean it did not try to manipulate what Apple did.  Microsoft's idea of cooperation in the industry is for the other company to do as Microsoft wants them to do.  "Apple decided not to pursue the Microsoft Proposal", is the answer given.  Does that mean that at no time did Microsoft even entertain what Apple wanted to do.  If it was cooperation that Microsoft really wanted  they would  have also considered Apple's proposals.  I guess Microsoft mis-spoke here.  I just wonder what Microsoft threatened to do if Apple did not go along.  Certainly, Microsoft has carrots and sticks to offer Apple.  Just what was the deal anyway?
 

"Microsoft is offering software developers the best and fastest Java implementation for  Windows and for cross platform Java programs" or "Java will never work if we can sabotage it"
 
The DOJ alleges that Microsoft has produced an altered version of Sun Microsystems  Java in an attempt to  pollute  it. In reality, Microsoft s Java strategy offers developers the choice of writing programs in Java that exploit the features of the Windows platform, or writing and running least-common-denominator, cross-platform Java programs. Microsoft s approach is proving popular: in April, PC Magazine named Microsoft s Java implementation its  Editors  Choice  for the second year running, stating that it was more compatible than Sun s own Java implementation. As the paper explains, Microsoft s Java license with Sun gives Microsoft the right to improve and enhance Java technology for Windows in ways that best serve our customers. By developing the best and fastest Java implementation for the Windows platform,
  while simultaneously offering the fastest and most compatible technology for running truly cross-platform Java programs, Microsoft is fulfilling its contract with Sun.
 
REPLY: Microsoft's policy with Java is the most deceitful plan any company has devised in the computer software industry.  Rather than cooperate with Sun, Microsoft attempts to sabotage the Java concept and degrade the value of the Java trademark.  Nothing that Microsoft has done with Java requires that it be incompatible.  Microsoft's version (already having lost the ability to use the Java logo) was only a deceitful attempt to degrade the value of another companies trademark.  For Microsoft to suggest that it is fulfilling its contract with Sun is absurd.  Certainly, Sun would disagree with that.  They disagree so strongly that they have already secured a preliminary injunction against Microsoft.

Now, why would Microsoft breach its contract with Sun (without a doubt in spirit), yet continue to insist upon a deviant version?  Why is it so necessary to have a version different than everyone else?  Why is it so necessary to have a version of Java with is incompatible with all non-windows platforms?  Is the language that good?  Is it so necessary to have a version optimized for only Windows platforms  that a legal suit must certainly follow?  That the very ability to hold a Java license is put at risk?  Certainly, windows developers do not need to have an optimized version of Java.  They can use C++ or Pascal from a number of suppliers.  Why is it absolutely essential that Microsoft offer a version of Java which generates applications only on Windows?

The answer is obvious.

If you do not like what your competitor is doing, make certain you sabotage their products any way you can.

IBM and Microsoft worked together on Windows 3.1.  IBM licensed it.  Could have IBM extended windows so that it would  be improved and optimized on OS/2?  I suppose it could have.  But, IBM did not.  I honored the spirit of its contract with Microsoft and did nothing to reduce the value of the Windows trademark.

Microsoft on the other hand, intentionally modified Java such that the value of the Java trademark would be reduced.  Microsoft intentionally sabotaged Java.  There is not nor was there ever a technical reason for designing an incompatible version that would run only on Windows platforms.  Plenty of other tools were and are available to write an optimized application if only Windows is intended to be used.

Microsoft wanted to sabotage Java.

 
"Microsoft does not have monopoly power, regardless of how the market is defined"
or "Did you hear the one about..."
 
It is well established as a matter of both law and economics that high market share does not necessarily establish the existence of monopoly power. High market share is a static snapshot of sales   a snapshot that does not even begin to reflect the intensely competitive, fast-moving software industry. History has shown that high market shares in computer software are vulnerable and susceptible to rapid deterioration, should the market leader fail to continue innovating at a rapid and competitive pace. Market entry costs are very low and profit opportunities vast in software platform technology, leading to constant efforts to unseat the incumbent leader (witness
  the advance of Linux, a new version of UNIX developed by a single individual). Once a software program is developed, replication costs are very low, so a market entrant can quickly and easily produce enough copies of its product to immediately satisfy all demand. Further, as the paper shows, Microsoft passes none of the other tests that seek to prove monopoly power.
 
 REPLY:   This statement is laughable.  70% of a market is generally enough to prove a monopoly.  Microsoft knows that it has in the range of 90% of the market with it OS.  Other indicators of a monopoly are the ability to set price unilaterally and the ability to bundle products without a reduction in sales quantities.  If Microsoft itself did not think it had a monopoly it would never have bundled IE in the first place. If Microsoft itself did not think it had a monopoly it would not price 98 at $200 for a new license when Linux sells for $40 or so or even free.

Microsoft has been bundling additional utilities and applications into its OS for many years in order to keep the price abnormally high.  A monopoly product can do this.  A competitive one can not.  Even Microsoft knows that it must sell Microsoft Word separately from the Office  Suite in order to maximize sales.  But, using a little deceit that IE is free, Microsoft also knows that it can force the sale of IE just by bundling it with the OS.  Did Microsoft jack up the price of the OS and toss in IE or did it just bundle the two and increase the price accordingly?  It may not matter, a monopoly can do either.  In fact, being able to do either (and boast about it) is a clear sign that Microsoft itself truly thinks it has a monopoly in fact.

Of course they do.

You just about can not buy a computer anywhere without a Microsoft OS being pre-installed on it.  Microsoft knows that better than anyone and that is the primary reason they bundled IE in with the OS.  They knew they could force the sale of IE and walk away with yet one more monopoly which they can exploit.  They do not need to even give away a product.  They only need to bundle it and jack up the price.  Simple.
 

DETAIL DISCUSSIONS
 
 

  1. "Windows 98 is a single, integrated product that benefits consumers" [ or "How consumers have been tricked
into buying two products"]
 
The central allegation made by the Department of Justice is that Microsoft has  tied Internet Explorer to Windows 95 and Windows 98. The Department of Justice alleges that Microsoft has  effectuated this tie  by requiring computer manufacturers, as a condition of licensing Microsoft s Windows operating system software, to retain the software code that  provides access  to Web browsing functionality in the operating system. The Department of Justice argues that Microsoft s license agreements with computer manufacturers therefore violate the Sherman Act, because they prohibit those manufacturers from disassembling Microsoft s copyrighted Windows operating software into its thousands of component parts, installing some of them but not others. This allegation of  tying  not only flies in the face of federal copyright law, it is also contrary to antitrust law.

REPLY:  As to the issue of copyright law: Copyright law does not invalidate antitrust law.  If two products are tied together illegally under the antitrust law, it is not a defense to simply show that the two "tied" products have been copyrighted together.  Rather it is the other way around.  Antitrust law can invalidate a copyright of illegally tied products.

REPLY: Microsoft has violated antitrust law by taking two completely independent products and tied them together. How they are tied is not relevant.  It could have been with plastic tape, string, boxes or files of source code.  The method is not important.  What is important is how Microsoft and the consumer view the two products.
 
Ironically, even Netscape cannot support the government s accusation that Microsoft has illegally  tied  Internet Explorer technology to the Windows operating system. In a recently unsealed document outlining the active collaboration of the Justice Department and Netscape months before the case was filed, Netscape s own counsel writes:  We are totally unable to provide examples of files that can or cannot be deleted from Windows 98 since, as we discussed this week, it is our understanding that it is simply not possible to delete any portion of IE, or of browser functionality, from Windows 98 as presently configured without severely interfering with the operating system.
 
REPLY:  This quote from Netscape does not even address the issue of Microsoft and the consumer viewing the OS and IE as two separate products.  This quote only acknowledges that any two software products can easily be intermingled at the source code level.  Any two products can be so "confused" or "blended" so as to appear at the source code and compiled execute code as being a single product.  However, both Microsoft Corporation and the consumer view these two products as separate products.

A body of case law has developed to deal with claims that the technical connection of one product with another constitutes an unlawful tying arrangement. These cases hold that such technically interconnected products are immune from tying claims (generally referred to as  technological tying  claims), as long as the interconnection of the two products achieves a technologically beneficial result. The case brought against Microsoft presents an even weaker basis for judicial intrusion into questions of product design because, unlike in most  technological tying  cases, Windows 95 and Windows 98 as provided to computer manufacturers have always included Internet Explorer technologies both operating systems are a single, integrated product. Additionally, there is no claim that the alleged tying product (Windows) was designed in a way that would make competitors  products incompatible with it. Moreover, the Department of Justice cannot genuinely dispute that the integration of Internet Explorer technologies in Windows 98 achieves technically beneficial results.

REPLY: The first version of Windows 95 did NOT include IE.  Again, Microsoft acknowledges the separate and independent demand for an operating system separate and apart from a browser application.  This is true even within the Windows 95 product line.  IE was only bundled in later versions in an effort to preclude Netscape from the market.

REPLY: The "technological beneficial result" claimed here is falsified.  For one, the benefit alludes only to those few customers would actually want a browser from Microsoft and want an OS from Microsoft.  Both of these products maintain their independent demand in the market place in both the eyes of Microsoft and the consumer.  To illustrate:  The IE bundled with 98 can perform no browser functionality separate and apart from the browser functionality as provided by IE for the Solaris, HP-UX, 95, NT  and the MAC.  It if did, it would be incompatible with those IE versions.  The OS (98) can not provide any functionality separate and apart from the first version of Windows 95 (which did not have a browser bundled with it) or it would be incompatible with Windows 95.  Consequently, neither the core OS (98) nor the bundled browser (IE) can provide any functionality beyond that of their separate products without being incompatible with former and current versions of the same products.

REPLY: Thus, the only benefit to be realized by any consumer would only result if and when the individual consumer actually wanted both products.  For everyone else, no benefit at all can be realized but they are all harmed by being forced to buy an unwanted and unneeded product (the added application, IE).  All consumers without modems, without telephone line access, already having a browser available to them and those who might want to select their applications fit into this latter category of consumers only harmed by bundling or tying the two products.  They realize no benefit at all.  Only a detriment.

REPLY: The real claim made here by Microsoft is that they want the legal right to bundled any two products of their choosing (regardless of suitability or cost to the consumer) if they can just show that a minimal number of customers might gain a slightly improved functionality.  Technically, this can easily and simply be done at any time by Microsoft or any other company.  This is not magic.  This is not even technology.  It is simply a fact that any two products can be "integrated" at the source code level and on at least a minimal functional level.

REPLY: Microsoft argument here would legalize the bundling of the Flight Simulator with MS-SQL.  It could legalize the bundling of Money 98 with the OS. (watch out Intuit, you have been suckered big time) It could legalize the bundling of Office Pro with the OS.  It could legalize the bundling of the entire selection of consumer games and products with every copy of the consumer OS.  What Microsoft is suggesting here is simply that if they can find a way to blend the source code of any two products and fabricate some minimal advantage to consumers would just might want to actually buy both (the Flight Simulator and MS-SQL), then they can legally bundle those two products immediately preventing any competitor of their choice from having  a market in which to sell their products.

REPLY:  Both Microsoft and consumers recognize that IE and the OS are two separate products.  They are not in fact technically combined at all.  The combination is only combined at the manufacturer, and it is done there solely to harm a competitor.  Microsoft continues to distribute IE separately.  Consumers continue to secure browsers and operating systems separately, if given the choice.  Microsoft, by tying, denies consumers that choice, but only with 98, the product over which they hold monopoly power.

To establish an unlawful tying arrangement under traditional tying law, it must be proved that (i) two separate products are involved, (ii) the sale of one product is conditioned on the purchase of another, (iii) the defendant has sufficient economic power in the market for the tying product to enable it to restrain trade in the market for the tied product, and (iv) a not insubstantial amount of interstate commerce in the tied product is affected. All four elements must be satisfied for a claim of tying to prevail.

REPLY:  As to "two separate products", both Microsoft and consumers treat the OS and IE as separate products.  As to "the sale of one conditioned upon the sale of the other",  neither 98 alone nor the IE in 98 alone can be purchased in any way without the other.  As to "sufficient economic power", Microsoft clearly has the power to ruin any market for browser applications.  (Netscape had to dispense with selling its browser.  No other company is able to sell their browser in the Window marketplace either.)  As to "insubstantial amount of commerce", Microsoft stands to sell hundreds of millions of copies of the bundled 98 and IE.  All of these factors are present and proven by Microsoft itself.
 
This requirement is devastating to the Department of Justice s case. First, the Department of Justice cannot prove that Windows 98 and its Internet Explorer technologies are separate  products, because Windows 98 is a single, integrated product. Second, the Department of Justice cannot show that any computer manufacturer has been forced to purchase a separate product, because Internet Explorer technologies are included in a single royalty paid by those manufacturers for Windows 98. Third, the Department of Justice cannot prove that Microsoft has done anything to restrain trade in the market for the alleged  tied  product, because the design of Windows 98 does not in any way foreclose Netscape s ability to distribute its Web browsing software to customers. In fact, Microsoft has devoted Considerable effort and resources to ensure that Netscape s Web browsing software runs flawlessly on Windows 98.

REPLY: Microsoft proves that IE is a separate product with its separate demand by continuing to provide IE for 95, NT, Solaris, HP-UX and Apple. 98 and IE are compiled together.  But, that is the same as using tape or string to wrap up two packages.  Microsoft's suggestion that if the DOJ cannot compile them separately without modifying the source code in minor ways is a false test and a false challenge.  Anyone can combine the source code of two products.  This is all that Microsoft has done. No integration of IE has in fact been done.  IE is provided by Microsoft completely free of any integration with their OS (many versions in fact, all compatible with the one bundled  with 98).

REPLY: It is not necessary for Microsoft to have designed the OS in such a way that other browsers would not run before a claim of tying can be sustained.  This suggestion is not relevant.

REPLY:  The act by Microsoft of not listing 98 and the IE for 98 separately or not providing a separate license or royalty plan is a unilateral act of Microsoft.  In fact, it is the act which forces the sale of the two products.  The fact that Microsoft choose not to have two license agreements does not mean that in the eyes of Microsoft and in the eyes of the consumer that these two products are in fact tied together or bundled to prevent a customer from buying only one of them.  Certainly, the paper work provided  unilaterally by Microsoft means nothing except to show that consumers and OEMs have no choice but to buy both.  Again, the two products are clearly acknowledged by both Microsoft and consumers.
 
When it reversed the December 11th 1997 preliminary injunction in June, the Court of Appeals rejected a claim under the 1995 Consent Decree that was essentially identical to the Department of Justice s tying claims in this case, on the ground that the Department of Justice s claim in that prior case was an improper attempt to interfere in the design of Microsoft s operating system software. As the Court of Appeals observed:  Antitrust scholars have long recognized the undesirability of having courts oversee product design, and any dampening of technological innovation would be at cross-purposes with antitrust law.  The Court of Appeals noted that for these reasons courts have routinely  rejected theories of  technological tying.   In fact, there has never been a reported case in which the stringent standard applicable to  technological tying  claims has been satisfied.

REPLY:  When the preliminary injunction was reversed, it was reverse on procedural grounds.  The DOJ did not notify Microsoft that an injunction was being requested, therefore the injunction was properly reversed.  Once the court made that decision, any discussion regarding the merits of case was inappropriate, dicta and not even binding upon the judges who expressed their opinions.  The merits of the case were never properly before that Court of Appeals.  That decision has no bearing on the current action.

REPLY:  It is true that courts have a hard time dealing with product design issues.  But, courts have a very easy time acknowledging when products have their own presence and demand in the market place.  Microsoft proves that IE is a separate product by its own acts of providing 100% of the browser functionality completely independent of  98.  Consumers prove that browsers are a separate product by continuing to acquire, install and maintain them from many companies including Microsoft (i.e. Microsoft distributes browsers for HP-UX, Solaris, Mac, 95 and NT).

REPLY: The court will have no problem at all recognizing IE as a separate and distinguishable product everywhere (except where Microsoft has bundled it or tied it with the monopoly product).  When associated in any way with the monopoly product, Microsoft forces the sale of both in all cases.
 
 
 

  1. "Windows 98 is a single, integrated product that benefits consumers" [ or "How consumers have been tricked into buying two products"]  (continued from part 1)
 

Additionally, the Court of Appeals noted  the limited competence of courts to evaluate high-tech product designs and the high cost of error  in making such evaluations. It
  cautioned that courts should be  wary of second-guessing the claimed benefits of a particular design,  and stated that they should reject any challenge to an integrated
  product design if there is  a plausible claim  that the integration  brings some advantage essentially the same standard that courts have applied in rejecting technological tying claims under the antitrust laws. The Court of Appeals concluded that the  integrated design  of Windows 95 easily satisfies that standard.

REPLY: The court need not second guess anything.  The court need only accept the definition of a browser as defined by Microsoft in its own browser products for HP-UX, Solaris, 95, NT and Apple.  This is easy to do. There, it is done.

In fact, the technological advantages and consumer benefits of the integrated design of both Windows 95 and Windows 98 are substantial. As the Court of Appeals put it, the integrated design of Microsoft s Windows operating system offers clear technological benefits  as compared to an operating system combined with a stand-alone browser such as Netscape s Navigator.
 
REPLY:  "Substantial"?  Name one browser functionality that is present in the 98 bundled that is omitted in the browsers (IE) distributed by Microsoft for Solaris, HP-UX, 95, NT and Apple.  Concluding something is better in the absence of any function unique, different or improved is rather shallow, not?  Just what does the browser bundled with 98 do that the other browsers do not do?  Have you informed ISVs of this difference?

Incorporating Internet Explorer technologies into Windows achieves at least three kinds of benefits over existing alternatives in the marketplace. First, modern operating systems have always included as one of their core functions the ability to access information on various types of storage devices. By providing access to the huge quantity of information stored on the Internet, the Internet Explorer technologies in Windows allow users to move seamlessly from a Website to a floppy disk to a CD-ROM to a local area network with a single mouse click, thus making computers easier for consumers to use.
 
REPLY:  So.  IE in 98 is one mouse click.  And, IE in NT is two mouse clicks?  Or, IE on Solaris is two clicks?  Are we justifying forcing everyone to buy unwanted applications on the basis of one mouse click?  Or, do both the integrated and the separate IE take only one click?  Consumers who do not have modems really want to know just how easy other customers are doing their work.

Second, the integration of Internet Explorer technologies in Windows makes it easier for independent software vendors to create products that are Internet-aware and otherwise technically superior. As the Court of Appeals noted,  incorporating browsing functionality into the operating system allows applications to avail themselves of that functionality without starting up a separate browser application.  Hence, a PC user running a software program such as Intuit s Quicken can invoke the Web browsing technology in Windows to do things such as update the prices of securities in the user's financial portfolio without leaving Quicken. This is a clear   and major   benefit to both consumers and independent software vendors.
 
REPLY: This suggestion is false.  Unless, you are referring only to those ISVs who write products exclusively for Microsoft platforms.  Are ISVs being subsidized here by Microsoft consumers?  Forcing consumers to buy extra baggage so that ISVs have an easier sale is very harmful to consumers.  Do these same products also work with IE for Solaris, HP-UX, 95, NT and Apple?  If they do, then the IE with 98 is not better, just the same.  In other words, no benefit to the consumer.  They can get the same service without the so-called "integration" of the product.
 

Finally, as the Court of Appeals also noted, the Internet Explorer technologies in Windows not only permit access to the Internet, but also provide numerous  system
  services  that are  not directly related to Web browsing    such as support for HTML parsing and rendering   that  enhance the functionality of a wide variety of applications.  Making such system services available in Windows frees independent software vendors from the need to develop and include similar functionality as part of their products. They can therefore focus their energies on adding attractive new features to their products.
 
REPLY:  Nothing the Count of Appeals said is relevant to this case.  Nothing.  They overturned an injunction on procedural grounds.  They did not properly review any facts nor law related to this case.

In addition to the foregoing consumer benefits, Internet Explorer technologies perform numerous functions in Windows itself that are totally unrelated to the Internet. The Court of Appeals found that  IE 4 technologies are used to upgrade some aspects of [Windows 95] unrelated to Web browsing.  Internet Explorer technologies play an even more important role in Windows 98; indeed, they pervade virtually every aspect of the operating system. For example, Internet Explorer technologies in Windows 98 supply a new user interface that adopts the navigational paradigms of the World Wide Web, including  back  and  forward  buttons, lists of  favorite  sources of information, and a history  of recently-accessed information. Such  in-place navigation  is extremely popular because it is easy to use and understand. Internet Explorer technologies are also essential to the Windows 98  Help  system, which requires an HTML rendering engine to display the content of  Help  files, as well as to provide easy user access from  Help to updated on-line resources. These and many others features of Windows 98, all of which provide technical benefits to users, depend on the presence of Internet Explorer technologies to such a degree that they will cease to function if those technologies are removed from the operating system.
 
REPLY:  Any functionality not also present in the IE as distributed by Microsoft on other platforms is not a part of IE.  If not a part of IE, then it belongs elsewhere.  Again, Microsoft has defined the functionality of IE by distributing it for many other platforms.  If the function is present in all of them, it is part of IE.  If not, not.

The Court of Appeals additionally determined that Windows 95 s integrated design offers technological benefits that could not be obtained if computer manufacturers simply combined an operating system and a stand-alone browser, noting that  If Microsoft presented [computer manufacturers] with an operating system and a stand-alone browser application, rather than with the interpenetrating design of Windows 95 and IE 4, the computer manufacturers could not combine them in a way in which Microsoft has integrated IE 4 into Windows 95.  Indeed, the Court of Appeals concluded that it is wrong even to talk about Internet Explorer technologies and Windows 95 as separately existing products:  IE 3 and IE 4 add to the operating system features that cannot be included without also including Web browsing functionality. Thus, ... the products the full functionality of the operating system when upgraded by IE 4 and the  browser functionality  of IE 4   do not exist separately.
 
REPLY: What the Court of Appeals thought or decided is simply not relevant.  IE clearly exists separately.  Microsoft itself distributes IE on other platforms.  To suggest that IE does not exist separate and apart from 98 is false.  In the eyes of Microsoft and in the eyes of the consumer, it clearly does in fact exist separate and apart from the OS.  Microsoft has insisted upon that.  Only on the bundled or tied product is this not the case.

Because Internet Explorer technologies are even more deeply integrated into Windows 98 than they were in Windows 95   a fact that the Department of Justice cannot plausibly dispute   the Court of Appeals  conclusions apply with even greater force to Windows 98. The Windows 98 user interface, among other features, is generated by the very same software code that enables users to browse for information on the Internet, and thus would be completely unusable if that software code were removed from the operating system. Given the extent of integration, it is plain that computer manufacturers could not have created the features made possible by the inclusion of Internet Explorer technologies in Windows 98 merely by combining an operating system and a stand-alone browser such as Netscape Navigator. Nor would it make any sense to seek to  hide  from users all of the many ready means of accessing Web browsing functionality provided by Windows 98 even if that were possible, which it is not. Although  hiding  such technologies might benefit competitors of Microsoft such as Netscape, it clearly would provide no benefit to consumers, as Judge Williams observed at oral argument.
 
REPLY: Any two software products can easily be combined at the source code and operational level.  Any two.  Pick two of them.  It can be done.  This argument is a false one and intended to deceive.  The reality is that both Microsoft and consumers consider the OS and any application as being separate and distinct.  Microsoft's intentional blending of the source code means nothing.  Microsoft itself has maintained this separation by  Distributing IE on Solaris, Hp-UX, 95, NT and Apple.

Although the precise issue before the Court of Appeals was the proper interpretation of  the 1995 Consent Decree, the Court of Appeals expressly stated that its analysis was consistent with tying law.  Accordingly, the Court of Appeals  entire analysis is fully applicable to this case. Internet Explorer technologies are even more deeply integrated into Windows 98 than in Windows 95, resulting in even clearer and more substantial technological advantages, and benefits for consumers.
 
REPLY:  "Precise issue"?   It was the only issue properly before the court.  The Court of Appeals  heard no witnesses nor reviewed any testimony on the substance of these claims.  No antitrust claim was before the Court of Appeals.  On this issue, those justices offered their personal opinions and did so improperly.