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February 20, 1999 - Saturday (day off) (Review of Friday transcripts)

10:08 AM PST - Compaq does do favors for Microsoft

q. Where it says, "favored treatment for the Microsoft browser and the Microsoft network would violate the aol agreement and may prevent us from featuring the Netscape browser, all with no replacement for the revenue lost," do you understand that she is saying that the mou/lou may prevent compaq from featuring the Netscape browser, among other things?
a. Yes. I see that she's saying that.

It is becoming very clear that Compaq forgoes significant revenue opportunities just to favor Microsoft and Microsoft's illegal acts in precluding competition.

9:45 AM PST - Mr. John Rose from Compaq certainly does not know much

q. -- which is "someone at compaq leaked to Microsoft the b-mail on the verbal agreement we reached with Netscape to enable compaq to put navigator on all presario systems at zero royalty (with revenue-sharing to Netscape.) Microsoft wants to prevent this from happening and will concede some revenues to block it." do you see that, sir?
a. Yes.

q. First, were you aware of the verbal agreement that compaq reached with Netscape to enable compaq to put navigator on all presario systems?
a. No.

q. Were you aware of anyone at compaq leaking to Microsoft information concerning compaq's negotiations with Netscape?
a. No.

Why is Mr. John Rose on the stand if he claims not to know so much? Maybe Compaq should find someone at the company that is a little more knowledgeable about the relationships between the players in the industry. It is real strange that Mr. Rose claims a total absence of knowledge when an act by Compaq precludes competition in the industry but has no problem back dating oral license agreements when it helps deflect evidence that Microsoft has brown nosed Compaq.

9:40 AM PST - Mr. John Rose from Compaq does not know an awful lot.

q. No. My question is very simple. If you had walked into Staples -- any staples anywhere in the country, and you had purchased a presario -- any presario anyplace in the country last year, it would not have had the Netscape icon on it, would it?
a. I am not sure.

Let me guess. Up until a few days ago, Presarios did not have the Netscape icon on it. Let me further guess that John Rose knows that to be true for a fact, but is choosing to forget or not to be certain. After all, this partnership with Microsoft is so much more important than testifying truthfully.

9:23 AM PST - The Microsoft and Compaq idea of fair competition is "sick", truly "sick".

q. And I believe you testified yesterday that you recently had an opportunity to go through the initial startup sequence of a new Compaq Presario; is that correct?
a. Yes, I did. I said we purchased Monday a new Presario from staples for $1225, and I went through that process.

q. And was any software from Netscape preinstalled on that new Presario?
a. Yes.

q. Which software, sir?
a. The Netscape navigator, and also there was, within the folder, about eight or nine other Netscape products.

q. Was there a Netscape navigator icon directly on the desktop of the new compaq presario?
a. Yes, there is.

q. Was there an icon for aol directly on the desktop of that new computer?
a. Yes.

q. Now, does Compaq also give customers, who sign up for the internet, using, I think, what's called "Compaq easy internet access," the option of using a browser from a company called ncompass?
a. Yes.

q. Now, my final question, sir. Does anything -- anything at all -- in Compaq's windows license agreement prevent Compaq from offering its customers this choice of different web browsing technologies?
a. No.

What is wrong with the thinking that Microsoft and Compaq have? They are trying to show that Netscape has equal access to the consumer, right? But, how much was Netscape paid for their contribution? Nothing, right? How much was Microsoft the monopolist paid? Sealed, right?

And, although Mr. Rose has testified that customers may pick either browser as their default browser, others have testified that under three occasions IE is required to be used by all consumers regardless of their choice of "browser". So is Mr. Rose being deceitful or is he just ignorant of the truth?

You tell me. Who is being paid? Who is precluded from the business? Who is being forced to use unwanted products?

9:00 AM PST - Compaq purpose in testifying is largely not relevant to any issue in this case

q. Okay. Over the last several days, Mr. Boies has asked you a number of questions about some documents that predated your employment at compaq and asked you some other questions about various e-mail written by mid-level compaq employees. and i'd like to, if I could, start this morning by asking you a broader question, which is if you could please explain to the court what is the gist of your and compaq's testimony to the court in this action.

the court: Wow.

Mr. Pepperman: I'll start with a bang.

the court: all right.

the witness: sure. As I've stated in my direct testimony, compaq and Microsoft have had a partnership together for 17 years, and we've had partnerships -- and do today -- with lots of other companies in the industry. the partnership, though it may have been bumpy, as many of them are, over the years has always been focused at benefitting the customer. and I think over the course of 17 years, what we see now today -- and I mentioned this in my testimony yesterday, your honor -- about buying a $1200 p.c. As an example, a presario, which today has more capability for the customer in the form of computing, communications, entertainment, and education than systems I recall 17 years ago that cost hundreds of thousands of dollars. so my point is, this partnership, along with our other partnerships, has benefitted the customer and will continue to focus on that.

the court: all right.

Was this question and answer supposed to be relevant to any issue in this case? (Yes, is the answer.) Was it? No. It was not. A restatement of Compaq's desire to provide valuable products to consumers is simply not relevant. It does not address the issue of whether Microsoft has a monopoly or not. And it does not address whether any act conducted by Microsoft violates or does not violate the antitrust laws. This answer is nothing more than an advertisement which could be written and distributed by any company in the industry.

The issues before this court relate to specific conduct by Microsoft which has been alleged to be in violation of various laws. A general statement about corporate objectives and partnerships with other companies is meaningless. Does not Netscape have the same or similar objectives? Does not every company? I assume they do, right?

Institutional advertising has it place. But, that place in not in the courtroom.

Compaq would do much better if they respected the basic rights of the consumers they claim to support. Mr. Rose in particular has testified before this court that Unix customers have expressed a demand for Navigator while completely ignoring all consumer demand by Windows customers for that same product. Compaq is testifying falsely in this case just to support the illegal acts of Microsoft. Their claim to be doing so to benefit consumers is deceitful at best.

What this answer does point out however is that Microsoft and Compaq are indeed closely joined. They have a partnership. But, the partnership is so deep and extensive that Compaq too should be held liable for violations of the antitrust laws. Compaq should be added as a co-defendant in this case. They are indeed acting in unison to preclude competition. At the heart of this case is Microsoft's ability to get other companies to carry out its bidding as required. Evidence has been produced in this case that Microsoft has required AOL, Intuit, Apple and Compaq to help preclude Netscape from Netscape's market. To a lessor extent many ISVs and ISPs, etc., have also been so required. But, Compaq has gone as far as testifying in court to help remove Netscape from the market.

February 19, 1999 - Friday (Court in session) (Review of Thursday transcripts)

3:00 PM PST - More Microsoft antitrust law suits filed
 
 

2:30 PM PST - Now we are getting a handle on the harm caused by Microsoft

q. Turning to the next page, it says, "about 70 percent of all businesses are running a web browser on their desktops." Do you see that?
a. Yes.

q. Is that consistent with your understanding?
a. Yes.

So if we use these figures only 35% of business customers would want to buy IE, right? If 70% are running browsers and if 50% preferred IE, then it would be fair to conclude that 35% might want to actually buy IE.

So why are we forcing 100% of those customers to buy IE? It benefits Microsoft, right?

2:00 PM PST - Bill Gates did not thank John Rose for the help with NT. Bill Gates mentioned the law suit specifically.

q. This is a memorandum dated november 2, 1998, from Mr. Gates on the subject of a compaq meeting the previous Friday. do you see that, sir?
a. Yes.

q. And near the end he says, "I thanked Rose for all of his trips to Seattle and his willingness to extract a lot of time for the lawsuit." Do you see that?
a. Yes.

q. Does that refresh your recollection as to whether you have had any conversations with Mr. Gates?
a. I have not discussed this lawsuit with Mr. Gates, as I said.

q. Do you have any reason-

the court: You said you discussed it with no one at Microsoft?

the witness: That is correct. Nor with any of Microsoft's counsel. The reference here to seattle has to do with high-availability nt and high-availability sql.

the court: What is he referring to, a willingness to extract a lot of time for the lawsuit about?

the witness: I think he's just making a comment there, but I have not discussed this case with Mr. Gates or any other person since Mr. Maritz asked me on behalf of Compaq, and I, in turn, told him that I would need to ask my--the general counsel of the company and the CEO. And I had direct advice from Mr. Seikman that I was not to discuss this with anyone, and I haven't.

by Mr. Boies:

q. So, it's your testimony that Mr. Gates did not thank you for your willingness to devote a lot of time to the lawsuit? Is that your testimony?
a. He may have said "thank you," but I never discussed this case with him or with anyone else.

q. Mr. Rose, let's just try to be precise, okay? Mr. Gates purports to set forth here something that he said to you. Is what he sets forth here accurate?
a. I have no reason-I would say yes, it's accurate.

q. It is accurate; is that what you're saying?
a. If he said that, he said "Thanks," then I expect he did.

q. Well, he didn't just say he said "Thanks." He said, "I thanked Rose for all of his trips to Seattle and his willingness to extract a lot of time for the lawsuit." Do you see that?
a. I never discussed-I never heard him say that. I believe he probably said "thank you for the efforts on high-availability nt and high-availability sql." That's a major thing we've done in the marketplace that culminated in a september 12th event with the media and a launch, and that's it.

No, Mr. Rose, he was thanking you for your help with the law suit. Do stories about "dead smelly fish" and "quid pro quo" sound familiar?

Sounds to me like the thanks were expressed by Bill Gates to John Rose in person. Funny that some meetings that took place did not. And, that some agreements that were not entered into were after all. John Rose has apparently falsely testified upon no less that three occasions. 1) the back dated license agreement during a phone call 2) the written exclusive promotion agreement that does not really exist. And 3) a meeting apparently between Bill Gates and John Rose regarding this law suit which did not take place.

1:34 PM PST - Microsoft has yet another agreement with Compaq that it can call "breached" when it needs a favor?

q. And i'm going to direct your attention to page 53, and you may wish to look at page 52 to understand the context. For example, on page 52, it's clear that Mr. Decker is being asked about this February 1997 agreement, and reference is made to where the agreement says that Compaq agrees to exclusively promote Microsoft Internet Explorer.
a. Yes.

q. And then on page 53, question at the top, (reading):

"question: let me go to the last page of the document. There are no signatures here. do you know whether this agreement was ever executed?

"answer: yes, it was.

"question: and in the agreement that was executed, did compaq agree to exclusively promote Microsoft internet explorer?

"answer: yes, I believe that the paragraph that we looked at is what this was about, yes."

q. Do you have any reason to doubt the accuracy of that testimony?
a. No, I have no reason to doubt the accuracy of that testimony by Mr. Decker.

q. And just to be clear, it is not surprising that you might not know about this because this was taking place in a group that you were not directly responsible for; correct?
a. That is correct. However, this document is still unsigned, and I can't tell if it was ever put in effect. and certainly, we have not exclusively featured internet explorer.

Here we have testimony about a signed written agreement between Microsoft and Compaq that Compaq will "exclusively promote" IE, yet this witness claims to know nothing of it? Have the Compaq lawyers put Mr. Rose on the stand to take a fall? Or is this just another contract conveniently missing from the files?

Do you suppose Compaq would find that agreement if they needed to justify putting icons back on the desktop? Clearly if a conference call can justify doing so, a written contract can be found, right?

12:52 PM PST - Compaq does ship both IE and Navigator, but...

the court: and you're telling me that you ship them both today?

the witness: yes, we do, your honor. We ship both --

the court: there are two browsers on the computers that you ship?

the witness: yes, there are, your honor. And from my own personal experience, you can -- though we set up with the default browser of Internet Explorer, as soon as the customer sets up, he or she has a choice to change that. you click it, and from my own experience, it changes in four seconds and Netscape becomes the default browser.

the court: okay.

by Mr. Boies:

q. On Windows 98, sir?
a. Yes.

q. You have done that on Windows 98?
a. Yes.

q. And, in all cases, it will now launch the internet explorer? I mean, it will now launch the Netscape browser; is that your testimony?
a. My testimony is -- and I did this to -- you know, this week to verify my testimony. I went and my legal team purchased one of the new Presarios from staples right up the road here, and I went through that process myself. I certified it, set it up, and then I changed the internet explorer. I clicked and chose Netscape and it made Netscape my default browser.

Well. John Rose is being set up here. Apparently Mr. Rose does not know that Microsoft refuses to honor the customer choice of browsers in all cases. Testimony from Felten pointed out three instances where Windows runs IE regardless of the users preference.

But, this dialog also brings up a few other questions as well.

1. How much is the Compaq customer paying for IE? Despite the great deal that Compaq gets, the cost to Compaq has been raised due to added features to the OS. So, the question remains. How much are customers being charged for IE?

2. How much is the Compaq customer paying for Navigator? Mostly likely nothing, right? The ability of Netscape to earn revenue from its browser has been eliminated by Microsoft. Microsoft gets paid for each copy. Netscape gets paid for none of theirs.

3. If IE will always run some of time, why would any customers spend the time and energy to learn or support both?

Either John Rose does not know the facts regarding IE and Navigator or his testimony is offered to deceive. Perhaps his later testimony will point out which it is.

The other interesting observation here is that the DOJ suggested to Microsoft that a settlement of this case could be achieved if Microsoft would just ship both the IE and Navigator products. Apparently Compaq is doing precisely that. But, Microsoft thought that even that would not give them enough unfair advantage over their competitors.

Microsoft does insist that it can cheat in all circumstances. Microsoft refuses to compete fairly on principal. Microsoft can be assured of winning if things are fair.

12:30 PM PST - After Microsoft bundles IE with the OS, of course Netscape is rubbed out of that market

q. Let me direct your attention beginning at page 15. And it talks about, for context, how Compaq had, in the past, been shipping Netscape navigator on its consumer p.c.'s and had done so for probably about a year. Do you see that?
a. Yes.

q. And then at line 9:

"question: Since that time, has Compaq changed the browsers that it preinstalls on its consumer p.c. Lines?

"answer: Yes. We no longer preinstall Netscape.

"question: Why?

"answer: Because we -- with the inclusion of Internet Explorer from Microsoft, that category is already filled because of the inclusion of that product as part of the operating system, and then also to actually license the additional browser that would involve both time by Compaq to put that particular agreement in place, we would have another product that would take up real estate on our hard drive and, you know, there potentially would be some additional licensing fees, and we would have to pay for that technology."

The simple observation is that even those from Compaq are well aware of the fact that when IE is bundled with the OS, Compaq and all other OEMs are forced to ship all PCs with IE pre-installed and ready to go. There is no question that competitive browsers are seriously disadvantaged by that process. What is really strange is the effort that Compaq and Microsoft go through to try to prove the contrary.

Why go through all the trouble of agreements with Compaq to favor Microsoft applications when you can just force them to promote Microsoft products? Clearly, after IE is bundled, that oral license agreement with Compaq is just not necessary. Even the writing that eventually took its place is just not necessary. Bundling forces all OEMs to promote IE and seriously disadvantage any competiting application.

12:05 PM PST - Microsoft is going to call a breach of contract and cancel the whole deal with Compaq? Over an oral agreement on the phone?

21 q. Okay. Now, let me go back to Mr. Decker's testimony at the bottom of the page 18, continuing on to page 19.

"question: how did Microsoft respond to Compaq removing the internet explorer icon from the desktop?

"answer: well, when they found out about it, they sent a letter to us telling us that, you know, they would terminate our agreement for doing so."

q. Is that testimony consistent with your understanding, sir?
a. That is correct.

Let me explain something that should be obvious here. Written contracts are nice. Oral contracts are okay in many circumstances. But, very often the wording of contracts is just not that important. (Despite the testimony from Microsoft employees regarding the obligation of AOL to promote IE.) What is important for big powerful companies is that they can throw their weight around and hire more lawyers than you can.

So if you talk to Microsoft on the phone and express cooperation and future business, Bill Gates is likely to call you for breach of contract should you ever stop promoting the interests of Microsoft corporation. If on the other hand, you need to call Microsoft on their dropping support for your contract they will just laugh and give you the phone number of their lawyers.

So. When John Rose gets on the stand and testifies that they are just abiding by their "contract", that statement is bull. They acted as Microsoft forced them to act without any regard to whether a oral or written contract existed or not. When you have two companies of roughly equal power, then perhaps a oral agreement might be respected buy both parties. But, when one company has a monopoly and the other has no alternative source for a key product, what the contracts says is completely beside the point. In this case, we even have a phone call which Microsoft is claiming has been breached.

If Microsoft threatens to cancel a deal with Compaq, it is not going to matter what the agreement really was. This is particularly so if Compaq is more than willing to fabricate it after the fact.

11:50 AM PST - Microsoft did bring the hammer down. On what basis is not really clear and may not matter.

q. -- because I think it is absolutely clear that Microsoft was unhappy with the fact that the presario desktop had had the msn icon and the internet explorer icon removed from it, correct?
a. No.

q. Okay.
a. They were -- let me explain. They were unhappy with the fact that we did not comply with our agreement -- our contractual agreement to display them. We never displayed at that time the internet explorer or the msn icon. And we had contractually agreed to that, going back to August of '95.

Well. The August 95 agreement was the so-called oral license agreement conducted on the phone. What is clear is that someone from Microsoft called Compaq on this oral agreement after they found out that the icons for IE and MSN had been removed (or as Rose seems to insist, "never made it to production machines").

11:20 AM PST - Depositions suggest facts contrary to the testimony of John Rose.

q. Now, continuing on to the bottom of the page, lines 16 through 25:

"question: was Mr. Heil supportive of the ultimate decision to remove the icons?

"answer: yes.

"question: now, you testified that representatives of Microsoft were informed of Compaq's plans to remove the icons before they were actually removed. Is that right? I don't want to mischaracterize your testimony.

"answer: yes.

"question: who at Microsoft was informed?"

and then continuing on page 77.

"answer: in the oem group, don hardwick and some of his people on his team. And then we also had involved various people in the technical organization under joachim kempin that were counterpart to my engineering team." and let me stop there.

a. Yes.

q. Do you have any reason to doubt the accuracy of what Ms. Dunn testifies to here?
a. No. I have no reason to doubt ms. Dunn's deposition testimony.

q. Let me go down to lines 18 through 25 on page 77.

"question: at the time Compaq informed Microsoft that it was intending to remove the icons, did anyone from Microsoft indicate that the removal of the icons would violate an explicit agreement with respect to msn?

"answer: no.

"question: did anyone from Microsoft indicate that it would violate an implicit agreement that representatives from Compaq reached with Microsoft in the summer of 1995 not to remove msn?

"answer: no."

q. now, let me stop there. Do you have any reason to doubt ms. Dunn's testimony in this respect?
a. No. I have no reason to doubt ms. Dunn's testimony anywhere here. It's her testimony.

q. Do you have any reason to doubt the accuracy of that testimony?
a. No. I don't.

q. Then at line 4, page 78.

"question: before shipping windows with the msn and internet explorer icons removed, did Compaq conduct testing to make sure it would function properly?

"answer: yes.

"question: who was involved in that testing?

"hardware and software engineers in the consumer division. And we were also part of a certification with Microsoft. We sent them copies of our software that were tested on site to make sure they met the criteria.

"question: how long before the icons were removed and actually shipped was this testing conducted?

"answer: it was conducted throughout development on a weekly basis, as well as, you know, intensely the last 90 days or 60 days before you ship.

"where was testing conducted?

"answer: the Compaq testing was conducted in california and in houston, texas.

"question: did the removal of the icons affect the functioning of the operating system in any way?

"answer: no."

q. and, again, is it the case that you have no reason to doubt the accuracy of this testimony?
a. That is correct. That is ms. Dunn's testimony.

q. Yes. That is her testimony. I know that you agree that she testified to this.
a. Yes.

q. My question to you is whether or not you have any reason to doubt that what she testifies to actually is the fact?
a. I have no doubt to what she testified to --

This dialog during a deposition casts real doubt upon the testimony of John Rose that Compaq had an agreement in place before the Microsoft icons were removed. Clearly the Compaq lawyers thought it was better to argue that the pre-dated oral license agreement idea was better than admitting that Bill Gates (or someone else) called up Compaq and told them to toe the line or else. I have no doubt that who ever made that "call", made mention of a conference call between Microsoft and Compaq. But, I also seriously doubt that Compaq lawyers would argue that the conference call qualified as an oral license agreement of some kind.

You can back date your gentlemen's agreements all you want. But, when you do so, not everyone get word of the alternative fact pattern necessary to re-write the history. Here we see that both Compaq and Microsoft people did not get their story straight.

As I first mentioned when Compaq suggested this oral agreement between Compaq and Microsoft, I do not find the distinction to be that significant. Obviously, the Compaq lawyers thought it looked better to have an oral agreement enforced that have Compaq jump after a phone call from Microsoft. But, the difference is subtle. Microsoft is calling the shots. Microsoft is not going to let Compaq promote any company that offers competition to Microsoft on any important product. Microsoft will prevent Compaq from promoting those products. And, it appears that Microsoft will not even let Compaq use those products internally. (Although the evidence on this point is still shaky.)

10:55 AM PST - Should Compaq be named on the DOJ complaint as a co-defendant?

q. Somebody who was responsible for the Presario computers made a decision not to include the Internet Explorer icon on the desktop, correct?
a. That is correct.

q. Okay.
a. And that was inconsistent with the corporate strategy --

q. Now --
a. -- and our contractual agreement with Microsoft.

q. I understand your testimony on that and I will probably come back to it, but what I'm now trying to do is just get our terminology straight.
a. Yes.

When the direct testimony of John Rose was first released, I suggested in passing that Compaq be named on the DOJ complaint as a co-defendant. Now it appears that not only is there an "agreement" between Microsoft and Compaq giving Microsoft an advantage over any competitors that might surface but John Rose here confirms that such an agreement in fact reflects corporate strategy. Well. Many companies have been charged with price fixing based upon less evidence that this. This agreement which Compaq is taking great pains to try to prove may only implicate Compaq in the antitrust action. Maybe not this action. Maybe in another action. Maybe an action that suggests that Microsoft and a number of OEMs have conspired to preclude any competitors from the consumer OS marketplace. So called "trusts" can take many forms. Cartels, price fixing agreements, agreements not to compete, etc., all fit into this latter category.

What is emerging here is an agreement between Microsoft and Compaq to preclude future competition. Just when does an agreement preclude competition? That is a good question debated often in the antitrust halls. But, here we see Microsoft acting to block Netscape and using its agreement with Compaq to do so. And, least that is what John Rose is saying. John Rose is saying that corporate strategy keeps Netscape off of the Presario?
 

10:40 AM PST - Microsoft does not want to let any other company conduct business

q. Now, Mr. Friedman writes here that "joe williams came to san bruno last week to meet with david gollob and myself to discuss revenue sharing from the Microsoft ISP agreements." do you see that?
a. Yes.

q. Do you know who joe williams is?
a. I believe joe williams is a Microsoft -- or was at that time a Microsoft oem person.

q. And the next line says, "why is Microsoft making the offer?" And then there are three possible reasons headed a, b and c. Do you see that?
a. Yes.

q. Reason a is "Microsoft is unhappy with the Netscape icon on the na predators desktops and wants to get it off." do you see that?
a. Yes.

Well. I do not want any potential clients to use other law firms, right? I want all the business myself. Every company wants all of the business. There is nothing wrong with wanting all of the business. However, it is illegal to use Monopoly power to force consumers to buy your products. Or, to force customers to do business with you exclusively. What is absolutely clear in this litigation, is that Microsoft is doing everything it possibly can to prevent Netscape from conducting any business. Their acts are directed specifically at Netscape. And, the power they apply is derived directly from their monopoly position in the consumer OS marketplace.

Microsoft is losing its right to exist by Microsoft's flagrant abuse of power. (Maybe this accounts for John Rose testifying? He had no choice?) I suggested yesterday that a quid pro quo or tit for tat was in the works. This may be a tit with no tat.

10:20 AM PST - Microsoft's ability to suppress competing technology is enormous

q. This slide is headed "potential reactions to go pda decision." Do you see that?
a. Yes.

q. Do you know what is being referred to there?
a. I don't know what the decision is that is being referred to. I do know what the reference of "go" "and" pda are.

q. Let's begin with that. What is the reference to "go" and "pda"?
a. The reference to "go" is "go" was a company that was developing a software for hand-held devices, and "pda" is, at the time, the reference term of our evaluating a device in that class.

q. I understand this happened before you got there -
a. Yes, it did.

q. -- but did you learn, after you got there, that there had been a time in 1992 or 1993 when Compaq had been evaluating "go" software?
a. I was aware that Compaq was evaluating this new category of device, and within that evaluation, "go" was one of the alternatives.

q. And was there a Microsoft alternative?
a. Yes, I believe there was developing a Microsoft alternative.

q. And did Compaq ultimately agree to make Microsoft the exclusive supplier of operating system software for Compaq's hand-held computer products?
a. Yes. But let me add something there, if I could. The key critical issue in this area from a customer perspective was the need to have integrated and interoperability between your hand-held device -- your portable device -- and your desktop device.

q. Let me be sure I understand what you're saying. You're saying that Compaq chose Microsoft as its exclusive os supplier for hand-held computer products because it was important to have interoperability between the hand-held computer products and p.c.'s and other products?
a. Yes. The key feedback that we were getting from customers is -- and we still get it today -- is having that seamless interoperability between the different devices and your predominant device that you use at work, which is a portable or a desktop.

q. Now, the decision to make Compaq -- or Compaq's decision to make Microsoft Compaq's exclusive supplier of operating system software for Compaq's hand-held computer products was made in april 1993, correct, sir?
a. I'm not sure.

If the DOJ is looking for evidence necessary to support breaking up Microsoft, it is finding it here. It has been common knowledge for years that Microsoft's power was sufficient to cause many decisions to be made in its favor in a whole range of associated markets. Here we are talking about hand held devices and software.

There is little doubt that Microsoft can all but dictate what its various partners do in these new and expanding markets. If we are going to have one company decide these kinds of issues then Microsoft should just be nationalized and let it call the shots. We could even make the CEO a publicly elected position. Or, we can enforce the antitrust laws and prevent a monopoly from using their raw power to gain monopolies in other markets.

Is it important that PDAs and Desktops work together? Yes. Is it important that Microsoft call all the shots? No. Not at all. There is not a single reason why Microsoft should control the development or implementation of any technology.

10:00 AM PST - BeOS not a strategic partner? No surprise there.

q. Okay. Is Beos a strategic partner?
a. No.

q. Are they a partner?
a. I am unaware that we have any partnership agreement with Beos.

Of course not. Compaq as well as every other OEM seeks to partner up with the monopolist and to hell with the rest. This is not a surprise to anyone but the economist that Microsoft was able to hire to testify. He testified (falsely I might add) that any kid can fire up an OS and compete headon with Microsoft just on the merits of the product. That witness even claimed that the 70,000 or so applications for the Windows platform were just not a factor.

9:38 AM PST - The relationship between Microsoft and Compaq does not really quality as independent

Transcripts Feb 18, AM: Mr. Rose on the stand.

q. Now, let's focus a minute on those principles. Those principles of the front line partnership are that Compaq and Microsoft are supposed to cooperate together, correct?
a. That's part of it.

q. And without going into the specific financial deals in open court, is it fair to say that you understand that part of what Compaq gets is a significantly lower price for the operating system than Microsoft charges other p.c. manufacturers?
a. Yes. But let me clarify that because, in return, Compaq is providing a tremendous amount of value. And if you'd like, I would identify that value.

q. Do you think you could do it quickly?
a. Sure.

q. That will affect whether I want you to do it or not.

a. Sure. Absolutely.

q. If you could just summarize it.
a. I'll summarize it in about a half a dozen key points. one, intellectual property, because of our patent portfolio, including software patents. second, our market momentum, our volume leadership. third, our -- in the case of engineering, I have 350 engineers in redmond that focus on working with Microsoft in enhancing the product. fourth, I have over 3,000 trained nt specialists -- windows nt -- in our service organization. and we push the largest and most comprehensive customer solutions, such as global mail and messaging for customers, around Microsoft products. so there's more value, I believe -- and have -- as well as the rest of Compaq, than any other manufacturer in the industry.

q. That is, you're closer to Microsoft, in your view, than any other p.c. Manufacturer in the industry; is that what you're saying?
a. No. I would say specifically that we invest more than any other manufacturer in the industry in advancing this open-industry standard, in putting value around the Microsoft products to provide the best solutions for customers.

It is not illegal for Compaq and Microsoft to form a tight partnership. However, that partnership challenges the notion that Microsoft and Compaq are independent companies. Compaq is more like a division of Microsoft. Microsoft helps out Compaq and Compaq helps out Microsoft.

What this relationship does do however is greatly increase the burdens of entry to the consumer OS marketplace. Remember the economist that Microsoft paid to testify? He claimed that Microsoft had no monopoly and that barriers to entry was all but non-existent. My guess is that he failed to evaluate the agreement between Microsoft and Compaq and how that agreement precludes competition in the OS marketplace.

Compaq does not sell only PCs. As he has testified, Compaq helped develop the server market. And, now owning DEC they clearly are involved in a number of other markets unrelated to the Microsoft markets. But, how is the BeOS and Linux going to get a fair opportunity for Compaq business if Microsoft is calling the shots with Compaq? Any cooperation between Microsoft and Compaq might be legal. But, do not foster any delusions that Compaq is going to offer your company a fair opportunity should you have a product that competes with Microsoft.

February 18, 1999 - Thursday

2:51 PM PST - Direct testimony of Eric Engstrom released by Microsoft

2:50 PM PST - Direct testimony of Daniel Rosen released by Microsoft

2:40 PM PST -  The review of the transcripts tomorrow promises to reveal more dead fish.

It is not good when the judge shrugs his shoulders and shakes his head.

Just what did Bill Gates offer John Rose?  Or was it a threat?  A fish is just a fish. But, when it begins to smell bad, something is causing it.

2:00 PM PST - Dead fish always smell after a while.

q. So, you have copies of this going to Mr. Flannigan and going to Mr. Stimac. and insofar as you are aware, did anyone after receiving this say, "we can't understand what you're talking about, we already have an obligation to dISPlay the msn icon on the desktop"?
a. I'm not sure, since I was not copied on it at the time, exactly what conversation occurred. I do, however, know Mr. Stimac, who was responsible for ms. Day, was a senior officer of the company and part of the--and was the executive partner of Microsoft at the time and part of the formal agreement with Microsoft on august 8th, '95.

q. And by "formal agreement," you mean oral agreement; correct, sir?
a. Yes.

q. I can only ask you what you know or what people have told you, but insofar as you are aware, nobody raised the conflict between the aol agreement, or what is suggested here, and the oral august 8th, 1995, agreement; correct?
a. I don't know.

What is interesting about this fishy story is that it is only important to Microsoft. And, the timing of the restriction to place the Microsoft icons back on the desktop is not really that important. Clearly it looks better if Compaq can claim they were obligated all along to leave the icons on top and not promote Netscape. But, the difference is not that significant. Forcing Compaq to promote IE is bad evidence for Microsoft whether it surfaced from an oral license agreement or a threat to cancel the Windows deal after Bill Gates found out about it.

And, now you have Compaq in an obvious quid pro quo. Which is worse? A sex scandal or a sex scandal following by perjury, witness tampering and obstruction of justice? Guess which risk earns the biggest "quid " (Or, is it the "quo"?)? Or, is it squid? After all this story does smell.

1:35 PM PST - Sounds to me that Compaq backdated their oral agreement? It is real easy to backdate oral agreements.

q. Right, but these are items that are being proposed in order to further the relationship with Microsoft; correct?
a. These are items that are being proposed to get Microsoft to accelerate in a similar kind of fashion the focus on the intranet that we had with Netscape, yes.

q. And one of the items that is being proposed is that Compaq dISPlay the msn icon on the desktop screen on all windows 95 pc's; correct?
a. Well, it says p-c-a-e, which i'm not sure what that is, as I said earlier. And if it's dISPlaying of the icon, that's something we should have already been doing in compliance with the opk.

q. Exactly my point, Mr. Rose. Here is yet another person who, in may of 1996, doesn't seem to understand that you reached this oral agreement that you say you reached back in august of 1995; correct?
a. That is correct.

This makes you wonder what kind of favor Bill Gates will play for John Rose. I mean, here John Rose is made out to be a less than truthful witness all to support the illegal acts of a monopolist. This is no small favor. We are talking a pretty significant favor here being served up by Compaq. The direct testimony from Mr. Rose also mentions established demand for Navigator for Unix customers. But, somehow completely skips over the millions of Windows customers that prefer Navigator. Just why would he do that? For an executive that claims to want to drive a greater internet experience, you would think Mr. Rose knows that about half of his customers that use the internet prefer Navigator and not IE. And, of course Mr. Rose knows that a significant percentage of his customers never intend to use the internet at all from their computer at work. Clearly Mr. Rose knows that, right? He claims to be intelligent about his market.

Just what kind of favors is Mr. Rose or Compaq getting for this testimony? Lower OEM price next contract? Lower OEM price this contract? Mr. Rose is falsifying his testimony in part. If I were him, I would certainly expect some kind of return favor.

What do you suppose the agreement is? Bill Gates does have a habit of offering rather significant favors in exchange for certain acts that preclude key Microsoft competitors from the market. Lawyers use the term "quid pro quo" (one thing for another). You scratch my back, I'll scratch yours. Bill Gates back is being scratched by this testimony. That is absolutely clear. It is illogical otherwise.
 

1:12 PM PST - Oral license agreement or fabricated license agreement after the fact?

q. When did you discover that there was this AOL-Compaq agreement that was inconsistent with the oral agreement that you say you reached with Microsoft august 8th, 1995?
a. I discovered that we had an issue in may of 1996 when Microsoft put us on notice for being in violation of our Windows 95 agreement. That's the first time that I knew we had an issue.

q. So, you first knew you had an issue after Microsoft had given you a cancellation notice? Is that your testimony?
a. That is correct.

Whether this oral license agreement really existed or was just fabricated after the fact, is really not that important. If Compaq wants to argue that a gentlemen's agreement was enter into that is fine too. Or, maybe it just was a mis-communication. But, remember the testimony from a few days back when the court asked Mr. Chase about language in the AOL agreement with Microsoft regarding promotional priorities or preferences that might bind AOL? Remember? Mr. Chase told the judge that the language meant nothing because the term was not defined. Well. Clearly a poorly written contract has more power than a so-called oral license agreement somehow formed during a conference call.

Compaq was called on their violation all right. Bill Gates did not like what he say and called in a few "chits". The mafia does not need written agreements either. The muscle to enforce the agreement is all they require.

12:35 PM PST - "Fly on the wall" time

the court: all right. Government exhibit 1856 is admitted under seal.

(government's exhibit no. 1856 was admitted into evidence under seal.)

(More documents consumers are not supposed to see?)

by Mr. Boies:

q. This is a Compaq document dated november 10, 1998; correct, Mr. Rose?
a. Yes, it is.

q. And are you familiar with this document?
a. No, I am not. I have not seen this document prior to right now.

q. Are you aware of the negotiations between Compaq and Microsoft to which this document relates?
a. No, I am not.

q. Let me ask you to look at the second page and the first paragraph, the second sentence.

Mr. Boies: may I inquire whether Compaq's counsel has this document?

Mr. Coston: Yes, I do, Mr. Boies.

Mr. Boies: And if there is no objection, I'm going to read the first clause of that sentence, which i do not think needs to be under seal.

Mr. Pepperman: no objection to reading it.

the court: very well.

Mr. Boies: this states, "in the past, Microsoft's oem business terms are indicative of what one would expect from a monopoly."

by Mr. Boies:

q. Do you see that, sir?
a. No, i'm not--whereabouts are you, Mr. Boies?

the court: page two.

the witness: page two, under what section?

by Mr. Boies:

q. First paragraph.
a. Yes, okay.
 

q. Second sentence, where it says, "in the past, Microsoft's oem business terms are indicative of what one would expect from a monopoly." do you see that, sir?
a. Yes, I do.

q. Do you agree with that, sir?
a. No. As I said, I have not seen this document. I don't agree with the term with literally 20,000 development people who could have created this document, any one. They could use any terms.

q. Well, sir, this was--this was created for the purpose of being an initial internal term sheet for a negotiation with Microsoft; correct?
a. I have not seen the document. It is labeled "initial internal term sheet," but it has not been blessed at the executive level, and I don't believe it has ever had executive-level visibility, Mr. Boies.

q. But i-
a. I certainly--as the executive partner of Microsoft, i have never seen of or heard this document.

q. Well, are you familiar at all with the negotiations that are described in this document?
a. No, i'm not. There are literally tens if not at any one time twenties or even a hundred transactions that go between Microsoft and Compaq on almost a daily basis. each development group is responsible for its own primary working interactions. If we get to a contract that's evolving the substance, then it gets elevated up to the management committee level.

q. Mr. Rose, would it surprise you that this negotiation has included people at the executive level within Compaq? would that surprise you?
a. I'm not sure. As I said, i'm not sure who has been involved in this. I haven't seen it. I'm not aware of it.

q. Are you aware Mr. Gates has been involved in this negotiation?
a. No, i'm not. I'm not aware of who was involved in this topic at Compaq or Microsoft.

q. You're not suggesting that this is an unimportant negotiation to Compaq, are you, sir?
a. No, i'm not saying that. I'm just saying that documents in negotiations and business contracts take on an evolution, as i've seen them over the years, and I'm not sure to which level this has got. I don't know if this was developed by one or two people down at the team level within the consumer group. I'm not even sure this is in the consumer group.

q. You don't know anything about this?
a. I know nothing about this document or the topic--

q. Now--
a. --that it addresses here.

q. Now, this was a document produced to us by Compaq in connection with your testimony. are you testifying here as a witness representing Compaq, or are you testifying here just as an individual?
a. I'm testifying here as a witness representing Compaq, and I have not seen this document, or heard of it.

q. And in connection with preparing to testify as a witness representing Compaq, did you try to familiarize yourself with the subject of what Compaq was producing to us in connection with your testimony?
a. My legal team and I went through as much material as we possibly could in preparation for this, but I have not seen this document.

the court: counsel approach the bench, and Mr. Coston, too, please.

(bench conference.)

(pages 47 through 50 under seal)

The public and consumers are shut out again. Now, maybe this is a document that Compaq does not want HP to see? Or, maybe this is a document that Mr. Rose is just going to deny he has seen or used. But, Compaq attorneys submitted it to the DOJ. So what gives?

If some junior executive just did not know enough not to draft a document honestly, it would not matter much. This document sounds like you might want to hear what it says, right? Sorry. Under seal. Competitors and the public are prohibited. It must be worth reading.

12:15 PM PST - Okay. We are back. Consumers are again privy to the testimony.

q. Mr. Rose, in the sealed session, we talked about the increase in the price of or the price for operating systems that Compaq paid to Microsoft. am I correct that given that increase, Compaq did not, as a result of that increase, evaluate any other operating systems for pre-installation on its desktop pc's?
a. That is correct.

This question and answer is more significant than first appears to be the case. We do not know the price increase. It is sealed. However, one of the test to ascertain whether or not a company has monopoly power relates to the amount a price for a product can be increased before significant competition for that product is to be expected. Here, Mr. Rose simply confirms that even with the price increase (however much it is), Compaq did not evaluate any other operating system. This is significant, but we do not know the numbers.

Go ahead guess. Guess now and find out later if you are about right. But, remember, Microsoft is raising the price of Windows to cover additional functionality (I.E. Internet Explorer), right? IE is not the only improvement over the past 5 years. But, it is clearly a major one. And, this evidence proves that Microsoft does or is planning on charging more for the Os with IE bundled.

12:10 PM PST - Court goes into private session so consumers are kept in the dark

(Perhaps some of the OEMs are not aware of the prices paid by Compaq but I doubt it. At least the larger OEMs are pretty much aware of what their competitors pay for Windows. Small OEMs may not know the numbers for Compaq.)

12:05 PM PST - Microsoft is increasing the price for Windows due to added features but IE is the free one? I already heard that joke.

Transcript Feb 17, PM: John Rose is on the stand.

q. And the price that Compaq was paying for the windows operating system increased significantly pursuant to that contract, that new contract last year; correct?
a. I would say that the price for Windows operating system, Windows 98 specifically, within the new frontline partnership that we established in March of '98, there was an increase in Compaq's license fee for the operating system. I would not use your terminology "significant."

q. You would not call it significant, sir?
a. I would say it was a price increase, yes.

q. I know it was a price increase, but I'm asking you now--and if we can't get agreement on whether it's significant or not, we will pass this until we get into closed session. I want to know whether it's your testimony to the court that you do not consider that increase to be significant.
a. I would still not use the word "significant" there. Certainly the cost increased, as we expected it would because of the functionality changing, and the fact that we had an outstanding agreement for five years.

"Functionality changing"? Mr. Rose, does that mean that Microsoft charges for all increased functionality except for the browser? How much is Microsoft charging for IE, anyway? Have I asked that question before?

q. Right now, I'm simply asking whether the price went up, and you said yes.
a. Yes, it did.

q. And I second asked whether you believed that that increase was a significant increase, and I take it your answer is no.
a. That is correct.

Off into closed session we do not go, right? Consumers do not have the right to know which products they pay for and which they do not? This is not really the "how much does IE cost' question, but we are getting very close. Clearly it is not possible to be zero.

11:25 AM PST - What? More obvious facts from Mr. Rose?

q. Well, you believe that the fact that there are 70,000 applications for the Windows operating system is not only a reason but a prime reason why you do not have a commercially viable alternative to Windows at the present time; correct, sir?
a. I don't know that I would call it--it certainly is a prime reason. What's important is the whole concept of compatibility. And by compatibility, any of the applications that were written up to 17 years ago can still run on the customer's PC. So, the customer can have confidence that the data that they have on their personal computers they can run on any of our competitor's computers and they could run it on any version, and they could go backwards or they could go forwards. And that's the real value of this whole open-industry standard.

And, if you want to extent that argue and suggest that is a value of a monopoly, that is fine. But, just do not get on the stand, take an oath and try to suggest that no monopoly exists or that any young kid with a compiler can effectively compete or enter the market for operating systems. That is false testimony. That is false testimony offered by more than one Microsoft witness for the purpose of deceiving the court on a critical matter relevant to this case. Did not Microsoft employees even make up some story about competing with their own prior OS versions? Is not the truth that prior versions of both the OS and applications provide additional barriers to entry for competing products?

q. Just to be clear, when you say that the customers can run any of your applications on any of your competitor's computers, that would be true only if your competitor's computers were also running the Windows operating system; correct, sir?
a. It would be true--yes, it would be true if they were running the Windows operating system and they complied with the standards, so that their hardware was truly compliant with the architectural standards.

Copyright, Patent and Trade Secret Law actually extent to Microsoft a good part of the protection they enjoy from competition. Remember the story about those pirates? Well. These laws are used by Microsoft to protect their monopoly. Funny how Microsoft argues that the law aught not apply to them when Microsoft benefits as much as any company from protective laws. Monopolies are not illegal. Some acts conducted by companies that hold monopoly power are illegal.

Being successful in the market is not illegal either. However, some acts conducted by those companies holding monopoly power can indeed be illegal.

11:00 AM PST - Oh? 70,000 applications for Windows? No wonder the Microsoft economist refused to give up a number?

q. And am I correct that it is your view that that is true, in large part, because of what you have referred to as the 70,000 applications that exist for the Windows operating system?

a. Yes, that is part of the rationale. What Compaq is driven for the last 17 years that we have been in the computer business is this concept of open-industry standards, and we partnered with Microsoft on there as well as other partners. And what that has resulted in is an open-industry standard where literally hundreds of people can manufacture PC's, hundreds of companies manufacture options for PC's--we call those independent hardware vendors--thousands of companies have created a portfolio of 70,000 applications, and then there has been lots of--literally thousands of retail partners or channel partners. In fact, we at Compaq today have over 40,000 channel partners. And the real end result, because this has been pro-customer, is the customer has been able to get more capability each year for less (sic) dollars. So, the 70,000 applications is only one element of that total story.

70,000 applications are only one element of that total story. But, I recall the so-called economists from Microsoft saying that all those applications mean nothing. Or, was that James Allchin that did not understand their importance. Now, I remember Paul Maritz said that Allchin would clear all of that up and tell us that only 3 applications mattered (Word Processing, Spread-sheet and Data base).

Gosh. And to think we had it all figured out. Now, we hear that Compaq has some 40,000 channel partners? What are they? How do they strengthen the monopoly power of Microsoft? Do you suppose those 40,000 channel partners think that only 3 applications matter and you can buy all three from Microsoft? Or do you suppose those "partners" know that the Microsoft employees are smoking the wrong weeds?

Sometimes false testimony is just a lie. And, sometimes false testimony is perjurious. Hint: When the lie is given under oath to tell the truth in a matter material to the case, perjury is the correct topic of discussion. Maybe the Microsoft lawyers can explain how claiming only 3 applications are important for an operating system to be successful in the market is not a matter material to this case. In case you are having a hard time following this line of thought, Mr. Rose is not going to lie about the importance of applications written for the Microsoft consumer OS. He also has decided not to lie about identifying the consumer OS market either.

10:45 AM PST - John Rose, Compaq has no problem being able to identify the consumer OS marketplace .... Surprise...Surprise

q. Focusing first on the Consumer Products Group, am I correct that Compaq believes that it does not have any commercially viable alternative to Windows as an operating system for the personal computers supplied by the Consumer Products Group?
a. Yes, but-

Hold everything. You mean major OEMs use the label "Consumer Products Group"? Are they not confused here? Should not this be labeled "Platform Products Group"? Does not Mr Rose know about browsers and Java? How can they function with this kind of market recognition? (Do you suppose that Mr. Rose thinks this "platform" labeling scheme that Microsoft has dreamed up to be a bit silly?)

the witness: Your honor, if I could explain that point?

the court: You could always explain after giving a yes, no, or I-don't-know answer.

the witness: Thank you, your honor.

the court: Okay.

the witness: All the way back to 1993, we had a vision for the Presario product, which is the consumer product. And that was that it was not just a personal computer, but it really was a center of information, entertainment, and communications. So, it really was a paradigm-shifting device. And what we centered and chose was that Windows was the best operating system to evolve there, and that's continued to be the case over the past six years. If something changes and there is a better operating system that fits that strategic direction of being more than just a personal computer, but really being a paradigm-shifting device that's very communication-centric, very entertainment-centric, very educational as well as computing.

the court: Until that materializes, then there is no commercially viable alternative to the Windows operating system?

the witness: That's our view, your honor.

the court: All right.

Even I can understand that. (But where are those Linux and BeOS promoters that are paid by Microsoft to confuse the court?)

9:40 AM PST - After a while the obvious is obvious.

q. Do you know what is meant by "bundled"?
a. I can't be sure. I just assume it means IE 2 is a part of Windows 95.

Bundled, integrated, blended, packaged or boxed: It does not really matter what term is used. Using the term "bundled" does not really convict Microsoft. Switching to "integrated" does not offer any defense. The real issue is why the conduct was engaged in.

q. Let me turn to what I was asking you about before we got down this byway, which is the statement "ie and msn icons hidden behind custom shells on consumer p.c.'s," which is purporting to be a description of what is the case at the time this document is being written. do you see that?
a. Yes, I do see that bullet point.

q. And is it fair to say that this was believed by Microsoft and by you to be a problem?
a. I recall this being true. I recall my concern about custom shells to be very different. My concern was that people were booting up their p.c.'s expecting to get Windows and were getting these custom shells. I was concerned about the impact that would have on windows among our customers and our customers' experience with windows. I do recall this being true in some cases, but Idon't recall that being my issue. My issue with the custom shells was that they were changing the user experience so the user was expecting to get windows and getting something else.

This is bull. Customers do not care whether they see the advertisements from Microsoft upon "boot up" or not. In fact, they may prefer to see a "Compaq Desktop" or an "HP Desktop" or an "Gateway Desktop". Microsoft was only concerned about the power derived from their monopoly desktop and the control it could maintain.

q. Well, what this document says is, under point 4, "in order to protect our position on the desktop and increase the likelihood that IE gets the prominent position with the end user, we should move the sign-up wizard into the boot-up sequence somewhere before we give control over to the oem." do you see that, sir?
a. I do see that. Yes, I do.

See. Microsoft only wants to use the startup as a promotional game for Microsoft products. That might be okay unless what? Unless Microsoft is using its monopoly power to preclude competition in other markets. The use of the desktop for this promotional purpose is not the strongest evidence of illegal activity. But, it does exist. And, while it might seem subtle at worst, everything that Microsoft does adds up. Everything that Microsoft does adds up to its using its monopoly power to preclude competition. Not in operating systems (there is no competition there) but in browsers. Netscape was in fact providing strong competition in browsers. Clearly the bundling and promotion of IE was not to be competitive with other operating systems but rather to preclude Netscape from the browser market. (Do you hear that bell?)

(Dr. Fisher was also correct in suggesting that bundling IE with the OS also increased barriers to entry for operating systems as well. Increasing barriers to entry for operating systems is not illegal by itself, however it does decrease competition or even the likelihood of competition.)

9:00 AM PST - Bundling IE with the OS does force competitors to offer superior technology just to continue to exist - Only the monopolist can be assured of high profits with inferior applications. Microsoft clearly thinks it should be able to cheat rather than compete for the browser application business. And, Microsoft is afraid of fair competition.

q. It's clear to you, is it not, Mr. Chase, that what is being said here is that because IE is a standard feature on Windows 98 machines everywhere, Communicator cannot survive if it is simply an equivalent product or simply a slightly better product, but it needs to be a very much better product in order to survive, correct?
a. I am not sure I would characterize it that way either. We included Internet Explorer 1 and internet explorer 2 with windows 95 from the very first OEM release. In the internet explorer 1 time frame, Netscape was a much stronger product. In the internet explorer 2 time frame, I would say Netscape had the edge. They were a better product, but it wasn't by a lot, yet they dominated the share at that time, even though we were including Internet Explorer technologies with Windows. So, in general, I would say that as long as we do a great job for our customers and improve the technology, we have a good chance of doing well. If Netscape does a good job with communicator technologies, they also have a good chance of doing well, and certainly the sun 10-q seems to reinforce that they believe they can do that.

Well. Great answer, but Microsoft has clearly expressed it true views that if it does not force all consumers to buy IE, IE does not stand a chance. Doing a great job with technology in IE and competing fairly for sales is one thing. But, Microsoft decided to refuse to compete fairly. It decided to just bundle IE so that the minimum price of the OS can be held high or even increased and force all consumers to buy IE.

Forcing all consumers to buy IE was and is critical to Microsoft's success with IE. It is absolutely clear that Microsoft fully agrees with the idea that it is hard to replace a dominant product in the market. Here Mr. Chase is trying to avoid saying the obvious. But, it is very clear he is trying to avoid doing so.

q. Let me see if I can focus on your understanding of this exhibit that you attach to your direct testimony. This is something you attached to your direct testimony, correct, sir?
a. Yes, this is one of many reviews I attached to my testimony.

q. And something that you relied on in your direct testimony, correct?
a. It's one of the things I rely on as well.

q. Now, I want to be clear that what I am now asking is for your understanding as to what the author of this document is saying. I am not asking for your personal views. I am asking for you to give me your understanding of the plain meaning of this statement here. Do you understand the distinction between asking you for your personal views as to the industry and asking for your understanding of what is stated here in this document?
a. I understand your question.

q. Okay. Now, it's clear that what is stated here in this document, whether you agree with it or not, is that with Internet Explorer a standard feature on Windows 98 machines everywhere, Communicator cannot survive if it is only equivalent or only a little bit better, but in order to survive, it needs to stand out, correct, sir? That's what this language "stand out" means, right?
a. I'm not sure I could accurately characterize exactly what the -- it may not even have been the author who actually did this. Sometimes editors put in these cutouts, but I am not sure I am in position to judge exactly what they meant by that. So I guess the answer is I don't know.

Bull. Mr. Chase knows full well precisely what this author is saying. He agrees it as well. Forcing all consumers to buy any applications absolutely requires that any competing product must clearly be judged superior in the eyes of consumers if that competing product is expected to survive. (Even if given away).

Mr. Chase is simply giving a false answer because a correct answer hurts Microsoft. Sometimes the obvious is just that, "obvious".

q. Without knowing exactly, it's clear that, in general, the substance is that what is being said here, either by the editor or the author, is that in order for Netscape's Navigator to survive, it can't be just a little bit better or equivalent; it has got to be significantly better? You would agree with that as a general proposition, would you not, sir?
a. I think it says what it says, Mr. Boies. I think the whole tenor of the review is that IE is better technology. And so what I believe this person meant was that communicator is going to have to be better technology and the fact that IE is a standard feature on windows 98 machines, including the benefits of integration for customers, is one thing Communicator is going to have to overcome. What exactly the person meant by "stand out" and whether they meant it the way you want to perceive it, I can't say for sure.

Gosh. And, this is the same witness who claimed to see the big picture on why AOL did not immediately cancel the deal with IE in December 98?

Mr. Chase simply could not avoid bringing up those elusive benefits of integration for customers again. The benefits of IE do not justify the forced sale of IE. All applications are such that any one and all of them can provide the same benefits without the requirement of forcing all consumers to purchase them with the minimum system. That claim by Microsoft is simply false. It does not exist.

IE does have benefits. Word has benefits. Excel has benefits. Wordperfect has benefits. The Flight Simulator has benefits. But, none of those benefits require a forced sale. Clearly inferior products might require a forced sale. Microsoft thought so themselves in regard to IE.

This whole discussion here points out a very important point. It is absolutely important that fair competition be re-established in the computer software industry. It is absolutely important that fair competition be re-established in the all product categories including browsers. Why? So that superior products actually have a chance of earning money for their developers and supporting further development.

The computer software industry simply has no need for any company that thinks only it should earn revenues and force the sale of products. The computer software industry simply has no need for Microsoft.

8:30 AM PST - When Microsoft forces the sale of IE, any other product must be superior to expect it to survive.

Transcript Feb 18, AM: by Mr. Boies:

q. Good morning, Mr. Chase. Let me begin with the first subject that Mr. Warden raised with you and, in that connection, let me show you defendant's exhibit 2183 that I think you already have up there because Mr. Warden gave it to you.
a. That one is in my testimony.

q. And if we could sort of blow up the top half of that. Mr. Warden asked you about the text on the left-hand side of the page. I would like to ask you about the text beginning on the right-hand side of the page -- and maybe we can yellow highlight it -- where it says: "with internet explorer a standard feature on windows 98 machines everywhere, communicator needs to stand out to survive." do you see that?
a. Yes, I do.

q. Is that consistent with your understanding, sir?
a. It's consistent in the sense that in our industry in general, products and technologies need to stand out to survive. With IE being the best technology currently available and integrated into Windows 98, Communicator is going to have to come up with improvements to do well. I think "survive" is actually a little bit strong. They are doing quite well today.

Well. It is a testament to Netscape that they have survived at all considering the illegal acts conducted by Microsoft.

q. Indeed, the purpose of integrating Internet Explorer into Windows was, in significant part, to try to make it necessary for Netscape's Navigator to be very exceptional in order to survive, correct, sir?
a. No, I wouldn't characterize it that way. One of the things that we recognized was that any operating system to be competitive in the world of the internet with the tens of millions, if not hundreds of millions of people worldwide using it now and growing very quickly -- any operating system would have to have internet technologies. So we recognized it was something we needed to do for our customers in order to do well. Also, it does provide value to the customers, so it raises the competitive bar. That is also fair, but it is something we needed to do to be competitive in the Windows operating system business -- with Windows in the operating system business.

Brad Chase is falsely testifying again. Operating systems do not need to provide browsing capability anymore than they need to provide word processing. Hint: That is what applications are for. In fact, the claim that the OS must do it because of OS competition is clearly false. Even John Rose of Compaq will testify that Microsoft has a monopoly in consumer operating systems. In short, that means that the inclusion of IE is not to meet OS competition at all. The browser does not remove the need for an OS in any way.

The bundling of IE was conducted in an attempt to wipe out Netscape not compete with other operating systems. Even Microsoft has said that in their public statements and e-mail.

Ah. So Mr. Chase agrees with Fisher that bundling IE makes it much more difficult for competitors to offer operating systems? Mr. Chase has really helped out the DOJ case by this answer. He agrees with Mr. Fisher.

8:03 AM PST - AOL might switch to Netscape technology. So what? Does that mean that Microsoft can violate the law again? Or, does that mean that Microsoft can violate the law in the first instance? The simple answer is "no".

q. Despite those factors, do you think they eventually will switch to Navigator for their client software?
a. Yes, I believe AOL will switch to Netscape navigator technology for their software. They need some time to get that software componentized and to meet all their technical requirements. And then I believe it's inevitable that they will switch. They spent $7 billion. I almost can't say it. They spent $7 billion to purchase Netscape technology. One of the key assets they purchased is that browser technology. And I can't imagine that they wouldn't use that for their own AOL client. And, in fact, reading some recent information in the Wall Street Journal and in Sun's 10-Q further reinforces my belief in that regard.

So what? Is AOL switching back to Netscape technology supposed to provide an antitrust defense? Is AOL switching back to Netscape supposed to justify forcing all consumers to buy IE technologies? Is AOL switching back supposed to justify Microsoft overcharging their customers for applications they do not even want? The answer is simply that what AOL does is just not relevant. Antitrust law does not say you can do otherwise illegal acts if you have or might have competition. In fact it says precisely the opposite. Antitrust laws say companies like Microsoft are prevented from acting in such a way as to preclude competition. It absolutely does not say that if Microsoft feels threatened in some way with competition or if circumstances might change due to a merger, that otherwise illegal acts are then justified.

If Microsoft loses its monopoly over consumer operating systems, then some acts that Microsoft has engaged in might not violate the antitrust laws. But neither the AOL-Netscape merger nor the possible switch of AOL back to Netscape technologies is going to affect Microsoft's monopoly in consumer operating systems. (At least not unless I missed a major announcement.)

Microsoft continues to suggest that its paranoia about future competition is somehow relevant to this case. It is not. The antitrust laws do not excuse conduct simply because a company thinks it might have future competition. That idea is contradictory to what the laws are trying to accomplish. Microsoft lawyers know that. They only try to bring out this future or imaginary competition in their vane attempt to rationalize illegal acts of Microsoft. Microsoft's acts are either legal or they are not legal. Paranoia and rationalization do not play any part in that determination.
 

7:40 AM PST - What? Microsoft employees actually can focus upon the big picture? I thought Microsoft employees were arguing that all decisions were based upon technological considerations exclusively?

q. Now, the AOL agreement is in evidence, and it reflects the fact that AOL had the right to terminate its distribution and promotion obligations on December 31, 1998. does that correspond with your understanding?
a. Yes, it does.

AOL does have the right to terminate the agreement with Microsoft. But, why should it?

q. Did AOL exercise that option?
a. No. AOL did not exercise that option.

Or, has not yet.

q. Now, it has been suggested that that's because AOL didn't want to lose its place in the ols folder. Do you agree with that?
a. No, I do not agree with that. First off, AOL has continued to do deals with p.c. Manufacturers in large numbers after we signed the ols deal. And in many of those deals, they are right on the windows desktop. I believe the reason AOL did not terminate the promotional section of the contract, as they had the right to do it -- as they had the right to at the end of December '98, is because, as I stated earlier, even almost three years since we signed the original deal, Netscape still does not have a shipping commercial version of componentized browser technology. So there isn't anything for AOL to use right now. However, I also think a very key reason is that AOL recognizes that Microsoft is a very vigorous competitor of theirs. And AOL also recognizes that if they were to announce that they are going to use Netscape's technology in their client software, people would internalize that our share -- our usage share -- would drop dramatically to about 30 percent, and Netscape's usage share would increase significantly to just below 70 percent. that kind of shift would be inconsistent with AOL's desire to support the government's position in this case, and as someone who wants to compete with Microsoft, I believe they were very careful not to do that.

Interesting theory offered by a Microsoft employee who previously claims not to be able to see the big picture. What is the big picture? 1) The market for browsers is totally ruined by Microsoft forcing all consumers to buy IE with each new system. 2) Without a revenue base, no company other than Microsoft (Microsoft sells IE for up to $140 per copy to everyone regardless of their choice) can sustain a R&D budget. 3) Netscape has been frustrated in any attempt to develop componentized technology for browsers assuming that would be the plan. 4) Placement on the Windows desktop is still extremely important real estate.

But, yes, Mr. Chase, if you insist upon taking into account the big picture, it might be that within the last 45 days, AOL has not decided to drop IE. However, this last possibility is pure speculation. And, it disproves the very argument that Microsoft has made that AOL chose IE because of technical considerations. Those technical considerations (if they ever did exist ... and Microsoft has argued that they are the only reason AOL choose IE ) remain today.

So. Which is it Microsoft? Which argument are you going to make anyway? Are you going to argue that AOL uses IE because IE is superior technology or are you going to argue that AOL uses IE to convict Microsoft of antitrust violations? If you are going to suggest the reasons have changed, then please identify which facts have changed since Dec 1998. I guess you could argue that both reasons exist.

But, so what? Microsoft is liable for antitrust violations based solely upon Microsoft's acts. What AOL might do or might not do is not relevant to any issue in this case.

7:12 AM PST - Microsoft attorneys continue to argue irrelevant issues choosing to advertise the product rather that address their illegal acts.

q. Take a look at page 3 of this, at the last paragraph on that page. Do you see that, where it says "because IE 5 is completely component based, developers can add custom controls, called web accessories, that plug into the explorer bar or into a predefined slot along the bottom of the window"? Who are the developers referred to there?
a. In this case, developers could refer to people who are building web sites or people who are creating their own customized browsers or sort of portal sites.

If IE has any merit at all, then Microsoft can market and sell it legally. Forcing consumers to buy IE is never justified by the quality of the product. Even if IE were perfect, this issue is just not relevant. The only reason it is offered is to trick the court into thinking that a quality product justifies the violation of antitrust law. Even Microsoft lawyers know this is false.

q. And what is the advantage that it says they have here?
a. So let me give an example to try to bring it home. One of the nice things about internet explorer 5 -- its technology -- is you could add in your own sort of accessories. So, for example, let's say you're a search site. You could create your special technology to add your own search window right to internet explorer 5. And that way, if a user really likes your search, it could be very central to the way you navigate the web because it integrates right into the internet explorer 5 browsing experience. interestingly enough, as this article points out, Netscape has actually taken advantage of our architecture - of that technology -- to add in their own capabilities to internet explorer. So that if there is an internet explorer user who wants to take advantage of certain Netscape functionalities or a Netscape site, they have a method to plug their functionality into our technology.

This testimony is nothing more than paid advertising.

However, this answer does point out a very important point for the DOJ: It is true that browser technologies can offer services to other products. And, this is a very important point. It is a very important reason why Microsoft must not be permitted to force the sale of IE technologies upon the entire industry.

Under what theory should only Microsoft be permitted to offer superior technology to other developers in the industry? Microsoft is trying to point out the value of their technologies, but they have offered no evidence at all that only they should be able to do so. This clearly should be a competitive effort. Netscape should have an equal chance at developing such technologies. All other companies should likewise have this opportunity.

Only Microsoft Corporation is "sick enough" in their thinking that if they can offer ideas and quality products, that somehow that justifies their forcing the sale of those technologies upon all consumers and precluding competition from everyone else. This is both illogical and illegal.

Despite what Microsoft thinks, there is no such thing as an industry wide franchise that is awarded on the basis of winning a few magazine reviews. All companies in the industry must abide by the appropriate laws.

Again, the quality of the product is not relevant to any legal issue before this court.

7:00 AM PST - Microsoft thinks that showing IE as a quality product in court is an antitrust defense?

Transcript Feb 17, AM:

q. What's the bottom line in this review, Mr. Chase?
a. The bottom line on this review -- let me see if I can find it here -- is that Microsoft internet explorer received -- 5.0 received five stars and was called the fastest, most flexible browser you could find. And it talks about many of the other things. It says "IE earned our unqualified recommendation for everyone except die-hard Netscape partisans." That's on page 4.

Do Microsoft lawyer think that if Ford can find enough magazines honoring the Ford cars that somehow Ford would be justified in forcing all consumers to buy a Ford car?

What is their point here? How is the fact that one or more reviews likes IE related to this case? The answer is that the quality of IE is just not relevant. The court is not going to decide which browser is best nor use that determination in any way to resolve the issues in this case.

Microsoft just does not know how to focus upon the legal issues presented by antitrust litigation.

The issues are whether or not Microsoft has a monopoly and whether their acts and conduct violate the antitrust laws.

The relative quality of IE versus Navigator is just not relevant. Except for one small point: Significant demand for browsers independent of the choice of operating systems. The independent demand for a browser application is proven by the very existence of the review articles. Which browser wins which review is just not relevant.

However, this line of questioning does point out the arrogance of Microsoft Corporation. Microsoft violates the antitrust laws by forcing all consumers to buy IE and ruining the market for all other competitors in that market, then they expect the trade press to hold the equivalent of a beauty contest between the browser they force all consumers to buy and a browser that must be developed without any expectation of having a revenue base. Microsoft gets paid billions for IE and Netscape is denied a market. But, Microsoft lawyers go to court to justify illegal business practices by pointing at a few magazine articles.

If you have not complained to the trade press yet regarding this issue, you really should. The trade press is just playing into the hands of Microsoft by comparing a product that all consumers must purchase with a product that must be developed with little expectation of revenue. If you think that is fair, you belong on a different planet.
 

February 17, 1999 - Wednesday

2:00 PM PST - AOL hurting itself by sticking with IE?

Did Brad Chase really say that? Or was that a lawyer that made that up?

It might be that AOL has held off on switching back to the Netscape browser. It might be that AOL is waiting to see if their purchase of Netscape will actually stick. That would make sense. But, for Microsoft to suggest that AOL is making bad business decisions just to help out the DOJ? I rather doubt that. They might do that. It would be their choice. Just like switching to IE and disadvantaging Navigator was their choice. It does make sense that AOL would favor IE just to get on the Windows desktop. That is obvious. Although Microsoft seems to fail to see the big picture a lot lately. Somehow they suggest their monopoly position and power on the desktop is of no value. That is really funny. I can think of no one would be so silly as to suggest that.

Could it be that Microsoft is becoming depressed over their own success? Might they wish now they had failed in getting AOL to switch to IE?

If you listen to Microsoft lawyers you might think so. But, lately nothing they have said makes any sense at all.

They try to convince the court that forcing all consumers to pre-purchase IE is some great benefit of being forced by a monopolist, then they try to convince the court how easy it is to download and install Navigator. Which is it, Microsoft? Is being forced, a benefit? Or, is downloading and installing of equal value? Does Microsoft really think they can prove both is true?
 

12:30 PM PST - More reviews point out how silly the testimony from John Rose of Compaq is going to look

q. Which is from the wall street journal october 22, 1998. It's entitled, "Netscape takes lead in race to build better web browser." do you remember this article, sir?
a. Yes, I remember this one.

the court: you do or do not?

the witness: I do, your honor.

Again. Keep in mind that which browser is best is just not relevant to the court. What is important is that competition in the market for browsers be fair and that no player violates antitrust laws as part of their participation in the market. In other words, it is important that Microsoft not be able to preclude competition for browsers.

Just wait until John Rose of Compaq gets on the stand and tries to justify forcing all of their customers to buy IE. His direct testimony even offers the point that Unix customers might prefer Navigator (nice going John) but then he flatly ignores the rights of all Navigator customers who might use Windows.

John Rose insults Navigator customers. And, he does so just to support the monopolist, Microsoft Corporation.

12:10 PM PST - The issue is really one of making certain that consumers have their choice. - Or does, the trade press unfairly support Microsoft and ignore Netscape's disadvantages?

q. And this is an editor's choice recommendation of Netscape communicator?
a. Yes, it is.

q. Is that correct?
a. Yes.

q. And it says, "in the month since the 4.0 browser shipped, a lot has changed." and then it goes on in the second paragraph to say, "in short, both browsers are better than they used to be, but Netscape communicator is our new choice. We originally gave our editor's choice award to internet explorer based on its innovative features and fast performance. Over time, however, our experiences and those of our readers showed that the demands ie 4.0 places on systems can cause some serious problems." were you aware of those serious problems, sir?
a. I was aware c/net believed there were some serious problems. actually, I take that back. I was aware c/net thought there were some problems. I don't recall c/net, besides this particular phrase, thinking there were serious problems.

Microsoft makes a big point about trying to prove to the court that IE is superior technology. Which browser is best is just not relevant. The only reason Microsoft makes that point is so that they can argue that the success of IE is based purely upon its technical superiority. Well. That is complete "bull" and everyone at Microsoft including their lawyers knows it. But, it is a legal argument that they will make.

What is important is that fair and open competition be re-established in the browser market. It is illegal for Microsoft to force consumers to buy IE. And, it is highly unfair to expect Netscape or anyone else to produce a competitive product without any ability to earn revenue from selling it. Microsoft earns money by selling IE. They will not tell anyone how much. (See earlier discussion on just how much Microsoft is charging.)

Another point needs to be made here. The trade press has clearly let the industry down here. The trade press compares IE (sold to everyone for up to $140) with Navigator (which must be given away because the market was ruined by Microsoft). I personally have suggested to ZDNet that they stop paying half of their journalists (if Netscape can work for free, so can the trade journalists). Then after 6 or 9 months we could evaluate the quantity and quality of their work. Of course, we too would ignore the fact that half of them work for nothing. It does not matter right? The quality of the work is the only thing that is important.

Well. When I suggested this test to ZDNet, they ignored it. Just like they ignore the difference between Netscape and Microsoft. They favor Microsoft simply by refusing to speak out regarding the serious disadvantages Microsoft forces their competitors to face. I rarely suggest that readers of this column write e-mail to anyone. However, ZDNet should respond to my proposal. If they are going to compare IE (a forced product) with Navigator (a free one), then they too must engage in the same test.

Contact ZDNet on this issue. Contact all trade publications on this issue. Does Microsoft really bully the trade press as well? It appears they do.

12:03 PM PST - And, I thought Brad Chase was intelligent?

q. And the second bullet says, quote, it came with my computer, closed quote, is the number one reason people switch to ie. do you see that?
a. Yes, I do.

q. Do you know where this supposed summer intern would have found out this information?
a. No, I do not.

q. Is this consistent with your understanding?
a. No, it is not.

q. And it says, "conclusion: oem's are the best vehicle to gain browser share." do you know where this supposed summer intern would have found out that information?
a. No, I do not.

q. Is this consistent with your understanding?
a. No, it is not.

Summer intern or not, whoever prepared these slides is better qualified for Brad Chase's job than he is. Does Brad expect to get another job in this industry if he does not understand basic consumer psychology? Chances are that Microsoft is just falsely representing the source of this slide show. It does not really matter. Everyone in the industry knows that the points presented are valid.

11:20 AM PST - Brad Chase points out that Microsoft can lower ISP promotion requirements once all consumers are forced to buy IE up front

q. And this relates to changing the requirements for isp participation in the windows 98 referral servers; correct?
a. That's one of the things it discusses, yes.

q. And let me direct your attention to the second paragraph here where it says, "the new requirements are isp must maintain greater than 75 percent overall penetration of ie in their entire customer base." did you understand that that was an additional requirement that was being added for isp participation in the windows 98 referral servers as of february of 1998?
a. It's hard for me to be precise about this. The business model for the referral server is something that we spent a reasonable amount of time talking about and working through. you have to understand the context, that this whole area is a sort of a new and emerging area, and we were trying to figure out how best to manage it and work it with our partners to meet their needs, Microsoft's needs, the isp needs, the oem needs, et cetera. I wouldn't be surprised if at one time we had this proposal, but, in fact, this is about the opposite of what he did, because in windows 98 there is (sic) no ie requirements at all to be part of the referral server, as well as no start page requirements either. So, this may have been a proposal at one time. It's not what we did, and we had numerous proposals.

Once IE is bundled with all copies of the OS (Windows 98 and NT), most if not all other programs and agreements are just not needed anymore. All consumers have been forced to buy IE. The market for any other browser is ruined and Microsoft's new monopoly is all but assured. Sure, Microsoft can loosen up the screws. The deal with Intuit can expire cutting them off the desktop space. The deal with AOL can lapse. Microsoft can take AOL off the desktop. And, Microsoft can stop writing Mac Office or slow it up even if Apple stops promoting IE.

Once all consumers are forced to buy IE (we still do not know how much Microsoft is charging Windows 98 customers for IE) agreements with ISVs, ICPs and even OEMs will matter very little. The new monopoly will be in place. Consumers will have lost their rights and Microsoft competitors will have again been removed from the industry.

11:04 AM PST - Good engineering dictates that applications not be bundled with the OS

q. And let me go back to the question that I was asking you in which Mr. Hawkins is talking about Microsoft's browser being tangled up with the operating system in windows 98. do you see that?
a. Yes, I do.

q. And do you have an understanding of what he means when he's referring to the Microsoft browser being tangled up with the operating system in windows 98?
a. I can only guess on what he means. I certainly can't be sure.

q. Were you ever told that the Microsoft browser being tangled up with the operating system in windows 98 was a problem with the Microsoft relationship for aol as is indicated here?
a. No, I was not.

It has been this way since the beginning of the industry. The reasons are obvious. Several of the problems caused by bundling the OS with applications have already been testified to by Microsoft employees in this trial. They include the offset update cycles between applications and operating systems. They include alternate distribution methods. They include consumer choice of applications (although on this point all Microsoft witnesses and attorneys have refused to acknowledge the right of any Windows customer to pick their own applications. John Rose from Compaq [on the stand next] even had the guts to suggest in his direct testimony that Unix customers might want Navigator so they offer it there but Windows customers would never want Navigator so they should be forced to buy IE). And, now we see yet another reason why applications should not be part of the OS. That whole concept just mucks up the works.

What is very clear in this trial is that Microsoft flatly ignored good engineering principals to gain the forced distribution of IE even if to do so violated the law.

10:30 AM PST - Does Microsoft even care about violating antitrust law?

q. Let me direct your attention to the bottom of the first page where Mr. Slade writes, "i positioned this proposal like this." And, in particular, that portion that Mr. Slade has capitalized where he says, "we'd rather not compete with you. Instead of growing the market, we'd just both spend a lot of dollars fighting each other for share, so how about this: you guys continue to do a great job on dos and mac. We're investing in a line of windows products anyway, so we'll just round out the line and together we'll grow the business." whether or not you remember this particular memorandum, do you remember being informed that a proposal of this type had been made to intuit?
a. No, I do not recall.

q. Let me just direct your attention to the second paragraph on the second page where Mr. Slade says, "so, if intuit was listening carefully, this could have been interpreted as a chance to avoid competition with us." do you see that?
a. Yes, I do.

q. Were you aware of instances in which representatives of Microsoft approached competitors to try to get those competitors to agree to avoid competition with Microsoft?
a. No.

An antitrust compliance program is vital for all major corporations. Requiring Microsoft to have such a program in place was suggested by Richard Gray a number of weeks back. I believe there is a link to such a suggestion on my DOJ Outline page. My DOJ Outline also references an article, The Antitrust Law: A primer by John H. Shenefield and Irwin M. Stelzer. This articles laws out some guidelines for an antitrust compliance program.

9:38 AM PST - Brad Chase disproves Microsoft's own defense

Transcript Feb 16, AM:

q. Well, let's look at your statement here. When you said, "only a little more than half of the people that download active set-up end up installing the browser," did you mean that, sir? Was that an honest statement at the time?
a. Yes. As I testified earlier, this was november of '97. ie 4 released in september of '97. And the early data indicated that. But it was an estimation based on the data we had available at the time. this estimation, because it was large, led us to go do more work on it and to find out that that early estimation was incorrect.

Downloading software is not impossible. Some users do it every day. But, some users could never do it.

What is very obvious here by this testimony is that Microsoft thinks it is okay to force all consumers to buy IE and require any of their competitors to use truly inferior means of distributing their products (and most likely not even be paid).

This is way beyond arrogance. It is a flagrant violation of the law coupled with arrogance.

Microsoft and their attorneys even offer fraudulent evidence in court in their effort to carry out their violations of law. Brad Chanse knows that downloading is an inferior method of distribution (particularly compared to forcing all consumers to buy IE pre-installed). But, he does not care. He is going to testify falsely in court anyway.
 

9:23 AM PST - Does Microsoft really think it is fair to limit competitors to downloading of their software?

q. Okay. Now -- and, again, what we're doing here, just so you're clear, is -- what we're doing is going through the steps that you skipped over in your videotape. Do you understand that?
a. I understand that, but it's important in the way of explanation that no one infer that Microsoft has any input on what these steps are. It is completely within the control of aol and Netscape to make this download as easy or as difficult as they want to make it.

q. So long as aol complies with your contractual terms, correct, sir?
a. Sure, but we're at a point in the process that, you know, is well within the contractual terms.

If Microsoft thinks that downloading is okay for Netscape, perhaps the court should entertain a remedy limiting Microsoft to downloads of its OS products over the next 5 years. No fee could be charged.

This is precisely what Bard Chase and Microsoft are suggesting is fair for Netscape. The court could further require that Microsoft OS products could not exceed 15%?

Is this not what Brad Chase is suggesting is fair to him? Or is he just so arrogant to suggest that a monopolist can prevent competitors and that is just too bad for them?

9:16 AM PST - Microsoft only thinks it is fair if they can cheat

Transcripts Feb 16, AM: (Brad Chase on the stand)

q. Well, there are a number of provisions in your contract, one of which talks about how many copies of Netscape they can distribute compared to the number of copies of ie they distribute, is that correct, sir?
a. That's correct.

q. And what is the percentage?
a. The percentage is 85 percent internet explorer.

When Microsoft uses the term "fair competition" it means contracts requiring ISPs to distribute 85% IE?

This is fair, right? After all 15% of the consumers can have a copy of Navigator.
 

February 16, 1999 - Tuesday

4:40 PM PST - "Smoking Video Tapes" by Rich Gray (article for the San Jose Mercury News)

Richard Gray is correct. Microsoft has shot themselves in the foot with their fraudulent video tapes.

The real problem is that those tapes were defective or fraudulent in their key points. The first was to show that Felten's modifications caused Windows to slow down. They could not show that at all. And, the second was to show how quick and easy downloads for Navigator are. They falsified that too.

They are just fraudulent.

1:04 PM PST - Brad Chase now agrees he was wrong last week? (Has he been reading my Wrap and Flow?)

12:40 PM PST - John Rose thinks that Unix customers might want Navigator but that no Windows customers do? Since when?

John Rose direct testimony:

35. We also offer Netscape's web browsing software through Compaq Direct Plus, Compaq's catalog and web-based direct sales operation. Compaq also ships Netscape Navigator with certain of our UNIX-based computer systems because some UNIX-based system customers, including Workstations customers, have expressed a preference for Netscape Navigator.

John Rose is offering false testimony. Yes. Some Unix users do prefer Navigator. But, his testimony suggests that none of the Windows users prefer Netscape. He even denies the most obvious of facts (I.E. many customers do not want any browser and about half who do prefer Netscape). This guy is sick.

John Rose is true to form for Microsoft witnesses. They make the most ridiculous statements. They present false testimony even under oath. And they do so to protect a monopolist and harm their own customers in the process.

12:33 PM PST - Does John Rose really think consumers want to buy and support two browsers?

John Rose testimony:

32. In May 1996, Compaq also entered into a Letter of Understanding ("LOU") with Microsoft extending the companies' Frontline Partnership to the Internet/Intranet. (Microsoft DX 2267) As part of that LOU, Compaq agreed to "[s]hip new versions of Internet Explorer as the default browser on all Compaq desktop and server platforms with each major Compaq product release." This LOU did not, however, prohibit Compaq from continuing to install Netscape Navigator on its new computers.

This testimony is insulting. Mr. Rose concedes that all consumers must be forced to buy IE but then he acts coy and suggests that does not prohibit Compaq from also distributing Netscape. Technically, that is true. But, do you think John Rose would find the market fair if all of Compaq's customers where required to first purchase an HP system before they could order one from Compaq? Or, do you think he would consider that as illegal?

I am amazed at the stupidity shown by some witnesses in their testimony. Mr. Rose knows that Compaq is just an agent of a monopolist, yet he testifies as if their acts are helping consumers. They are not. Compaq is harming their own consumers to help out Microsoft's monopoly.
 
 
 

12:20 PM PST - John Rose falsely concludes that product bundling helps consumers - It helps monopolists but harms consumers

John Rose Direct Testimony:

23. Based on my experience in the computer industry, functionality that might begin as a separate product or application over time may become a feature of the basic product offering as more and more customers demand that functionality. For example, modems were until recently a separate add-on product that consumers purchased for use with their personal computers. Now, however, modems are generally included as a standard component of a personal computer and are now considered part of the hardware system. The same is true of software. For instance, in the past, consumers who wanted features such as hard-disc compression technology had to purchase separate products. In recent years, however, they have become a standard feature of every modern operating system. The end result of this integration of more and more features into computer software and hardware has been to put more and more capability into the personal computer, to the benefit of the customer.

John Rose is testifying falsely. The browser is no more valuable to the computer user than any other application such as word processing or spreadsheets, etc. Here he testifies that IE should be bundled with the OS for no reason other than his support for Microsoft Corporation.

Bundling applications and utilities harms consumers and offers little benefit. Even his example of disc compression is a poor one. Today disc compression technology on NT and Windows 98 are incompatible because it is bundled with the OS. If Stac had been permitted a valid market their product would offer compatible compression across platforms including NT and Windows 98. But, since Microsoft bundled that technology and ruined the market for such products, consumers are still harmed today. The same is true with networking.

Almost any technology bundled with the OS harms consumers by precluding superior ideas and concepts from having a viable market to develop. This was true with networking and disc compression. It is true with browsers today. And, Microsoft is trying very hard to do the same with Java. The concept is to prevent any product from having a cross platform appeal or value. It is technology suppression in its worst form.

Compaq supports the suppression of technology by their agreement with Microsoft. Compaq harms consumers by their false testimony in this case.

12:10 PM PST - Should the DOJ amend the complaint to also name Compaq as a defendant?

John Rose Direct Testimony:

22. I understand that the government has taken the position in this lawsuit that web-browsing software is an "application" separate from the operating system. I believe that, today, most consumers want a personal computing system with broad functionality that is simple and easy to use "right out of the box." They want to compute, to entertain, and to communicate by manipulating the mouse on visual graphics displayed on the personal computer's screen -- to them, that is the computing experience. I believe consumers want to purchase a personal computer that allows them to view, communicate or manipulate visual graphics displayed on the personal computer's screen regardless of whether the data or software code that responds to the manipulation resides on the personal computer's hard-disk drive, a CD-ROM, or on a computer that may be continents away. For basic features of the computing experience, it is irrelevant to users whether the feature is incorporated in application or operating system software. A recent Wall Street Journal article (Dec. 17, 1998, p. B-1 Mossberg column) neatly captures this point:

Consumers expect new PCs, or upgraded operating systems, to take care of basic functions without requiring the purchase of extra software. And the displaying of Web-type content, which is what browsers do, is now a basic function that people expect from PCs.

I suppose John Rose thinks that the basic rights of consumers should be ignored and all consumers should be forced to buy their applications only from Microsoft? While Mr. Rose raises the question of whether the browser is an application or not, he fails to address it. Instead he simply argues that all consumers must buy it and therefore buy it from Microsoft because that is where everyone must get their OS.

Sometimes companies (Compaq) support monopolists (Microsoft Corporation) out of envy. And sometimes they just do not care about their own customers and how they are being harmed.

I guess consumers who do not want to be force fed their applications will have to buy their products from companies other than Compaq who only add to the force placed upon consumers by Microsoft.

12:01 PM PST - All consumers must purchase browsers and only Microsoft can develop that product?

Direct Testimony from John Rose:

19.Compaq also believes, based on various marketplace data, that one of the most important features of personal computers for our consumer customers today is easy and instant access to the Internet. Given the strength of consumers' demand for Internet access, Compaq would not today ship a personal computer system for consumers that did not include the ability to access the Internet. Because we view the computer as a device for computing, for entertainment, and for communication, a computer must allow a customer to have access to sources of information and to convey information to others. Compaq now includes an "Easy Access Button" along the top on the keyboard of its newest Presario line of personal computers that provide users with one-touch and immediate access to the Internet and e-mail.

Should Microsoft bundle Office Pro, Compaq will get on the stand and suggest that all consumers should be forced to buy Office Pro?

John Rose is not representing consumers in his testimony. He is only doing the bidding for Microsoft Corporation.

Does John Rose really think that all consumers want to be forced to buy IE? What about business customers? What about customers that use the Netscape browser?

Does John Rose really think that forcing consumers to buy IE is more important than giving them the basic right to pick and choose their own applications?

Does John Rose of Compaq think that if consumers want a browser, they must be forced to buy IE? Where did he get his education? Compaq has joined Microsoft in forcing products upon the consumer.

11:45 AM PST - Testimony from John Rose is bought and paid for?

Direct Testimony from John Rose:

17. If there were sufficient customer demand for a different operating system for personal computers, Compaq would consider licensing that operating system. Since 1993, however, Compaq has not consistently loaded any alternatives to Windows on personal computers it markets to consumers. Our assessment of consumer preference is that our customers want Windows to be preinstalled on their computers.

The testimony from John Rose is not truthful. Here Mr. Rose suggests that Compaq would honor consumer's demands. While no alternative operating system may have significant demand, they flatly ignore the right of consumers not to have to purchase IE.

Does John Rose really think that 100% of all consumers want to purchase IE? Of course not. But, Compaq is forced to sell IE to all consumers by Microsoft. Compaq is forced to ignore the basic right of consumers to pick and choose their own applications. Compaq is just playing the role of a pawn in the hands of Microsoft.

Does Compaq force consumers to buy IE even if they do not want a browser? Yes, they do force consumers to buy IE.

Does Compaq force consumers to buy IE even if they want to use Navigator? Yes, they do force consumers to buy IE.

However, this testimony does disprove Microsoft's suggestion that competition is alive and well in the consumer OS market. Compaq clearly says there is no competition at all.
 

11:35 AM PST - Direct testimony from John Rose of Compaq is released (Summary, Full Direct Testimony)

9:35 AM PST -  Microsoft considers offering a new language in yet another attempt to defeat cross platform Java

Windows needs more languages?

Right now Windows developers can choose between C++ (several), Delphi (Pascal), Visual Basic and Java.  The only thing that bugs Microsoft is that they do not own Java and therefore can't use that language to tie ISVs and developers to the Windows only platform.

What developer in their right mind wants to be trapped into the Windows only platforms?

Microsoft might want to tighten its noose, but none of the developers want to be tied there.

Is Microsoft legally entitled to develop yet another language?  If they do not violate any laws, sure.  But, what is the point?  Use Windows so you have to buy IE?  Use Windows so you have to buy Office Pro?  Use Windows so you have to buy MS-SQL?  Use Windows so you have to use Money?  Use Windows so you have to use Microsoft networking?  Use Windows so you have to use Microsoft utilities?  Use Windows so you have to buy all Microsoft products without regard to quality or merit?

I will admit that half a billion in R&D aught to develop a fine browser, but no company has any right at all to force the sale of that product (even if perfect).  It is harmful.  It is wrong.  It is illegal.

Microsoft is a corrupt company and culture bound to force consumers into buying unwanted products and then subsidizing developers with the bounty (up to $140 per copy of IE).  Their acts are illegal and both consumers and developers are seriously harmed by Microsoft.

If developers want to turn over the control of their products to another company, they are free to do so.  If they think they are financially better off by supporting a monopolist, they are likewise free to do so.  But, they better understand the nature of their actions and the harm caused by such actions.  And, they better understand that they exist only at the mercy of those they let decide their future.

February 15, 1999 - Monday - Court not in session

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