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February 27, 1999 - Saturday (review of Friday transcripts and today's news)
4:35 AM PST - The judge in the Java law suit disagrees with Mr. Muglia's legal opinion. But, that is no surprise. Microsoft just does not respect any legal decision or injunction found to be appropriate against them.
q. Now, Mr. Gates also said that he's hardcore about not supporting jdk 1.2, but on the second page says, "if you think we should support jdk 1.2, it's okay, but you will really have to explain why and
where it stops." do you see that?
a. Yes, I do.
q. Did you ever have the opportunity to give Mr. Gates that explanation?
a. Yes, I did. in a subsequent discussion with bill, I talked to him about our plans to support future versions of java, and I reminded bill that we have a set of obligations under the contract to stay
up-level--when I say "contract," I mean our java contract with sun, and we have some obligation to stay up-level with that. In other words, to support the latest versions. I did also remind bill that as a
part of that contract, we don't have to ship the sun api's inside windows, inside our products. We have the ability to put them on our web site. so, when bill said support, it was my understanding here
that he actually meant include them inside the windows product, and I reminded him that we don't have to do that. We have the opportunity to just put them on our web site.
the court: to be in compliance with your contract?
the witness: yes, that's right.
by Mr. Burt:
q. And, as a matter of fact, Mr. Muglia, did Microsoft ever have to decide whether, as of this point in time today, has Microsoft ever had to decide whether or not to support jdk 1.2?
a. No, we have not.
q. And why is that?
a. Because sun, in violation of our contract, has not delivered it to us.
Well. Mr. Muglia is not an attorney and is not capable of issuing an opinion on whether Sun or Microsoft violated the license agreement. He is just testifying falsely here for a reason which escapes me. The judge will be taking judicial notice of the injunction issued in the Java law suit. There he will find that the judge has decided that it is likely that Microsoft will be found to have violated the contract and not Sun as Mr. Muglia suggests. The judge will also find that the injunction finds that Microsoft is also likely in violation of trademark laws as well as unfair competition laws.
Why this witness would testify that Sun was in violation is beyond me. The best evidence (the injunction itself) states the opposite. I guess Microsoft has no problem with continuing to offer dis-believable evidence. This evidence borders on perjury since Mr. Muglia has obviously been instructed by legal counsel that the current effective decision of the court in that case is contrary to his testimony. He obviously knows he is testifying falsely.
By this time, this is not news to Judge Jackson.
4:15 AM PST - Microsoft's "but we built a better bomb" defense.
q. And just so the record is clear, Mr. Muglia, what happened to the afc project?
a. In the mid 1997 time frame, may-june 1997 time frame, we ran some performance tests on afc, and we determined that although the performance was, in many cases, comparable to sun's
cross-platform api's, that it was in almost all cases significantly slower than what we could get by writing directly to windows. As a general rule, we found it to be a factor of three--three times
slower--than writing to windows. and given that incredibly poor performance that afc was getting, we decided to focus our efforts, instead, on exposing windows api's to java developers.
I assume AFC was a class of Java that was compatible with cross platform Java but was abandoned. Mr. Muglia suggests it was dropped for performance reasons. That might be the case. But even if you assume it is, that does not justify Microsoft writing an incomparable version of Java. Why? Because if you needed a faster environment that would run only on Windows, C++, Delphi and Visual Basic as well as others were available to ISVs and Microsoft itself. If you wanted or needed a cross-platform application, J++ was not going to provide it anyway. So even assuming that standard Java was not good enough, that did not matter. In fact, if cross platform was just mediocre then it would not present much of a threat, would it?
What Microsoft wants to do here is fabricate a reasonable excuse for their illegal acts. But, it is missing. It sounds like writing a better Java justifies the violations of the license agreement, trademark law, unfair competition and antitrust laws, but it does not. There was no need for Java to run super fast but only on Windows. Applications could run fast without Java. And, there was no reason for Java itself to run fast if it only ran on Windows.
Remember Sun decides what the Java trademark means in the marketplace. Not Microsoft. Not HP. Not IBM. Not Netscape. Only Sun. And, Sun has decided that Java means cross platform applications. Any act to fragment or destroy that trademark is likely to be illegal. License or no license.
Trademark law does not say a third party can develop incompatible technology and confuse the market for any reason. Coca-Cola has the right to decide what Coca-Cola means in the marketplace. Microsoft has the right to decide what Windows means in the marketplace. And, Sun has the right to decide what Java means in the marketplace. It does not matter what the motivation was to sabotage the trademark. Building a better Java no more justifies what Microsoft did than building a better bomb excuses blowing up a building. If you blow the building, it is sabotage.
4:00 PM PST - Just because Microsoft wants Java and Navigator to go away does not mean the Windows OS competes with them.
by Mr. Burt:
q. Do you anticipate, Mr. Muglia, that jfc--that sun and Netscape having worked jointly on jfc and now having released it to the market, do you anticipate and believe that the jfc is a threat to the
windows platform?
a. Yes, I do. in particular now, Netscape and aol, together with sun, have joined together, and one of their specific things they've said is they will build a version of Netscape navigator that includes all
of the sun java platform including jfc, and they'll use all of the distribution vehicles they have available to get that in the market.
Microsoft is using some warped thinking when they claim that Java and Navigator competes with the consumer OS. It clearly does not. Neither one is an operating system and they are not an operating system when they are combined.
What Microsoft would like to do is single out companies that may have superior technology that might reduce the monopoly power they have and then declare they are a threat and somehow that is supposed to justify violations of antitrust law. It does not. Even if Java and Navigator combined were an operating system (toss in Linux if you must), that observation does not excuse any conduct engaged in by Microsoft. 1) you still have a monopoly position 2) you still have acts the primary purpose for which is to preclude competition.
Now if you are wondering if Microsoft can gain a monopoly position in browsers, that may not happen if the AOL-Netscape merger supports or continues to develop a competitive browser. But, failing to drive Netscape into the ground is not a defense for Microsoft. That result does not matter. If Microsoft acted to preclude competition, those acts violate the law regardless of their effectiveness. There were sufficiently effective to force Netscape away from selling a browser in a real market (you know the kind that Microsoft uses to force consumers to pay it money...that kind of market).
The point here is that Sun, Netscape and AOL have every right to compete with Microsoft in any way they wish (provided they do not break laws in the process). Same with Microsoft Corporation. Only problem is that Microsoft holds that monopoly and is using it directly by bundling IE with the monopoly product, forcing the sale and ruining the market for "internet technologies" as they like to say.
Do we really want a ruined market for all internet technologies? I do not think so. I do not think developers want that. I do not think consumers want that. Only Microsoft wants it if ...and if the key word....if they hold the monopoly. Otherwise, they are against a ruined market too.
3:32 PM PST - Microsoft is both deceitful and disingenuous in their Java Strategy
q. Okay. And the statement under "strategic objective, kill cross-platform java by grow the polluted java market," at any time, Mr. Muglia, was that an accurate statement of Microsoft's java objectives?
a. No, that's not.
q. Could you explain to the court why not.
a. Well, we were building, as a part of our Java strategy, our Java strategy was focused on out innovating Sun, and we had best the built implementation of cross-platform Java in the marketplace. It is
part of our strategy very much to also give developers the choice to build Windows applications. So, this statement, as worded here, is wrong, because, really, our focus is not to kill cross-platform Java;
we are building great cross-platform Java support. We have a focus to compete against Sun with their Java platform relative to Windows.
q. And in terms of the Java platform, Mr. Muglia, as distinct from true pure cross-platform Java programs, but in terms of the Java platform, is Microsoft competing against Sun in that area?
a. Yes, we are.
q. And are you doing everything you can to win that competition?
a. Yes, we are.
q. And has that consistently been part of Microsoft's strategic objective?
a. Yes, it has.
Sounds good except for one thing (perhaps two or three): Java is a trademark owned by Sun, right? And, when you own a trademark you are the only company or person that has any right to define what the trademark means. It is a fundamental right of the hold of the property. Sun defines what Java means in the marketplace. Let me say that again, "IN THE MARKETPLACE". That is what a trademark is. Windows is a trademark of Microsoft. Microsoft defines what Windows means in the marketplace. (Microsoft clearly understands this concept since they want to insist that initial boot up screens not even deviate from their version.) But, what has Sun defined Java to mean in the marketplace? This is very simple. Everyone knows that Java is supposed to stand for a "write once run anywhere" environment. Microsoft has even violated their license agreement to try to change the meaning of Java in the marketplace from the "write once run anywhere" understanding to "write on Windows runs only on Windows". There attempt in this regard is obvious as can be.
Now, they can mouth the words "writing a better java" as many times as they wish. But, it is absolutely clear that their strategic objective is to sabotage the idea that Java applications run anywhere. They are deceitful and disingenuous when they try to point out that real Java applications might run on their JVM but fail to admit that they design their Java stuff to run no-where but on Windows, a proprietary OS and platform.
That is called sabotage. They know it is sabotage. They violated a license agreement (and other laws such as unfair competition) to accomplish it. And, now they lie about their own strategic objectives in this regard in a court of law.
3:15 PM PST - Mr. Robert Muglia has not evidence that Microsoft was not trying to sabotage Java
q. Maybe my question wasn't clear. Mr. Slivka, in his e-mail here, says that sun and Microsoft disagreeing is a super outcome for Microsoft because it leads to fragmentation. do you see that?
a. I do.
q. Now, I have a simple question. do you know of any document that exists subsequent to this that takes a contrary position; that is, that it takes a position that fragmentation is not something that
Microsoft wants?
a. I don't know. I know that my focus here was trying to work with Sun. And my engagement with Ben, following this e-mail, was not about some inflammatory words he was writing. But, instead, it
was about trying to work with Ben to get him to work with Sun, because I thought that was right, as reflected in this mail.
Microsoft uses the term "trying to work with Sun" when they mean they were trying to tell Sun what to do. It is pretty clear that Microsoft thought that whether Java was fragmented or as Microsoft wanted it to be, they win. Why do you suppose that is? And, why do you suppose there was no way that Microsoft would support a cross platform version of Java?
Microsoft still refuses to support a cross platform version of Java. The injunctions requiring them to perform according to their license are being appealed. They continue to seek judgements giving them authority to write a fragmented version even outside of the license agreement. Microsoft is bound and determined to harm Sun by directly attacking the intellectual property they have (I.E. the Java trademark).
Sabotage is the appropriate term simply because Microsoft is trying to ruin the value of the Java trademark.
Microsoft claims that Sun if trying to compete with Windows. Well. Sun is offering a cross platform solution that requires an OS. Java does not eliminate the need for Windows. If anything it provides what Microsoft refuses to provide, that is a development environment that does not require Windows. If Microsoft wanted to compete fairly, it would offer its own cross platform solution rather than try to sabotage the property of another company.
1:45 PM PST - Microsoft just lost their case?
The following dialog between all the parties is critical because it points out the fallacies in Microsoft's defense.
q. Would you agree that the burden on developers to redistribute the JVM is, in part, a function of how large the JVM is?
a. Generally, no, because, typically, these are applications that are being delivered on media like cd-rom, where the size is largely unimportant.
Well, if the size of the JVM is not an issue, then the size of IE technologies that might have to be distributed by an ISV that might rely upon them is also not an issue. Microsoft has argued (falsely) that consumers and ISVs benefit from the forced pre-distribution of IE.
q. Microsoft intends to distribute Internet Explorer as part of Office 2000; is that correct?
a. Yes. Office 2000 takes advantage of some of the features of Internet explorer that are new things that we're adding to Windows. It's common--one of the things we commonly do is allow ISV's to
redistribute parts of Windows with their application.
All Microsoft applications will require IE sooner or later, you watch. But, the real reason for this line of questions is to show that if Office 2000 can also include IE then it need not be forced upon purchasers at the time they buy the OS.
q. Now, when you talk about parts of windows, I just want to be sure that with respect to office 2000, the part of windows that you say you are distributing is the part that's called "internet explorer";
correct?
a. No. It includes internet explorer, but we're also distributing with office 2000 other parts of windows, including updated com facilities, updated data access, and other things as well.
Sure. Any technology that an application depends upon can be distributed along with the main application. In fact, everyone else who might want to develop such technologies must do it that way. Only Microsoft can force all consumers to pre-purchase and pre-install technologies that ISVs might want to rely upon. This not only creates an incentive for ISVs to use Microsoft technology but also makes it more difficult for independent developers to offer their technologies to ISVs. This is a primary method for Microsoft to suppress superior technologies. If a third party wants to distribute their technologies (superior or not) they have to promote it and get ISVs to use it. If Microsoft wants to do so, they just force consumers to buy it up front. And, then Microsoft turns around and signs up ISVs with the argument that all consumers already have the technology in place (I.E. DirectX, Jdirect, ActiveX, you name it).
q. And are those, in particular, dll's?
a. Yes, I believe they are all in some form of dll eventually. Many of them are also com objects, but com objects are dll's, yes.
q. So, what you are doing is distributing certain dll's separately from the rest of the operating system; correct?
a. No. Windows is an integrated product, a product which was designed to be integrated. We are distributing parts of the operating system that have been updated since its last release into the market separately.
Well. I realize that Microsoft employees forgot what operating systems were and what applications were. But, generally when technology is distributed separately from the OS it clearly qualifies as an application. Calling applications "parts of the OS" is pure semantics.
q. You're not distributing the entire operating system; correct?
a. No, we're not.
So it is either an application or a service release, right?
q. You are distributing certain DLL's that you have extracted from the operating system and not other DLL's; correct?
a. Yes. The word "extract," I just want to be clear, there's (sic) packages that deliver functionality that the operating system has, and those packages, in general, are cohesive. And we are distributing
updated packages, including updates like our data access package.
"Data access package"? Does he mean "Access", the application?
q. And those are being packaged as dll's?
a. Yes, that's right.
q. Is package better for you?
a. Yes, that's fine.
Heaven forbid the word "application" slip into the conversation. No Microsoft employee knows what those things are, right?
q. There is a large number of dll's in the windows operating system; correct?
a. Yes, there are.
q. And you are taking some, but by no means all, of those dll's, and then you're including them in Office 2000, which is an application program, and you are sending it out to users; correct?
a. Yes. There is updated Windows functionality that we need to take advantage of. So, to make sure that functionality is on the user's computer, we are distributing it with office 2000, just like other
ISV's have the option to do.
So. It is real easy to ship required technologies along with the applications?
the court: Is this coming out as a cd-rom?
the witness: Yes. In general, your honor, that's the form.
the court: Okay.
Sounds like the judge understands very well the line of questions.
by Mr. Boies:
q. And office includes separate application programs; correct?
a. Let me be precise about that. Office is an integrated--office is an integrated package, and within it are programs that are also sold separately.
q. Office is an integrated package, in your terms; correct?
a. Yes.
q. And in that integrated package are the word program and the excel program; correct?
a. Yes. They're included in the overall office, which, when purchased as a whole, has an integrated design.
And, the Pro Version even includes Access, the data base management system, yet another integrated application sold and distributed separately because of separate and distinguishable demand.
q. You have designed word and excel, among other things, to be integrated together into office; correct?
a. Yes, that's correct.
Mr. Burt: objection, your honor. It seems we are getting far beyond the scope of Mr. Muglia's written direct and supplemental.
Finally, the attorney from Microsoft realizes that one key argument for defending Microsoft is going down the tubes.
the court: If he hadn't asked him, I would have.
Damn right. And, he should. Microsoft has been arguing for weeks that integrated products must be sold to all customers. Legitimate reasons might be
based upon efficiency, etc. But, this line of questions and the answers from Mr. Muglia clearly point out that the argument is a bogus one.
Mr. Boies: and I have just a couple more along this line, your honor.
the court: all right.
(, I'm with you.)
by Mr. Boies:
q. Now-
a. Could you ask the last question because I'm not sure I have an answer on the record. I'm not sure if I do or not.
q. All right. Microsoft has an application program called "Word"; correct?
a. Yes, we do.
q. Microsoft has an application program called "Excel"; correct?
a. That's correct.
Mr. Boies knows he is not going to get a "correct" answer on the next in this line of questions, so he just skips it. But, it is obvious to all.
Not in the transcript: Microsoft has an application called "Internet Explorer"; correct? That's correct.
q. Microsoft also has a program or a package that's called "Office" that includes both Word and Excel and some other things all integrated together into a new package; correct?
a. Yes. They're designed to be integrated, yes.
q. And--
the court: And it's got IE in it?
the witness: The current version--your honor, the current version does not. Office 97.
the court: 2000?
the witness: The 2000 does.
the court: Both have ie?
the witness: it does in the sense that we needed some of the facilities that IE has.
Well. Or a browser has. Microsoft could easily design Word so that Access is required but they have not. Excel for that matter, but they have not.
the court: all right.
by Mr. Boies:
q. And Word and Excel will still be sold separately by Microsoft; correct?
a. Yes, they will.
q. Even though they are integrated, in your words, together with IE in the office package?
a. I'm confused by--you said with IE. IE is a set of Windows services that office takes advantage of. The way I might say that is that office is an integrated package overall. It was designed to be
integrated. We produced, because our customers would like us to produce it, a separate word-processing program that we derived from the overall integrated office package and a separate spreadsheet
program.
"But we screw any customers who might want IE as a separate application. Or might want to only buy one browser application."
q. You had a separate Word program and a separate Excel program before you had an integrated office; correct?
a. Yes, we did.
q. And you have described office as including Internet Explorer; correct, sir?
a. Yes. Office uses the updated facilities of Internet Explorer 5.
q. I'm not saying what does it use. I'm saying it is described both by you and by Microsoft as including Internet Explorer; correct?
a. Yes.
But, it does not say it includes Windows 98, the OS, right?
q. Okay. Now, what you describe as Internet Explorer and Word and Excel and, perhaps, other things are all integrated together into a new package that you call "Office"; correct?
a. Yes. It's an integrated design, yes.
So. Even if you are not forced to buy IE with the OS, you will be forced to buy IE if you use any other Microsoft product? Is that right?
q. Okay. Let me ask you to--do you have your deposition up there?
a. I don't believe I do, no.
q. Let me hand you your deposition in this case.
(document handed to the witness.)
q. And let me ask you to look at page 313.
a. I'm sorry, three one three?
q. And for context, let's go back to 312.
a. Okay.
q. And in 312, you're talking about office and the functions of office and the various things that are, as you have put it, integrated into office; correct?
a. Yes, that's correct.
q. And then on page 13, lines 7 through 13, (reading):
"question: But that's not a reason, I gather, not to offer the product separately-Word and Excel separately, is it?
answer: Sure. Of course not. Again, we're just providing choices for customers. We're saying if people want to buy just a word processor or spreadsheet, they have the option to do so."
q. And I take it you agreed with that testimony when you gave it?
a. Yes.
q. And you would agree with it today; correct?
a. Yes.
End of case. Microsoft is going to have a real hard time trying to convince anyone that it is necessary for all consumers to buy IE based upon its so-called integration when it does not force all Word customers to buy the Office Pro Suite. Or, the Excel customers to buy the Office Pro Suite. Or, the Access customers to buy the Office Pro Suite.
Microsoft clearly and absolutely acknowledges the fact that even when applications are designed to work with other applications or operating systems (call it integrate if you wish) they do not force all users of those applications to buy the entire suite. Why? Because separate demand exists. But, the real reason is that a monopoly product is not present with enough power to force the sale of the entire suite at all times.
This case is about bundling IE with the OS. The next case is about bundling IE with the Office Suite.
It is absolutely clear that Microsoft will use product bundling to preclude key competition if it can possibly do so.
So if you use any Microsoft products you will have to help preclude competition to Microsoft in the internet.
1:25 PM PST - Mr. Muglia continues to point out how important it was to force the distribution of IE upon all consumers (at their expense)
the court: is this redefined platform up here what has been referred to as "polluted java"?
the witness: no, your honor, it's not. In fact, the whole redefine the platform up there doesn't really refer to java at all. It refers to an alternative way of people delivering internet functionality instead of java. in this time frame this presentation was written, which, I believe, was the fall of '96, the message we were giving developers was, instead of using sun's java platform to achieve cross-platform support, use a combination of html and scripting together with active controls, which Microsoft believed we had leadership in. so, it was an alternative to java, polluted or not.
the court: and whatever version of java you included in ie was in addition to whatever this redefinition of the platform represented?
the witness: yes, your honor.
the court: all right.
Well. So much for the cover story about integrating the browser is supposed to improve the experience for consumers. First only consumers who already want IE are so helped by being forced to buy both up front. Two, everyone else is harmed.
But, what is very clear here is that it was a very important strategic objective of Microsoft to make absolutely certain that all consumers bought, installed and ran IE.
By the way, his answer "no" was incorrect. "Yes" would be correct. The judge suggested the Java being distributed was the "polluted java" and that is correct. Microsoft is forcing the distribution of Microsoft's polluted Java not Sun's.
1:00 PM PST - Sounds like Mr. Muglia thought it was really, really important to force all consumers to buy IE.
q. And it says the third item, "Microsoft's ability to lead java developers is largely driven and limited by IE's share." Do you see that?
a. Yes, I do.
q. Did you agree with this statement back in the fall of 1996?
a. Yes, in a complex way, which is that we are--one of the things that Internet Explorer has is it let's developers build html-based applications. And one of the key ways that we saw ourselves competing
with Sun was in getting developers to write to HTML instead of Sun's Java-Sun's Java platform. especially in this time frame. People saw those as alternatives. They could just write a web page, or they
could write a Java applet. They essentially present the same functionality in different ways. And by leading an HTML, we saw ourselves able to compete against Java and Sun.
Sounds to me like the strategic reason for bundling IE with Windows has a lot to do with Java and Navigator. Sounds like the only reason IE is bundled is related directly to the harm it will cause to Netscape and Sun. Forcing the sale of IE and forcing the distribution of Microsoft technologies does serve to preclude competition.
Microsoft has made a lot of comments on the court house steps about the DOJ failing to show harm to consumers. Well, we still do not know how much consumers are being charged for IE, but the real point here is that harm to consumers does not need to be shown for antitrust violations. If competition is precluded and real and fair choices are removed from the market, harm to consumers can be assumed. Not necessarily in the price for products but simply in the lack of competitive alternatives.
Mr. Muglia's suggestion that HTML is going to compete with Java is bogus. In some limited ways it might. But even Microsoft bogus Java does that. Mr. Muglia's is just trying to avoid testifying truthfully. IE was intended to force the distribution of Microsoft's polluted Java not to offer HTML competition to Java. Netscape's HTML would do that too. But, Microsoft was doing everything ti could to make certain that Netscape was unable to offer Navigator to the market in any reasonable fashion. Being able to give away product does not qualify as reasonable, unless Microsoft wants to give away its OS for the next five years. But, you know that Microsoft would cry foul if the court suggested that remedy.
12:30 PM PST - Microsoft is truly duplicit in its arguments - Fragmentation for Java is great but all Windows must boot the same?
q. Now, my question is regardless of where the fragmentation of the java platform came from, did Microsoft believe that it was in Microsoft's interest to have that fragmentation occur?
a. Yes. In essence, that's true. in this case, remember I was saying fragmentation is really a word, and particularly with java, meaning choice, different choices for developers. and it is in our interest to have more choices for developers, yes.
Yes. Yes. Yes. Choices for developers. But where is Microsoft when OEMs want choices? Or, consumers want choices. "Oh screw OEMs and customers", says Microsoft Corporation. "We have the raw power to tell them all what they must buy and sell."
Microsoft does not argue on the basis of principals at all. They only rationalize illegal acts.
I really need to apologize for the language I use here. But, Microsoft is making me sick. If their witnesses and lawyers are going to present a defense on the
basis of a principal or legal argument, they should at least be consistent during the same day.
12:02 PM PST - Polluted, sabotaged or fractured, the term used is not really important.
q. And this states that the strategic objective for j-plus-plus 6.0 is to kill cross-platform java by growing the polluted java market; correct, sir?
a. Yes, that's what it says.
q. Now, in terms of the use of the word "polluted" here, is it fair to say that what your interpretation of that is is that it is not necessarily something bad but simply something different?
a. Yes. let me try to be clear about this. When we say "polluted," it is a sort of sarcastic response to one of Sun's marketing programs for cross-platform Java. Sun often referred to programs that were
written to run purely cross-platform as pure, and they would--they made statements that if you had even a small amount of noncross-platform code--in other words, a small amount of native code in
it--that they were no longer pure. So, sometimes internally within Microsoft, we referred to programs that were written with native code, particularly and generally programs that were written for the
windows platform using the sarcastic phrase "polluted," again in reference to Sun's marketing program "pure."
That is fine. But Microsoft is making a big stink about OEMs being able to modify something as mundane as the start-up screen in Windows. And, what is the argument made in that regard? Consistency of the experience, right? As if the video show that all consumers must first see must be similar. The first thing that customers see does not need to be similar at all. There is no reason for that. None. But, here Microsoft acts to sabotage cross platform Java. That is significant. That act is and was intended to harm the Java Trademark itself. That act was intended to harm the intellectual property of another company. None of the OEMs wanted to harm the Windows trademark, did they? None of the OEMs wanted to change anything in Windows so that it would not run Microsoft applications, did they? None of the OEMs wanted to extend their version of Windows so that custom applications would only run on PCs purchased from that OEM, right?
Microsoft is not only duplicit in their arguments but they use their monopoly power to prevent any appearance of harmless fragmentation of their technology while violating a license and sabotaging the trademark of another company to hold off possible competition. Do the lawyers really think that no judge is going to notice that they argue for and against the same concept on the same day to justify two illegal acts?
11:45 AM PST - Robert Muglia clearly says that Microsoft's intent was to make Java proprietary to Microsoft - a theft so to speak
q. Was it also part of what you were doing was attempting to use your tools to get developers to write programs that would not be cross-platformed?
a. Well, yes, in the sense that our tools provide--at this time, our tools were primarily targeted at building cross-platform java programs, although there were attributes of the tools that let developers
create programs that were specifically for windows. but certainly yes, our tools make it easy, once again, to have developers create windows applications, that is, applications that only run in the
windows environment.
Microsoft really does understand this "fracturing" concept. Microsoft wanted to fracture Java so as to prevent that technology from serving consumers and at the same time acted to prevent any "fracturing" of its startup or boot-up sequence which might leave open an opportunity for Netscape. Microsoft understands fracturing very well. In this case, they violate the law to prevent it (Netscape) and violate the law to cause it (Java). Just this morning Microsoft put Mr. Kempin on the stand and had him testify how important it was that no OEM sabotage the start screen for Windows (pretty much a non-event) and now Microsoft puts Mr. Muglia on the stand to convince the judge that two versions of Java helps out consumers. It is duplicity extra ordinaire.
11:35 AM PST - As long as Microsoft does not violate the law, they are free to develop anything they want.
q. Did Microsoft plan to use its tools division as an element of its response to what it perceived to be the java threat?
a. Well, yes, in one sense. Absolutely, Microsoft was using its tools then, and still is today, to help developers write great applications for Windows. So, in the sense that our tools enable developers to
build applications and in particular our tools do a really good job of helping developers build Windows applications, yes, it was part of the competitive--it was part of our overall competition with Sun
and their alternative Java platform.
Well. Microsoft can write a disparate version of C++ too if it wants to. Or, it could not write any Java stuff. But, as we all know, Microsoft wrote an inconsistent version of Java, a trademarked product and a product licensed to Microsoft by Sun. If all Microsoft wanted to do was write a better development system for Windows, it could fix their C++ compiler, right? But, they specifically chose to write a fractured version of Java so as to sabotage the cross platform value of the Sun product. It clearly was not necessary to violate a license agreement and fracture the Sun trademark just to help Windows developers write better applications. Multiple languages are available on Windows to do that.
Microsoft's cover story for their illegal acts just does not make sense. Microsoft even had to break the law and their license in order to act that way. Microsoft did not have to break the law nor any license to improve their own C++ or Visual Basic, did they? Clearly not. They wanted to sabotage Java and directly harm the property of another company, Sun.
11:25 AM PST - Robert Muglia points out why Microsoft does not act in the best interest of its customers at all
q. And when you talk about application writers who write to awt are potentially opening up the opportunity for your competitor to slide in its own operating system offering, can you explain what you
mean by that.
a. Certainly. What I meant by that was that sun's strategy, the strategy that they had been pursuing since 1995, as I understood it, and were still pursuing at this time was to offer developers a
cross-platform set of class libraries and a cross-platform platform, in essence. and what they were trying to do was get developers to write to that alternative platform. so, even if--even if a developer
wrote a java program and that program runs on windows, even in the case where it runs on windows, it's not written to Microsoft's programming interfaces. so, when I said slide in their platform, what i
meant is that they could, in essence, make what everything else that our platform did irrelevant, thus enabling to replace windows and make it obsolete, so to speak.
Well. Making an application cross-platform is of tremendous value to a customer. What is very clear by the reaction of Microsoft to this concept is that
their interests are diametrically opposed to those of their own customer. Microsoft is like a drug dealer who has customers hooked on cocain. Clearly
Microsoft is opposed to anything that will remove their addiction.
11:10 AM PST - Robert Muglia takes the stand. Mr. Boies conducting cross-examination
q. Now, let me ask you to go down to the next paragraph. You begin by saying the windows franchise is fueled by application development which is focused on our core API's. and then you say, "when
a developer writes an application to AWT, even if they are using windows and visual j-plus-plus, they are not supporting our platform. Instead, they are furthering Sun's momentum, potentially opening
up the opportunity for our competitor to slide in its own operating system offering." Do you see that?
a. Yes, I do.
q. And I take it that you agreed with that when you wrote it in 1996?
a. Yes, I do. And did.
q. And do you agree with it today?
a. I still do.
This dialog is not very exciting. However it does introduce Mr. Muglia to the trial. Robert Muglia is in charge of J++ at Microsoft. This question and answer simply points out why Microsoft viewed Java as a competitor. It is not because Java is an operating system. It is not. But rather it is simply because Java being a cross-platform solution reduces the dependancy of an application upon the underlying operating system. And, of course, Microsoft knows full well that most of its monopoly power is based in the lack of alternatives in the market and the dependancy that applications have upon Windows. This is Java reduces the dependancy, the power of the monopoly is reduced. Note however, that an operating system is still required. So using Java does not necessarily replace Windows. It only reduces the strangle hold that Microsoft has on developers and consumers.
How is this testimony important in this case? Well. Mr. Schmalensee, the economist from Microsoft testified that no barriers to entry existed for competitors to Microsoft, right? I mean, he went to great pains to throughly discuss a whole range of concepts or ideas related to how hard it was for a competitor to introduce a competitor to Windows, a consumer OS. Upon each occasion he concluded (falsely) that no barriers exist. Yet, here we have Robert Muglia testifying that the entry of Java and Netscape upon the scene is so significant (even though neither is an OS) that Microsoft considers them a "threat". If Mr. Schmalensee was correct then Robert Muglia and Bill Gates need to have their heads examined, because if Mr. Schmalensee was correct there was nothing to the concept that developers and consumers were bound to Windows anyway. All this testimony proves is that Mr. Schmalensee testified falsely. Java is not an OS. And, Java could only be a threat if it reduced the barriers to entry. But, Mr. Schmalensee said there weren't any. So one witness or the other is lying.
Mr. Schmalensee presented the false testimony.
10:00 AM PST - Direct Testimony of Robert Muglia released
February 26, 1999 - Friday (review of Thursday transcripts and today's news)
7:00 PM PST - Mr. Kempin confirms the plan to get third parties to promote Microsoft platforms at the exclusion of any competitor
q. And then you go on to say, "with the appearance of IE 4.0 and beyond, we will add more features to the standard windows desktop by adding pointcast-like third-party services and/or advertising."
do you see that?
a. That is correct.
q. And was that a true statement?
a. I believe at that point in time, it wasn't quite clear what we would do, but I think this was the best i could--i could say at that point in time. I think we were still discussing this.
q. The next sentence you say, "in all cases we're planning to give third-party service providers an advantage to be part of the original feature set if they work closely with us to promote our platforms
and, thus, help us strategically." do you see that?
a. I see that. wait a second. Wait a second. yes.
q. And was that a true statement, sir?
a. I believe it was.
Well. It is pretty clear that Microsoft plans to use its desktop and advertising value to get third parties to promote Microsoft platforms. This is just one activity that only a monopolist can engage in. And, such an activity would clearly further the power of the monopoly to the detriment of any and all competitors.
What does this ability to get third parties to promote Microsoft products have to do with the merit of those products? Nothing, right.
How can platform competitors compete? Microsoft and all its OEMs and ISVs and ISPs are promoting Microsoft products or they are left out, right?
6:40 PM PST - Netscape's revenue directly related to the ability of OEMs to list ISPs and Browsers?
q. Sure. It was a long question and awkward, and I apologize. It is late. Netscape makes money from ISP's in conjunction with OEM shipments, is what Mr. Akerlind says. And I take it, although you
don't recall that, you don't have any reason to dispute that?
a. He might have found out about it.
Okay. We know a key source of revenue for Netscape, right?
q. Okay. Now, did the exclusion of Netscape from the ISP signup process that oem's were permitted to use, was that something that affected Netscape's ability to make money from ISP's in conjunction
with OEM shipments, as Mr. Akerlind says here?
a. I have no knowledge about that.
No knowledge? Right. It appears very clear why Microsoft acted to preclude or limit what OEMs could do on the startup and boot screens.
6:10 PM PST - Pricing and competition for Windows: There is none. The Windows price is set by Microsoft unilateraly.
q. Let me ask you to look at your deposition from October 1, 1998.
(document handed to the witness.)
q. And i'm interested in the questions and answers that begin at line 22 of page 21 of your deposition. and this is a question about what factors you considered in deciding what the level of windows 98
royalties in the oem channel should be; is that correct, sir?
a. Yes.
q. And then there is at line 25 a question, (reading):
"question: in considering what the level of the royalties should be, did you consider what royalty other vendors than Microsoft charged for their operating systems?
answer: we look at some of them once in a while, but in this particular case we really compared it with windows 95." and am I correct that when you refer to "in this particular case," you're referring to setting the royalty rate for windows 98, sir?
a. That is correct.
q. You then continue, (reading):
"question: why is that?
answer: it was the closest in value you could get to.
question: did you consider competition more generally in considering what level royalties for windows 98 should be?
answer: again, I said I look at the competitors, but windows 95 or 98, when it comes to value propositions, it just doesn't come close to anything else. Meaning, I believe, the competitors are basically selling inferior-type products.
question: what is the basis for your belief to that effect?
answer: it's the simple fact that the number of applications, peripheral devices, support on that platform, basically, is so huge that the benefits for buying into that platform is huge."
Was that accurate testimony at the time you gave it, sir?
a. It was, yes.
q. And is it accurate today?
a. Yes, it is, but at the same time--i mean, windows 95 lives in a competitive environment, and I don't think i denied that. And there may be more to a competitive environment than just operating
system vendors who are trying to sell operating systems. so, with that in mind, I would say the testimony is correct.
q. Okay. Let me continue on page 23, line 7, (reading):
"question: did you have any understanding as to why the number of applications written to the windows 32 platform is greater than for other operating systems?
answer: because most independent software vendors and component vendors basically design for this platform or write software for that platform.
question: do you have any understanding why they do that?
answer: because it's the highest volume platform there is.
question: what do you mean, `the highest volume platform'?
answer: in absolute terms, it sells the highest number of pc's in the industry.
question: and how does this relate back to what ISV's write their applications to?
answer: I mean, if they have--if the number of pc's sold in that platform is way higher than any other platform, they expect to sell more. I mean, they see a correlation there."
q. Was that accurate testimony at the time you gave it?
a. That is accurate.
q. And is it accurate today?
a. Probably is. at the same time, I believe that ISV's, even if they have a high correlation in volume, do not see this always as the most profitable strategy for them. I mean, I have a bunch of friends in
germany that do very well on niche markets, and they would not write for windows. So, this is not true for everybody.
q. Certainly, there are some software manufacturers that do write for niche markets--i don't think anybody is denying that--but that's not what you were talking about here; correct, sir?
a. No.
This dialog is important. Very important. One of the considerations that must be taken into account when deciding whether a company has a monopoly or not is based upon whether the company prices products competitively or unilaterally. Clearly Mr. Kempin is testifying that no other product was considered when setting the price. He does mention Windows 95 but that is just a prior version. I suppose 1999 Fords do compete with 1998 Fords, but they do not count as competitive products. This testimony not only helps the DOJ prove its case, but it contradicts the testimony of the Microsoft economists that tried desperately and hopelessly to prove that Windows98 has competition. Remember? The economist made up ghost stories and stories about pirates and claimed they were all highly significant competition. The fellow also suggested that Linux and the BeOS were right there in the front row. Well they may exist. But, if Mr. Kempin did not consider them in setting price, that issue is about rapped up.
Just how much more Microsoft is charging for IE being included is not clear. Clearly it is an undisclosed amount. But, even Mr. Kempin suggests quite clearly that the feature set does determine the total price. Of course it does. And, if the OS did not contain IE the feature set is considerably less, right?
6:00 PM PST - Microsoft again offers testimony that the price for windows goes up as features go in.
q. Okay. Now, you were responsible for setting the license fees for windows 98, were you, sir?
a. That is correct.
q. And am I correct that in setting the license fees for windows 98 what you primarily looked at was the license fees for windows 95?
a. That is correct, because when you do a feature-to-feature comparison, that's the closest you can get to. And at the same time, windows 95 was in the same competitive environment.
Well. A former version of the same product is not considered to be a competitive product. But, it is nice for Mr Kempin to note that the price of Windows is a function of its features.
5:30 PM PST - Ah. Mr. Kempin admits the customer must use IE regardless of their choice. Because Microsoft wrote it?
q. And in addition to that, with respect to windows 98, the way that windows 98 is designed, even if you make Netscape navigator the default browser, internet explorer will still launch in certain
circumstances; correct, sir?
a. I believe that is correct, because it is our product.
I thought he testified a few minutes ago that OEMs are not restricted and they are only responding to consumer demand. But, now he admits that IE does
fire up upon occasion regardless of the consumers choice of browser because "if is our product". Well. The reason IE is bundled with the OS is because IE
is the Microsoft product. Bundling, forced sale nor forced use is justified just because Microsoft wrote it. Mr. Kempin might think so. Apparently he does.
Apparently Mr. Kempin thinks that IE can be force fed to all consumers because Microsoft wrote it?
5:15 PM PST - Mr. Kempin does not understand how forcing consumers to buy IE can harm them?
q. All right. Let me turn next to the issue of what pressure, if any, Microsoft puts on oem's. and is it the case that from time to time Microsoft has told oem's that they disapprove, or that Microsoft
disapproves, of what the oem is doing with Netscape?
a. I don't think so because the oem's truly have their own--determine their own destiny, and I have a hard time to believe that we can really tell them what to do, because at the end of the day, they sell
what the customer demands.
q. Well, sir, if the customer wanted to have only one browser and wanted that browser to be Netscape, the oem couldn't provide that, could they?
a. The answer is "no, but." It takes two mouse clicks as an end user to remove that browser from the machine, so what harm was done to that end user?
Compaq is an OEM. Did they control their own destiny? Mr. Kempin is a first class liar. How is the OEM going to sell what the customer demands if Microsoft forces OEMs to sell IE? And, Windows for that matter? Is Mr. Kempin really this dense? I guess he forgot all about threatening Compaq. And, of course he knows nothing of Linux customers being forced to buy both the OS and browser from Microsoft.
"Customer demand". Mr. Kempin is flat out lying. Even his "no, but" answer is wrong. The customer can not remove IE from Windows with a few clicks.
Microsoft is truly a repressive company. They force the sale of their products and then get employees to testify in court that since an icon can be deleted, no consumers are harmed by their illegal acts.
Just how much do customers pay for IE, anyway? It is clearly not zero as Mr. Kempin wants to suggest here. Even Mr. Rose from Compaq testified the price went up as features have been added.
5:00 PM PST - Better mousetraps do not need to be sold together with the cheese.
q. Yes, you were trying to build the best mousetrap, but you needed something more than the better mousetrap. You needed windows integration so that Netscape never got a chance on the oem shipments; correct, sir?
a. That is not correct because I considered integration part of the product advancement. Integration is goodness. every single manufacturer who has--who is--who works in product tries to integrate that product over time, make them all efficient and put more features in. That's how i see that. I think it's a great idea when you want to change the ground rules on a competitor to do this.
Integration can improve products. But, integration has never required product bundling. The only reason to bundle the product is to guarantee the sale. Each time Mr. Kempin discussed the integration he refers to the impact that integration has upon Netscape rather than the benefits to the consumer. There are no benefits to the consumer. At least not any that can not be realized by separate products such as Word and Excel.
What Mr. Kempin likes about the so-called integration is that it blocks Netscape from the market. That can be accomplished simply with some scotch tape. Now, there may not be a legal defense available if Microsoft uses scotch tape. But, did not Microsoft just release IE 5 for downloading? That is a separate distribution. So clearly, the benefits of the mouse trap do not nor have they even depended upon simultaneous distribution by the OEM or anyone else.
Microsoft defense in this regard is a total fabrication.
4:40 PM PST - Is it stupidity or false testimony?
q. Mr. Kempin, let me continue with the document that we were looking at, which was the May 27, 1998, marketing review. And the last item on this page is headed "conclusion."
a. Could you do me a favor? Give me the reference number here because I closed it up. I can't see it.
q. It's 655 at the bottom right-hand corner.
a. Yeah.
q. And it says here, "conclusion, OEM's are the best vehicle to gain browser share." do you see that?
a. Yes, I do.
q. Was that an accurate statement as of may of 1998?
a. I personally never saw it that way. The person who presented it saw it that way, so I would say oem are one vehicle of gain browser share, would be my judgment.
q. Did you say one of the vehicles or one of the best vehicles?
a. I would have said one of the vehicles.
Are there other vehicles? Sure. But, Microsoft has the OEM channel locked up as tight as possible. 100% of all OEMs must distribute IE to all customers.
We have prove of Mr. Kempin's stupidity if he really thinks that some other channel is going to be more important. No other channel is ever going to offer a pre-loaded and ready to go browser, right? With 100% penetration? And, Mr. Kempin, on the stand, says "I personally never saw it that way"?
The only reason Mr. Kempin finds it so necessary to give false testimony here is because the OEM channel locked up by Microsoft. So of course he is going to deny how effective that channel is to get customers to use IE. But, clearly, the intelligence he is displaying would barely qualify him for a job as janitor at a software company.
4:30 PM PST - Mr. Kempin does not know that customers do not have freedom to avoid the use of IE? Or is he just lying again?
q. And under those circumstances, if somebody was getting a good browser with their computer, do you understand why that would mean that the number of people who would use the browser that simply came with their computer would go up?
a. You're correct. This could happen. At the same time, you never know what a user does with this computer because he has total freedom. And before i, you know, say it was 15 percent three years ago and 20 percent one and a half years ago--again, I can say I have not seen a good statistic about it. Personally, I don't.
I thought Microsoft hired intelligent people? Here, Mr. Kempin asserts that users of Windows have the choice of using the browser of their choice. But, we have had testimony in this case that clearly illustrates his claim to be false. Earlier testimony laid out 3 instances where IE was hardcoded to be used by the customer regardless of their choice. Now either Mr. Kempin is ignorant of this or he is lying.
Either way his intelligence is in question. Apparently he can not understand how if users are forced to buy IE and at least use it upon a few occasions that their use of IE would not go up.
I am getting very tired at hearing so-called intelligent people testify as if they are stupid or ignorant. They are neither stupid nor ignorant. So, I assume they are lying before the court. The only question is whether it is perjury or just lying.
4:00 PM PST - Such passion.
q. That is, you told them you were going to cancel if they didn't put the ie and the msn icons back on the desktop; correct?
a. That is correct. and I think we actually extended that period in order to accommodate them, because we didn't want them to ruin their production lines.
q. You didn't want them to ruin their production lines, but you wanted to make them put the msn and ie icons back on the desktop; correct?
a. That is correct.
I am beginning to think the comments coming from Marc Andreessen are appropriate. Knowing how Microsoft treats Compaq when it is important to Microsoft to preclude Netscape, I have little doubt that Mr. Andreessen expected a bloody terminal to show up in his bed by morning.
Microsoft's corporate culture is truly corrupt. Much of what they do is more representative of organized crime that it is of the computer software industry.
3:50 PM PST - Oh. But we did not really cancel Compaq, we just threatened them with the cancellation. Oh, ok that is different.
q. Is it fair to say that cancelling an oem's license is a very big step for Microsoft to take?
a. Yes. And we do not do this easily.
q. Right. And was this one of the steps that was taken in the second half of the fiscal year of 1996 in order to make oem's support Microsoft's internet browser efforts?
a. I do not think that's correct. I think the step with compaq and not with the other oem's--because I don't think we terminated any other license agreement--was done in order to restore the original
windows 95 product, and i believe compaq totally understood that. in addition to that, let me make aware--let me make you aware that we didn't consummate the agreement as far as we know. We sent
the letter with the intent to consummate and gave them a cure period, if i'm not mistaken. And it was cured within that period.
Oh. This must have been hard for Microsoft. Threaten to cancel the availability of a monopoly product to a major OEM because they failed to honor an "oral promise" made in a phone call? Mr. Kempin is correct. Forcing Compaq to promote IE must have been really important. What did a Microsoft employee say about undefined terms in written contracts not being important? Who was that guy? Did he not tell the judge that such terms were meaningless and should not held against Microsoft? Yet, an oral promise from Compaq is enough for Microsoft to threaten Compaq with bankruptcy?
3:35 PM PST - Did not the Godfather kiss the forehead of one of his soldiers before he sent him off to be murdered? Or was that his brother?
q. Okay. That was my question.
a. Okay. The "no" part is there was no intent to Microsoft to harm compaq. We have worked for such a long time together, and I think compaq knew that, too. But i believe compaq had made us a
promise, and they broke it, and they basically never followed up on it. And at the end of the day, I think we had to get their attention, as unpleasant as that was. And I think I apologized several times
afterwards about the incident. we have moved on, and we are good partners today.
q. Is it fair to say that cancelling an oem's license is a very big step for Microsoft to take?
a. Yes.
I am really sorry to make comparisons between movies about organized crime and Microsoft business practices. But, this is not my testimony. It is the testimony from Mr. Joachim Kempin.
I thought Mr. Rose testified that the oral agreement was a license agreement of some kind. Now, here, Mr. Kempin calls the representation in that phone call a "promise". Well. Legally, a promise is not a contract nor a license. Yet Mr. Rose testified that they were acting in such a way because they were required as such because of terms in an oral license agreement reached during a conference call.
All Microsoft "partners" should really be forewarned by these illegal acts. Any OEM or ISV can be subject to extortion at any time. The only question is whether you (and I do mean "you") capitulate to Microsoft's demands (legal or not) or run the risk of being removed from the market as Netscape has been.
2:30 PM PST - And, I am sure the mafia attempts to work out differences before they break the legs of a guy who can not pay his bill.
q. Okay. Now, is it also your understanding that compaq believes that it does not have, and in 1996 did not have, any viable competitive alternative to the windows operating system for its pc's?
a. I believe that I read john rose's testimony, and i think he testified to that. and naturally, what I believe he meant was for a short time because they could have always started another effort to overcome
that, number one. and number two, I think when you take a hard look at Compaq as a company, I believe john rose testified further that they were committed to the environment, so they had made a
management decision based on this environment. and I think the way we worked together, we normally iron out our differences.
Sorry, Mr. Kempin. Cutting off Compaq to force them to put icons back on is not "working out differences". That is called extortion. In the long run,
maybe not. But in the short run it clearly is. It is clearly an flagrant abuse of monopoly power.
3:10 PM PST - Did Compaq begin distributing Navigator in an attempt to put Microsoft in a better light for this trial?
q. Well, sir, you say they just decided to put navigator on. have you ever had any discussions with compaq as to why they decided to put navigator on in january of this year?
a. I personally had not.
q. Do you know somebody who did?
a. No.
q. Okay.
a. I just know they put it on; that's the only thing I'm saying.
q. All you know is they put it on. do you know how much money Netscape had to pay to have it put on?
a. I have no insight in that.
q. Do you know how long compaq has committed to keep it on?
a. I have no idea about that.
q. Do you know, in fact, whether compaq has any obligation to continue to do it other than just month by month?
a. I have no idea. The only thing is they're doing it.
Why do you suppose Compaq decided to put Navigator on their machines? 1) to help Microsoft in this trial? 2) customer demand 3) go ahead guess. It is clearly is not because their minimum package required a browser, right? IE is bundled. So why would Compaq also go back to distributing Navigator?
Of course the Microsoft employee in charge of OEM relations knows nothing about that? And, the lawyers for Microsoft and Compaq? They would know
nothing. And, Engstrom seems to not know about it. But, for some reason, the economist, Mr. Schmalensee knew all about it back in December of 1998
before it even happened. So somebody prepped Mr. Schmalensee.
2:45 PM PST - Why all the fuss over browser usage versus browser distribution?
q. I'm just really trying to get the data that you looked at five or six months ago that compared ie's share of distribution through the oem channel with Netscape's share.
a. Yeah, I believe I got a little confused by your question, and this is truly my mistake, because I believe that I remember was ie usage, not share. I'm not sure if we actually track share. I have seen some
figures about ie usage for customers, and I might--i might just mix that up in my head.
There is an interesting observation to make in regard to Microsoft always insisting upon browser usage as opposed to browser distribution.
In most of the e-mails, etc., they just refer to browser share. And, of course in bundling IE with the OS they are assured of 100% distribution. But why all the focus upon "usage"? There are three reasons. One is that browser usage can be measured currently on the internet, right? Second, browser distribution would be very high because it is bundled. Browser distribution currently is 100% and that number would clearly be damaging to Microsoft so they do not want that number. And, finally, actual usage would be a much smaller number. Some users do prefer Navigator. So, even if 100% of all new customers must buy, install and sometimes use IE, some of them may use Navigator once in a while or all the time they can. Well. Microsoft wants to avoid antitrust liability by showing that they have not yet wiped out the use of Navigator. The use of a browser will certainly lag behind the distribution. Currently the distribution is 100% for Microsoft systems (it even covers Apple systems). On other platforms the numbers vary.
All Microsoft witnesses have a memory problem with they discuss "browser share" or "browser distribution". They just can not seem to be able to use those words. Browser usage is small enough now so that they do not feel so quilty. In time usage will catch up with the forced distribution.
Microsoft has brown nosed both Compaq and Gateway directly into dropping Navigator and using IE. They sent their goons over to take care of that problem.
2:40 PM PST - For Mr. Kempin, a 100% probability is a "could be"?
q. And first, would you agree that the OEM channel is one of the two most important channels for distributing browsers?
a. That could be.
q. Well, when you say "that could be," is it your understanding that that is true?
a. For distribution, yes.
Well. If 100% of OEMs are forced to distribute and pre-install IE, anyone would have to say more than that form of distribution "could be" an effective method. It "is be". If OEMs could distribute either IE or Navigator with equal ease then "could be" might be correct. But, Microsoft literally forces the distribution of IE via the OEM channel.
2:12 PM PST - Being able to bundle the OS and IE when Netscape can not do so does not mean that benefits consumers nor does it mean it is legal.
q. Okay. (Mr. Boies allows Kempin to continue a former answer)
a. So, the answer is, we needed a better product in order to attract more users. And for me, the integration was one way of doing that, and Netscape just couldn't respond to that because they choose not
to respond to that.
q. Well, sir, Netscape couldn't respond to that, among other reasons, because they didn't have an operating system to combine it with; right, sir?
a. Wrong.
q. Okay. Tell me what operating system they had.
a. There are a lot of other responses to integration than--there are lots of other responses to integration.
q. Let's take it one step at a time.
the court: why do you think integration made it a better product? What did it do as an integrated product that it didn't do otherwise?
the witness: I hope that, personally, I hope that jim allchin has shown some of that here in court.
the court: he's helped, but I would like to have your view on the matter.
the witness: and, I mean, my view was that having an integrated help system, have it much easier to basically organize the computer, and--i mean, have over time no differentiation between if you're on your file system on your hard drive or if you're on the net when you work. I think these are all very compelling reasons, i believe, for users to like that product a lot, better than it is not integrated. But at the same time, I just believe that Netscape could have just, you know, gotten their act together and came out with a big bang, with a real hit product, and so far I haven't seen that. these are things they could have overcome; no doubt about it.
the court: you thought that the consumer derived some benefit from knowing whether or not he was on his hard drive or his file system or on the internet; is that right?
the witness: I believe so. It was very seamless for them.
the court: all right. Why do you think that that assisted the consumer?
the witness: in a way, i'm a computer user myself.
the court: okay.
the witness: and I like that much better than having to figure out what a, b and c is, and switch between different utilities and go on "my computer" and have a different format there and go on the internet and find a different format there. It's already complicated enough. I personally believe that we really simplified the--basically, the operation and the usage of the system for the consumer.
the court: and do you regard yourself primarily as a salesman as opposed to an executive or a technician? is your role primarily sales?
the witness: my role is primarily sales and marketing.
This dialog does bring up a number of issues. Assuming that the OS and IE are better together than the OS and Navigator, does that justify forcing all consumes to buy the OS and IE combination? What if the customer does not use the Internet? Does that consumer still have to buy both? Microsoft Word and Excel are better together than if only one is purchased, right? But, does that justify selling only a "suite" and never the applications separately? The answer is clearly no. In fact the answer gives rise to the explanation why even if IE and OS are "integrated" it does not necessitate nor does it benefit the consumer that they both always be sold as a unit.
Mr. Kempin suggests that the two products are better if a customer buys both. That could be. But, as with Word and Excel, one could be purchased this week and the other the following week, right? If so, is there a difference? The answer is "no", not with computer software.
Mr. Kempin confuses the severe disadvantage that Netscape is in when the products are bundled with "fair competition" or with competition at all for that matter. Bundling precludes it. Bundling harms all consumers now and all but removes any demand to which Netscape might be able to satisfy.
He does suggest that if Netscape offered a clearly superior product, it could still exist or possibly sell a few copies. But, that is not "fair competition". And, it is clearly not competition based upon the merits. Competition on the merits could exist if Microsoft sold IE separately as Netscape is required to do. What features they may have when installed on the OS is where the competition would lie.
Mr. Kempin just wants to be able to force the sale of IE for the illegal benefits. Any legal benefits can be realized without the bundle. Any competition that Microsoft might want to provide can be done with a separate sale.
Is if tough to defeat an incumbent? You bet. That was the point made by the DOJ economists, Franklin M Fisher and Frederick R. Warren-Boulton. It was the Microsoft economist that suggests it was a piece of cake to replace an incumbent in the OS marketplace. Clearly the Microsoft economist has been discredited by none other than Mr. Kempin, a fellow in sales and marketing. I guess it just shows how wrong the Microsoft economist was.
1:50 PM PST - Microsoft can bundle IE and Netscape can not, that is true. But, if that is illegal, Microsoft will do it anyway?
q. Well, you say you wanted to create a better product. Mr. Kempin, is it your testimony to this court, under oath, that the only reason that you combined the browser with the operating system was to
construct a better product?
a. I, personally--the answer is yes. I, personally, believe that our intent was to come out with a best possible product integrated into the operating system.
the witness: I mean, for me, your honor, this looks like there was an incumbent out there who definitely had the leading share of the operating system market, and I believe we changed the ground rules
on him, by saying, "look, if we integrate this deeper, we can give you, end user, a much better product, a much better browsing experience and a much better operating system experience at the same
time, and I hope we were entitled to do so."
There was an incumbent in place, that is true. It was Netscape. And, yes forcing all consumers to buy both does (or may) remove the incumbent. And, yes, violating the law would be changing the rules. Mr. Kempin's answer does go to the heart of Microsoft legal defense. They want to be able to force all consumers to buy all of Microsoft products and be able to force that sale as long as Microsoft maintains its monopoly power and do so simply by making one big monogamous program, such as Windows98 and IE.
Should Microsoft be able to wipe out WordPerfect by integrating Word with the OS?
If all Microsoft has to do to avoid antitrust liability is to combine products, then Microsoft can force the sale of any product it wants, right? Of course that is right.
The real question is whether both products must be sold together in order for the better product to be available to consumers. The answer is clearly "not". Evidence in this trial has already illustrated that.
The only reason both products are combined is to preclude competition. Competition would not be precluded if IE were sold competitively and fairly with Navigator.
Even Mr. Kempin in his answer refers specifically to the disadvantage for Netscape if they bundle the two. Mr. Kempin thinks that "winning" means competition. But, that is not true. Almost all anti-competitive acts "win". In fact they are very effective. They are the most effective.
1:45 PM PST - Product bundling works regardless of product functionality and benefits - does not Mr. Kempin know that?
q. Well, sir, Netscape didn't have an operating system to tie its browser to, did it?
a. No, they didn't, but they had different means and ways to combat us. And I believe that what it comes down to at the end is who provides the best functionality and the best benefits for users. And it
doesn't matter if it's integrated or not integrated. In general, I believe they have to create demand for that product, and we tried it with integration, and I believe they failed to respond.
Does Mr. Kempin really think that when a consumer is told that they must buy IE because it comes bundled with the OS, that the consumer is making a
choice based upon "functionality and benefits"? I thought he was intelligent?
1:20 PM PST - Mr. Kempin calls antitrust violations "competition"?
q. Did you participate in any discussions concerning why Microsoft wanted to make browsers what you referred to as an integral part of windows 95 and windows 98?
a. My answer is I might have, but I'm pretty sure I was not the most important person in the room at that point in time, because I do not design products.
q. Let me ask you to look at government exhibit 53, which is already in evidence.
(document handed to the witness.)
q. And this is an e-mail from Mr. Maritz to you and Mr. Cole with copies to Mr. Allchin and others, dated January 7, 1997. did you receive this e-mail, sir?
a. I believe I did.
q. And Mr. Maritz, in the third line, says, "to combat Netscape, we have to position the browser as, quote, going away, closed quote, and do deeper integration on windows." do you see that?
a. I see that.
q. Was that consistent with your understanding as to why Microsoft wanted to make IE an integral part of windows?
a. No. I believe that the deeper integration into windows was done to basically benefit the person who uses the machine, and that means he will get a better product. and at the same time, if Netscape
could not basically beat that new product in the marketplace, I know that was unpleasant for them, but I think you can call that competition.
Well. Mr. Kempin is not qualified to distinguish between what is fair competition and what are violations of antitrust law. Certainly some Microsoft employees or attorneys are.
However, this email points out a very important point. The integration of IE (for what it is worth) was conducted for the specific purpose of precluding Netscape from the market. Mr. Kempin makes up another answer here during this trial. But, his answer is illogical. The majority of Microsoft customers no more want IE integrated such that they must buy it too any more than they want WordPerfect to be integrated so that they have to buy it, right?
Pick any application you want. Browsers, word processing or spreadsheets, consumers do not want it integrated with the OS. (Some might. Current uses of WordPerfect might want WordPerfect integrated with the OS.) But, clearly Microsoft Word users would not, right? It is a very simply question and answer.
Mr. Kempin just lies here to defend Microsoft from antitrust charges.
For sure you can find some customers that would want just about any application to be integrated with the OS. But, you will not find a single application
that all consumers want to be integrated. Bundling or integrated, it is false for Mr. Kempin to suggest that forcing all consumers to buy any application
benefits them. It no more benefits them than being forced to buy a case of bubblegum or jawbreakers.
1:03 PM PST - Bundling IE with the OS does force the sale of IE - even Mr. Kempin understands that.
q. First, you say they ship what end users demand. With respect to ie, they ship what Microsoft demands, correct, sir, because Microsoft demands that they ship ie, correct?
a. It is correct that ie is part of the windows product. they ship windows.
q. And in order to ship windows, they have to, according to your license agreement with them, ship IE, correct?
a. Absolutely correct, because we do not want them to alter our products.
End users are not demanding IE at all. Some 30% or so do not want any browser. And, 50% of the remainder prefer Navigator.
Consumers might want Windows (for lack of any choice) and bundling IE will force the sale of IE too.
Not buying IE is not "altering" Windows any more than not using IE on Solaris is altering Solaris.
Microsoft wants to force the sale of IE. And they are doing just that. Any other claim is just false testimony. A fabrication or lie offered only to defend antitrust charges. Windows does not require IE to run. 98Lite proves that. 98Lite runs just fine without IE.
Microsoft just does not want any consumers not to buy Microsoft products and it is going to break any law as necessary to force the sale of Microsoft products.
12:45 PM PST - Using Navigator is butchering windows?
q. Now, not only does he not say this here, but nowhere in your document of january 22 -- the presentation that you wrote about three weeks later -- do you say, "the problem is pride of authorship or
not wanting people to interfere with this thing that we have created." You're talking about problems relating to browser placement, correct, sir?
a. That is correct and, as you know, the browser is part of windows -- at that point in time, probably 95 and later on with gateway 98. And I mean I was part of the discussion in january of 1996 where
very upset people in the product group discussed internally that they didn't like for oem's, as they call it, to butcher the windows operating system.
q. Butcher the windows operating system? Is that what you said, sir?
a. That's what I said.
The arrogance of Microsoft and of Mr. Kempin is quite apparent. Microsoft forces all consumers to buy their browser application and if per chance anyone would do anything to use a competing product Microsoft considers that as "butchering" Windows?
The browser application is not an operating system by Microsoft's own practices. IE is a Microsoft product yes, but that does not make IE part of the OS. Microsoft distributing IE for NT, Windows95, Windows98 (IE 5.0), Solaris, Hp-UX, Mac and others clearly and absolutely makes it an application not an OS.
12:30 PM PST - Microsoft's monopoly interests conflict with the interests of consumers and OEMs
q. Were you informed that hewlett packard believed that Microsoft's mandated removal of its boot-sequence and auto-start programs had resulted in significant and costly problems for hp's retail p.c.'s?
a. I believe I read this letter, so I was informed.
q. Let me go down to the 7th paragraph, the first line of which reads: "from the consumer perspective, we are hurting our industry and our customers." do you see that?
a. I see that.
q. And did you understand that that was hewlett packard's position?
a. Probably.
q. And did you understand why that was hewlett packard's position?
a. Not necessarily.
q. Did you understand that hewlett packard's position was that Microsoft's mandated removal of boot-sequence and auto-start programs was limiting hewlett packard's ability to provide help and
guidance to their customers?
a. That is not my total understanding --
Microsoft likes to claim publicly that Microsoft's proprietary interests always benefit consumers. But, they do not. I can think of no reason why a Microsoft logo would ever have to appear when a computer boot ups. In fact, IBM permits users to completely replace any part of the start up sequence (or practically so).
Microsoft falsely claims that they should restrict what OEMs do solely so that they alone can benefit from that key space. Here, you see reference to the
problem that HP has with being restricted from helping their customers. But, why? Because Microsoft has no problem harming consumers if it protects
their monopoly.
12:05 AM PST - Finally, an answer that does not change from Mr. Kempin
q. Were any of those browsers significant in January of 1996, other than Netscape and Internet Explorer?
a. I believe I answered that question already.
q. And the answer was? Because sometimes your answers change, I just want to be sure this answer hasn't changed. the answer is those were the only two significant ones, right?
a. That's what I answered.
Sometimes lawyers appreciate witnesses that constantly change their answers. It does make the examination more difficult to follow. But, it affords a chance to the lawyer to make comments embedded in his questions that the witness is unreliable and is likely to change his story at any minute. Judges do not appreciate such witnesses at all. It just makes their job much harder. But, opposing counsel love it. It makes their job easier in some ways.
11:40 AM PST - Fabricated testimony is real hard to keep straight
Transcript Feb 25, AM: Mr. Kempin on the stand.
q. Sir, a few minutes ago you didn't even remember that you'd done it, correct?
a. I mean, I hope this is not a memory test.
No. Not a memory test. It is a "truth test". And, when you testify truthfully you rarely have to continually change your story. When you fabricate a story, then and only then is it very hard to keep it straight. This testimony from Mr. Kempin is a dead giveaway for the judge. Think about it a little bit. Anytime you are a witness to an event or you are trying to recall the details of a complex transaction, you may have lapses of memory, you may have to have your memory refreshed from documents. But, in the end, your "story" will be consistent and complete. In the end, you will have recalled only one version of the events.
Mr. Kempin is falsifying his testimony as he goes along based upon what he thinks will most help Microsoft. Sometimes his answer are accurate (I.E. when he said the agreement prevented certain things). And, sometimes they are just fabricated (I.E. anyone could have gotten permission if they just asked). The problem is that after a while he forgets what is real and what is fabricated. Some real stuff is inconsistent with the fabricated stuff. So, he has to adjust the fake story. It is called lies upon lies.
Mr. Kempin is the kind of witness that the court will just ignore completely with the exception of harmful admissions that are made. Since admissions against the interest of Microsoft are not likely to be fabricated, they retain credibility.
11:20 AM PST - Do not believe me when I was lying, believe me now?
q. Mr. Kempin, just so the record is clear, when you say you've never objected to that, when I asked you that question about ten minutes ago, you said it was precluded by your provisions.
a. Mr. Boies, I believe I corrected myself. And please take that testimony as truthful testimony.
Which lie should we believe, Mr. Kempin?
11:04 AM PST - Mr. Joachim Kempin's credibility is going south fast.
q. Let me begin -- and I do want to come back to the things that you do that are not in writing, sir -- but let me begin by what you do in writing, okay? And I just want to be clear on the record what
your present testimony is. and let me put up on the screen the -- will you put up on the screen the hewlett packard choice from Mr. Kempin's video? in the video that you prepared, after somebody signs
up for an ISP, they are presented with this choice of browsers, correct?
a. That is correct.
q. One is the hp browser and one is the Microsoft internet explorer browser, correct?
a. That is correct.
q. And just as another example, could we put up the acer? and, again, once a person using the acer p.c. In your videotape signs up for an ISP, they are presented with a browser choice of either using the
acer browser or the Microsoft internet explorer browser, correct?
a. That is correct.
q. Now, I asked you whether, under the letter agreement, the oem would have been permitted to add a third choice there for the Netscape navigator, and you told me that under the letter agreement they
would not be permitted to do that. do you recall that?
a. And I corrected it, I believe.
q. Okay. That's what I'm trying to get. You're now taking that testimony back and saying that was wrong?
a. Yes.
Mr. Kempin can not even get his testimony straight. He is just lying. When a witness fabricates testimony they easily forget which way they fabricated it. So later in time, they slip up and say it another way which may be inconsistent.
But, this dialog is important for another reason. Notice that he says that HP is able to list a choice between IE and the HP browser. This is rather deceitful on the part of Microsoft. Sure, HP might want to list their browser as a choice. But, the HP browser is no threat to Microsoft. They might include it as part of their package. But, it is most likely just IE running a disguise. Even if it is not, if Microsoft can limit all OEMs to either promote IE or their own browser, Microsoft effectively precludes Netscape from being able to work a deal with any OEM.
Hint: that is called precluding a competitor from the market. Or, precluding competition. On its face it may look like it is fair. But, it clearly is not.
10:44 AM PST - The Mafia puts very little in writing, right?
q. When you say, "we would have bended a little over and said it was okay," that is something that you believe you would have done, but you have not done that, at least in writing, with respect to any
of these OEM's, correct, sir?
a. That is correct that we have not done this in writing, but when an OEM asked us -- in this particular case, Gateway, and I think the record is very clear on that - Gateway got permission. and
sometimes you don't need these things in writing. We do a lot of business without having everything in writing.
The exercise of monopoly power can be very subtle. But, having a standard agreement that is very restrictive, a letter that may or may not get sent and retracted to individual OEMs and by requiring OEM to specifically ask for permission to do a whole list of useful tasks, Microsoft effectively prevents Netscape from having any useful means of entering the market. It is very simple. How many small OEMs are going to go to the extra effort to make a special deal? Gateway might. And, Mr. Kempin here suggests that Microsoft is some innocent babe in the woods because Gateway was given some leeway. Well? What about all of the other OEMs? The answer is they are manipulated by the standard contract to preclude Netscape from their plans. Only if they want to spend the time and energy can they get a release.
The result is that a very high percentage of all OEMs and of all OEM sales are conducted under the restrictive standard agreement.
What you really need to do is put all of the illegal acts together and measure their results. 1) restrictive agreements 2) deals with Intuit, Apple and AOL 3) pressure on Compaq to stop using Netscape browsers internally 4) pressure on Gateway to stop using Netscape internally (coming up in the transcript) 5) deals with ISVs 6) deals with ISPs and 7) forcing all consumers to buy IE regardless of their wants and needs. All of these illegal acts together serve to preclude competition. Have they wiped out Netscape completely? No. And, Microsoft will show the arrogance to suggest that since Netscape has been able to survive and form other alliances in the industry that somehow Microsoft is the innocent babe all along.
Microsoft looks like the repeat criminal that wants to be let lose simply because the last shot gun blast partially missed the victim and they only lost an arm.
Attempted murder is attempted murder. But, Microsoft in their arrogance will argue that the Netscape-AOL-Sun deal proves their innocence. That deal is not even relevant to the illegal acts conducted by Microsoft to preclude competition, except that their illegal acts may have failed to achieve their desired effects.
10:15 AM PST - Sorry, Mr. Kempin. The Windows startup process is not at all like a book. It is not even close.
q. This is, as you say, the fourth page of the document, the one that bears document production number 3852 in the bottom right-hand corner. at the top of the page it says that the "alternative ISP
sign-up process shall contain no third-party advertising or product promotions other than those from the oem, the oem's subsidiary brands or the ISP being signed up." do you see that, sir?
a. That is correct.
q. And that provision would preclude the oem from including the Netscape navigator browser under the Netscape brand, correct?
a. That is correct. and let me add to that a little bit to describe this a little bit to your honor. I think we are basically talking about something like this. If you would be a bookseller and you would sell a
book -- what we're doing is here we're saying you can insert a forward into the this book if you have a friend who wants to write it. We will enable you to do that. But please insert it in front of the
introduction, and please do not put any advertising into it.
the court: I understand.
the witness: but what we do not allow these oem's to do is to basically alter the last chapter of the book because they don't like the ending.
the court: all right.
Why does Mr. Kempin insist upon making an analogy to a "book"? Windows is not a book. The startup process is not a book. The initial boot up is not a book. It is not a story at all. At best it is just a simple way for a consumer to make initial decisions regarding associated services. This is a best a "sales" process. What is it at worst? Just something that gets in the way. Users do not want to see a boot up process. They want to be finished booting up so that they can get on with their work. To the extend this process offers associated services, Microsoft inists that it alone calls all of the shots. To the extent that products do not compete with Microsoft, they may allow them. But, Netscape is precluded.
But the book analogy was recommended by Microsoft attorneys. Why? Because one of the legal arguments Microsoft will surely make is that the boot up process is copyrighted by Microsoft. They will argue that since Windows including the boot up screen is copyrighted, their legal rights under the copyright laws prevents anyone from telling them what they must or must not do during that process. This is a legal argument which they will surely make and just as surely lose.
Why will they lose this argument? Because the copyright law prevents others from gaining financial rewards from copying their work. That is what the copyright laws do. Copyright laws do not provide defenses for charges of liable or defamation of character or any other violation of law that might be perpetrated by a copyrighted document.
Microsoft will argue that they can control the boot-up screen because they hold the copyright. But, that is false reasoning. Copyright laws, nor patent laws, not any other law gives an absolute right to design anything. I am sure you can patent a bomb if you want. But, the patent laws do not offer any legal defense for the wrongful use of a bomb or any other technology.
What Microsoft is doing here is using its software (boot up process) in an illegal manner. It is using that technology to suppress technology. It is using that technology to preclude Netscape from the browser market.
Mr. Kempin's choice of a book as being an appropriate analogy is just false testimony. Both OEMs and customers want total and complete control over their ability to "change any chapter they want in their book". If Windows is a book, it is a 3 ring binder not a paperback with perfect binding or a hard bound edition with gold lettering. Microsoft wants the computer to be a hard bound volume because that removes customers ability to choose. A few days ago information surfaced regarding Microsoft future plans for a total OOB (out of the box experience) operating sytem. The whole idea is use Microsoft monopoly power to re-load all Microsoft applications and remove all choice that a consumer might have. This concept has been consistently used by Microsoft to preclude competitors from markets. It was used with networking, disc compression and now browsers. Tomorrow it will be used for any product Microsoft chooses.
If you are a software developer, maybe Microsoft will decide that your company should no longer do business. Intuit is on the bubble. Real Networks is on the bubble. Netscape is too (one of their bubbles already popped).
10:00 AM PST - Microsoft insists upon blocking out Netscape from the Boot up and Sign up process on Windows
Transcript Feb 25, AM: Kempin on the stand. DOJ conducting cross examination
q. Okay. Under your license agreement, would the oem be permitted to give the user a choice in the ISP sign-up sequence contained in the boot-up sequence of using a browser that was not internet
explorer and was not branded with a brand of either the ISP or the oem?
a. My best answer for that is that I don't think so, but i might want to actually look into the license agreement or, in particular, into the letter we send the oem's. So it might -- so maybe you can help me
on that.
The Q&A on just what an OEM can and can not do during the boot up screen is extensive. A couple of concepts are very clear. 1) Microsoft prepares a standard license agreement which is very restrictive. 2) if an OEM makes a specific request then sometimes extra flexibility is given 3) Microsoft also issues a letter which contradicts terms of the standard contract so that terms remain at Microsoft discretion from day to day ... anything given by letter could just as easily be taken back by letter, right? 4) Alternative browsers are permitted (sometimes) to be promoted provided it is not the Netscape branded browser.
In summary, the whole boot up processing system is designed to block Netscape and retain full discretionary control in the hands of Microsoft. Afterall, you never know when Microsoft will feel the need to tighten the screws a little, right?
What this business practice points out is that Microsoft can easily block Netscape from having any kind of equal exposure to new customers.
In essence, this practice is using its monopoly power to preclude competition.
Is this an effective way to disadvantage Netscape? Sure it is. Is this competing with Netscape on the merits of the two products? No, clearly not.
Microsoft is using this approach to keep Netscape out of the market now and as more and more customers are forced to by and use IE, they can provide a little slack on the rope (issue those letters, right?). After a period of time, Microsoft can hold its hands high and say "look ref, no hands".
However, the scheme from day one was illegal. The scheme was and is designed to preclude Netscape from the market.
February 25, 1999 - Thursday (review of Wednesday transcripts and today's news)
5:20 PM PST - Direct testimony released for Robert Muglia
1:30 PM PST - Microsoft conducts business as a boa constrictor?
q. Could Hewlett-Packard have customized the bootup sequence in the way shown on your tape, if it had not had an exception to the standard license agreement?
a. If they would have-
q. For windows 98.
a. I'm sorry. If they would have not received the additional letter that we send them, they could not have done that.
First we have seen that Microsoft puts into a contract language that required Apple to promote IE or make it their primary browser. Then it says such language does not mean anything because the term in the contract was not defined. Then we find that Microsoft and Compaq sign two different agreements on the same day so that one set is acceptable to the DOJ but the other one restricts Compaq. Now, we see that OEM contracts restrict what an OEM can do, but Microsoft sends out a letter says you can do this or that.
So if the DOJ files suit Microsoft can claim credit for the letter, right? But, if the DOJ does not file suit, then Microsoft can renege on the extension by a unilateral letter, right?
Microsoft has shown time after time that it uses it strong monopoly position to force OEMs, ISVs and other to sign contracts and conduct their affairs at the whim of Microsoft depending upon the weather report.
Boy, is making a billion dollars easy when you own a monopoly.
1:10 PM PST - Chances are that Mr. Kempin told Mr. Schmalensee about Compaq putting the Netscape icon back on the machine
q. Now, in your job, you try to keep track of what the OEM's are doing, do you not, sir?
a. If you felt that we try on ad-hoc basis twice a year look at certain computer manufacturers and see what they have on their system, that is correct, sir.
q. Do you have any explanation as to why you, as the head of OEM relations from Microsoft, did not know that Compaq was including the Netscape Navigator until February 11 of this year, when the
government's chief--not the government's chief economist--when Microsoft's chief economist testified that he knew about it back in December of 1998, before it happened?
a. I didn't see his testimony. At least I didn't read that portion of it. And I believe my people might have missed it too, the people who work for me, and I just have no time personally, I mean, to go in a
computer store and check out every single Compaq Computer. I mean, I maybe buy for some of my kids I might do that.
Just guess here. But who is likely to have known about it first? Who is likely to have suggested to Compaq that they do that? Consumers? Consumers are not being charged with antitrust violations that might break up their company.
Mr. Kempin is proving to be an unbelievable witness. A witness that is not to be believed. Who is supposed to believe that the head of OEM relations for Microsoft was unaware that Compaq (offering a witness in this case for Microsoft) would put the Netscape icon back on the machine? Mr. Kempin may not have seen Mr. Schmalensee's testimony on this point. Maybe that is why he thought he could lie and get away with it? You know, sound like it is news to him.
1:05 PM PST - Microsoft's witnesses are funnier than the joke told by the judge right after lunch.
q. Well, sir, when did you, as the vice president in charge of OEM relations, find out that Compaq was going to include the Netscape browser with its Presario line in 1999?
a. Actually, that's a very good question to us, because I didn't. And I was totally surprised to see it when we booted up the system the first time.
I know. A little canary suggested to Mr. Kempin that the video should be redone in time for the circus. I do not think the judge is laughing here. I think the judge understands that Microsoft will never abide by the laws of this country unless forced to by court order. (Just a thought.)
1:00 PM PST - Sounds like Joachim Kempin will cover all of your bets
q. No, it didn't, because in 1998, when your original video was prepared, Compaq didn't ship on the Presario the Netscape Navigator; is that correct, sir?
a. That is correct. and it basically shows how fast this industry is changing.
q. Yes, even while this case goes on; correct, sir?
a. I'm not sure if this has anything to do with the case.
q. You're not sure?
a. I mean, I don't think the industry changes because of this case.
Joachim Kempin starts out with false testimony. Clearly this evidence shows not only that the industry changes as a result of the DOJ bringing this case, but it also illustrates yet again the value to the industry in having real competition. And, it points out the enormous harm caused by Microsoft when it suppresses competition.
Microsoft still thinks that what is good for Microsoft is good for the industry and consumers. Nothing if further from the truth.
12:50 PM PST - New videos? Here we go again? Joachim Kempin on the stand. Mr. Boies with the cross examination.
q. Now, there are some significant differences between the video that you've presented to us today and the video that was done in november of 1998 and which is referenced in your sworn testimony;
correct, sir?
a. That is correct.
q. And I would like to go through some of these differences, if I could, sir. one of the differences is that the video that we have just been shown today, the last sequence shows a compaq presario
computer; correct, sir?
a. That is correct.
q. Was there any illustration of a compaq presario computer in your original video, the one that's referenced in your sworn testimony?
a. As far as I can recall it, I believe there was one.
q. And the compaq video that we have just seen had a Netscape icon on it; correct?
a. That is correct.
q. Did the compaq video that was in your sworn testimony, or that was referenced in your sworn testimony, did that video have a compaq computer with a Netscape icon?
a. I don't believe so.
Does anyone want to place a bet that Compaq would not be displaying the Netscape icon today were it not for this litigation?
12:40 AM PST - Judge Jackson offers a humorous tidbit upon return from lunch
the court: Before we get started, I would like you to know that a colleague has called my attention to another news item that appeared. Apparently, somebody was running a contest for innovative theories, and I'll give you some examples and then tell you who the grand prize winner was. One of the runners up was as follows, and this is in the probability theory category. If an infinite number of country boys riding in an infinite number of pickup trucks fire an infinite number of shotgun rounds at an infinite number of highway signs, they will eventually produce all of the world's great literary works in braille. The winner is in the perpetual-motion category. When a cat is dropped, it always lands on its feet. And when toast is dropped, it always lands butter-side down. It was proposed to strap giant slabs of hot buttered toast to the backs of a multitude of tethered cats. The two opposing forces would cause the cats to hover, spinning inches above the ground. Using the giant buttered-toast-cat array, the high-speed monorail could easily link New York and Chicago." All right.
Mr. Holley: well, I can't match that, your honor...
One can only imagine why the judge thought this story was relevant to the Microsoft defense. What ever you do, never lose your humor.
12:10 AM PST - Mr. Engstrom avoids the obvious interpretation of "leverage points"
q. Well, in fact, sir, when Mr. Cole writes that "we don't know the leverage points," doesn't he mean that we don't know the points of leverage to get apple to give up having the runtime on windows?
a. That's not the way I would read this. We don't know what's important to apple. I mean, that's what this means. and if they are going to adopt our runtime, they are going to have to, at some level, give
up, mentally and emotionally, on building this duplicative set of services, because it wouldn't make sense for them to build a service on top of ours that uses our services while they are still building a
service that is -- you know, that they view as their hope for their future, you know, that sits next to this piece of windows. That's odd. And that's what he means by "give up." it's not like we need to get
apple to never ship a piece of code in our operating system, which is the way i think you were reading it.
It is true that if you want to strike a deal with someone else, you need to know what is important to them. The Gates memo clearly expresses the fact that Microsoft does not know what they could offer Apple that would entice them to use ActiveX technology. Mr. Engstrom wastes his time taking about what Apple would have to give up. Everyone knows what Apple is supposed to give up. There are supposed to give up their autonomy and create a dependancy upon Microsoft technology.
11:35 AM PST - Microsoft consistently tries to split the markets so that it gets the mass volume and control over the consumer and the other party gets a niche market
q. And just so we're clear, you told them that Microsoft had no interest in and would not go into that space if you were able to work out a deal to use Directx as the runtime on windows whereby you
would then be supporting apple's authoring solution, correct, sir?
a. If apple provided an authoring solution that targeted Directx, you know, I would probably not invest as rapidly in that solution as otherwise. I never promised to stay out of that space. I did say I
would ship their authoring api's if they targeted Directx, and that I would help make sure those API's worked well on windows. the point there is I need an authoring solution. they are very proud of
their authoring solution, and from all of the inquiries I have made, which have not been many, their authoring solution seems to be adequate. That would be a good thing for Directx.
It all boils down to forcing ISVs to use Microsoft technology or suffer the results of anti-competitive (illegal if necessary) activities of Microsoft. How are superior technologies developed by anyone other than Microsoft supposed to have a fair marketplace. Apple and Netscape are all but forced to abandon their superior technology. Netscape did not accept Microsoft "offer" and ended up with a product without a viable marketplace. Apple has resisted, but they too were forced to disadvantage Netscape.
This industry is going to have to ask itself a very important question. Do we want to see superior technology succeed? Or are we going to only allow one company to develop software technologies? Currently, the industry is so far out of whack that software startups figure their only hope of success is being picked by Microsoft for acquisition. (Of course, every other player in that market goes under or must merge with another bigger player as Netscape did.)
Then, of course, you have Microsoft's lawyers running around looking for information on the Netscape-AOL-Sun deal hoping that since Netscape was not completely wiped out, their own illegal acts will somehow be justified. Antitrust activities of a monopolist are not excused if those acts fail to drive a competitor into bankruptcy.
11:15 AM PST - Microsoft to Apple: Use Microsoft technology or else?
q. So what did you mean when you told Apple, not once but frequently, "if you don't agree to have a directx-based runtime, we will compete aggressively against you -- against your quicktime"?
a. Actually, I think I only said that to them twice. The point was simply, "Hey, we are not backing out of the space. You know, we are going to continue to build this thing. We think it's an important
service for Windows. You know, we will go license codecs that we think make it better." One of the things that we cover again in my direct testimony is exclusive licensing of codecs. You know, one
of the things Apple does is exclusively license codecs, period. Realnetworks does this as well. Microsoft does this. It's one of the ways you compete on this basically commodity space. We only do our
exclusive licenses, however, for Windows, so that, you know, the experience is preserved on the cross-platform scenarios.
Competing fairly is just fine. The problem is that Microsoft cheats at every opportunity. Microsoft will just bundle their media technology with the OS, force all consumers to buy the Microsoft version and eliminate the natural demand for such applications by forcing the supply. Microsoft has done precisely that with networking, disc compression and now browsers. Microsoft will force all consumers to buy all of the internet technologies it might want to develop regardless of merit or cost to consumers.
I know that Microsoft and their lawyers call this pro-competitive, but they refuse to accept even the idea that Microsoft might be violating antitrust laws.
The threat here is very clear. What Microsoft means by that threat is also very clear. Microsoft customers are going to be forced to buy more Microsoft
technology. Their right to choose will be ignored.
10:44 AM PST - "We do not know nothing about no bug fix in exchange for poking Sun and Java with a stick"?
q. At the bottom of this is an August 8, 1997 e-mail from Mr. Tevanian to Bill Gates, in part reporting on a difficulty or a problem that Quicktime is having with IE 4, correct, sir?
a. That appears to be the case, yes.
q. And the e-mail right above that is a message from Bill Gates to Mr. Maritz, Mr. Ludwig and others in which he says, in part, in the third line, "who should avie be working with?" Correct?
a. Yes.
q. So his response deals with responding to Mr. Tevanian, figuring out what the problem is; is that right?
a. I would believe that's probably what he is saying, yes.
q. In addition to that, Mr. Gates also writes, "I want to get as much mileage as possible out of our browser and Java relationship here. In other words, a real advantage against Sun and Netscape." And
then after the part about who avie should be working with, he continues, "do we have a clear plan on what we want Apple to do to undermine Sun?" do you see that?
a. I do see it, yes.
This is the problem with corrupt corporations that hold monopoly power. They always use their monopoly power to further extend that power or preclude competition. Microsoft does not want Sun to succeed. That is clear. But, antitrust laws are designed to prevent a monopolist from using their power to preclude competition. Here, Bill Gates makes the connection between a service to Apple and getting Apple to "undermine Sun". If Microsoft wanted to compete fairly with Sun and their Java technology, they would develop their own cross-platform environment, right? If a competitor has a nice C++ compiler you develop a better compiler and offer it to the market at a competitive price, right? You do not go around the industry finding ways to sabotage the business of someone else. Microsoft does. But, that is why they are violating antitrust laws. Getting Apple to undermine Sun is not pro-competitive at all.
q. Were these goals of Microsoft's at the time of this e-mail, that Mr. Gates had -- to your understanding, Mr. Gates had in mind when he was asking, "who should we have avie work with to fix apple's
problem"?
a. No, Mr. Malone. Mr. Gates doesn't talk to me very often, and certainly not about strategic matters. I mean, I literally saw this mail. You know, perhaps it was forwarded to me or not. I don't know, but
I saw it for the first time in preparing for this case. We didn't do anything to fix the bug. We don't have the bug. In fact, in all the reports that I provided here, no one could see any difference between IE
3 and Ie 4 and Windows 98 in the behavior of Quicktime 2 or 3, okay? We could never replicate Apple's results on that chart that Dr. Tevanian handed to the court as part of his testimony. I have been
over that and over that and over that. We can not get those results.
q. And you say you have no record and people have no recollection of fixing a bug. Is that your testimony?
a. Absolutely, that's true. No recollection of fixing the bug. By the way, if there had been a bug, it was in a beta version of the software, so this is referring to a prerelease.
Sometimes bugs do go away. And, sometimes records of fixing bugs are shredded. This is where the credibility of the witness(es) from Microsoft is so important. Were it not for the fraudulent videos, this answer might be accepted by the court. With the fraudulent videos, who knows?
10:20 AM PST - Microsoft not very helpful if ISV do not tie themselves to Microsoft technology
q. Now, you didn't tell apple about either of those supposed problems or causes for the problems they were having before this litigation began, did you?
a. We didn't have the data to find those problems prior to this litigation, sir, so, no, we did not. We did tell them in january about the enable plug-in flag. And I would remind you that the Netscape
plug-in documentation on how to write a Netscape plug-in is not mine to tell people how to do. That's Netscape's job. It's Netscape's architecture.
The operating system vendor is not obligated to help any ISV with their bugs. However, you have to realize that when the OS vendor is a monopolist and does not want to do anything to help a competitor with superior technology to their own, any and all competitors are going to be at a serious disadvantage. What is very clear is that Microsoft lets competing technology hit the fan and fail simply by being less cooperative. Compare the help offered Apple (and RealNetworks) with the help offered Intel so as to take up Intel's bandwidth and spend less time on the Java technology. Neither of these acts are illegal. However, they point out the serious advantage that the monopolist has and the serious disadvantage that everyone else has.
Some people actually think that Microsoft having a monopoly is better for everyone than if they had competition. However, monopolies suppress technology coming from any other source. Microsoft is no different. Monopolies just act that way.
This observation does affect which of the various remedies are desirable. If the monopoly power of Microsoft is not completely removed, all of the disadvantages that the rest of the industry faces will remain in full force and effect. If the Windows technology and the control over its definition is removed from the financial interests of a monopolist, then the disadvantages faced by competing technologies are also removed. This possible result supports the idea of selling the Windows code base to 6 or 8 major players and put the Windows standard into the hands of a volunteer standards body. That body will not have any incentive to force Apple to use ActiveX. None of the major players will have an incentive to force ISVs to use ActiveX. In fact, any competing technology to ActiveX would have a much better chance of being adopted or accepted by the industry.
No one company should be the only company that has a decent chance of developing and marketing superior technology. As it stands today, only the monopolist has that advantage. Everyone else suffers a disadvantage. Witness: Apple and RealNetworks.
9:45 AM PST - Microsoft clearly wants all applications to depend upon proprietary Microsoft technology
Transcript 24, AM: Eric Engstrom on the stand; Mr. Malone conducting the cross-examination for the DOJ:
q. Let me just be sure. I think at the end of that answer you said that what you told them was that an activex control would fix everything; is that correct?
a. Yes, because we had already put the enable plug-in flag in for them and told them about it. And at some point you go, "gee, if these things aren't working for you, we know this activex control thing
works." bear in mind also that for Netscape navigator, we build a Netscape plug-in to work in that because you can't use an activex control in Netscape. Just so you understand, we build both.
q. Now, while we're on the subject of activex controls, activex controls work only on windows, correct, sir?
a. Yes, I believe that's true.
All developers of component technology want everyone to use their technology. That is a given. Microsoft is no different. It is expected that Microsoft would want Apple to use ActiveX technology for any application they write for the Windows platforms. But, how is this important in this litigation?
It is important in two ways: First, when you use Microsoft technology your product is tied to Windows. If you use independent technology or develop your own, you have the option of making it cross-platform. So naturally, Microsoft always wants you to use ActiveX and developers would prefer to end up using their own technology. Reflect back upon the comments from the two economists (Richard L. Schmalensee, Microsoft and Franklin M. Fisher, DOJ). Mr. Schmalensee said barriers to entry were all but non-existent for consumer operating systems. Right here and now, we see testimony of how Microsoft acts to further increase those barriers. As more and more technology is bundled with the OS and more applications depend upon that technology, barriers to entry increase dramatically. Mr. Schmalensee said they did not exist. His testimony is clearly false and misleading. His testimony is also disingenuous because if he denies the existence of barriers to entry, then his economic analysis is also flawed. Mr. Fisher's testimony pointed out very clearly that bundling IE with OS not only precluded practical competition in browsers but also greatly increased the barriers to entry. Anyone wishing to offer an operating system must also offer a browser and overcome the intrenched use for both products. Microsoft spoke of these barriers when they expressed the idea that IE (if not bundled with the OS) would not be successful in competing against Navigator. So, Microsoft is well aware of this concept. They just testify about it falsely when they discuss the advantages they themselves have and when they act to increase their advantages as they are doing here with ActiveX.
Again, wanting others to use your technology is not illegal. However, if you are successful, you have to understand the liabilities that come along with that success. Some Microsoft supporters claim that Microsoft is only being charged because they have been successful. Well. Unsuccessful companies do not need to worry about antitrust liabilities as much as successful ones, that is for sure. But, it is not the success that is being punished. It is the conduct engaged in by a monopoly player.
February 24, 1999 - Wednesday (review of Tuesday transcripts and today's news)
4:00 PM PST - Engstrom details Microsoft's plan to get Intel to stop supporting Sun's Java capabilities and instead support proprietary Windows capabilities
Transcript Feb 23, PM: Joachim Kempin on cross examination by
q. Now, Mr. Engstrom, do you understand that Microsoft has argued in the course of this litigation that its Java strategy is to encourage or enable developers to create Java programs that run really well
on Windows? Do you understand that?
a. Yes.
q. What you wrote here, though, suggested rather than that, that Microsoft wanted to keep Intel or to stop Intel, in your words, from aiding in the creation of Java technology that would run well on
Windows; correct?
a. No, sir, you're confused. This piece of e-mail is referring to Java multimedia API's. Directx, you know--and I'm not sure if it was actually shipped at this particular instant in time or not--is available
from Java. It's also available through, I believe, the Jdirect services. It's our intention to make Java--and I think this has been covered several times in this case as well--the part of Java that is the
language worked very well in Windows. As I said, at this particular time, contemporaneous with this document, I was managing the world's largest Java application, or very close to it. I'm actually not
sure of all the Java projects that were going on there, but I had a very large Java application working for me at this point. So, it was not the point to stop Java. Java means a lot of things. This was
specifically about competing API's.
What Engstrom means to say here is that Microsoft only supports the version of Java that runs exclusively on Windows. His activity to take away time from Intel to help Sun is just one way to do that. However, Mr. Engstrom is being very deceitful in his testimony on Java. Java is a trademark (happens to be held by Sun and not Microsoft) that implies a cross platform functionality. Microsoft has done and is doing all it can to prevent the cross platform aspect of Java from having any value in the market place. In part, it is doing this buy discouraging Intel from working with Sun on the cross platform capabilities that might be offered by Java and attempt to force Intel to support an Windows only version of Java.
It is disingenuous for Mr. Engstrom to secretly harm the Java trademark while testifying that he supports Java. Mr. Engstrom only supports the version of Java running exclusively on Windows. That version is not Java at all. That version is offered by Microsoft to harm the Java trademark.
q. So, at least in the case of competing Java API's, even ones that ran well on Windows, Microsoft's goal was to stop those rather than to support or encourage them; is that what you wrote here?
a. Our goal was absolutely not to support of encourage competing API's to windows. What I wrote here is that I was trying to work out with Intel to be a better partner to them because--and you can see
this in the last sentence in the second summary bullet point there--they tended to work with whoever was paying the most attention to them. That's what I mean by making the most noise in multimedia
at the moment. They just tended to do that, so I went down to be a good partner to them, period.
Being a good partner is fine. Having an evil intent is not. This is just one more act by Microsoft calculated to preclude competition. And, Microsoft again uses its strength of having a monopoly to get the mind share of Intel. What other company do you think can get Intel to stop working with Sun on Java? This is just another example of how a dominant supplier or a monopolist can control or preclude competing technologies.
The antitrust laws do not say that if Microsoft is helping Intel, then those acts are somehow protected.
q. Let me just be sure I understand your testimony before we move on. In this particular case, it was Microsoft's goal absolutely to stop Intel from working with the competitor, someone who created
competing API's to Windows, even if those API's ran well on Windows; is that what you said?
a. It was my goal to get Sun--to get Intel to work with Microsoft for their multimedia investments, not with Sun. Absolutely.
Well, yes. But notice the attention paid by Mr. Engstrom about the impact that Microsoft's acts will have on Sun. Anytime you have an act which makes it more difficult for a competitor to do business, it begins to smell. If the actor is a monopolist, it begins to smell like an antitrust violation.
Compare this act to what Microsoft could do by introducing its own cross platform capability. That does not smell. That is competition. Microsoft incorrectly assumes that anything they do that makes them more powerful is fair competition or pro-competitive. That is the incorrect use of the term. When an act serves to preclude a competitor from doing business, that act is anti-competitive not pro-competitive. The question remains whether the act violates antitrust law or any of the State's laws.
3:55 PM PST - Eric Engstrom takes the stand.
3:15 PM PST - Windows 95 is the client for Microsoft but Navigator is the client for Netscape? Oh. Okay.
q. I asked you a slightly different question, Mr. Rosen. what is Microsoft's client? Not its internet platform client.
a. I'm sorry.
q. I'm going to take you back to your testimony, sir.
a. Microsoft's client is windows 95.
Then what is IE 5.0?
Microsoft is insisting that there must be an antitrust defense in word games.
2:15 PM PST - Does Dan Rosen really think they were only trying to sell the benefits of Microsoft technology?
q. Did somebody convey that Microsoft wanted to own the windows 95 client market?
a. As I read these notes, sir, they are under the heading "reassessing msn." And for msn, it was pretty clear that Microsoft would have the windows 95 client market, yes, sir. But nothing in words or
substance in this way was conveyed during that meeting.
Was MSN supposed to only be accessible from IE?
q. Let me be sure I understand what you're saying, sir. did Microsoft convey to the Netscape representatives at the june 21 meeting that Microsoft wanted to own the windows 95 client market?
a. No, sir. At that meeting, we told them what we would do and urged them to use it.
Right. We told them the technology would be bundled and forced upon all consumers, so they better use them? Even Mr. Rosen suggests they really wanted Netscape to rely upon Microsoft technologies. I can understand that the way this idea was presented could vary. And, I can understand how the presentation was perceived might vary. But, Dan Rosen's words here sound a lot like what Microsoft is telling all consumers now. "...we told them what we would do and urged them to use it". Netscape did have a choice not to use Microsoft technologies. But, consumers are denied even that as an option by Microsoft right now. What makes Dan Rosen think that anyone would believe his testimony. Microsoft forces all consumers to buy IE.
q. Sir, let me ask you to look at government's exhibit 955, which are your notes. And at the top, you say your first goal was to establish Microsoft ownership of the internet client platform for windows
95. do you see that?
a. I do.
q. And you will perhaps agree, won't you, that that bears a striking relationship -- resemblance to Mr. Andreesen's statement that Microsoft said they wanted to own the windows 95 client market?
a. The biggest difference between the two is the word "platform." And as I described during my redirect, that is -- precisely what we talked about at the meeting were those platform technologies that we
were embedding in windows 95.
Ah. The word "platform". Yes. That makes all the difference in the world. Mr. Andreessen did not pick up the word "platform".
q. Two more quick points, hopefully. Let me show you government's exhibit 34, which is already in evidence. This is a june 22, 1995 internal aol document. have you seen this document before, sir?
a. It was shown to me in the preparation of my testimony.
q. Now, this purports to summarize what america online was told by Netscape immediately following your meeting with Netscape, correct, sir?
Mr. Lacovara: I object. Lack of foundation, your honor.
the court: it's already in evidence.
Mr. Lacovara: his characterization of the document to the witness.
the court: the document will speak for itself.
by Mr. Boies:
q. This is dated the very next day after your meeting, correct, sir?
a. Yes.
q. And it begins "Microsoft was at Netscape yesterday," and that Dan Rosen was there. Do you see that?
a. I do.
q. And it goes on saying that Microsoft wanted "equity, a board seat, Netscape to renounce the network as a platform, Netscape to disclose all plans to Microsoft, and Netscape to limit access to API's.
And, in return, Netscape would be Microsoft's special partner and get inside information." Do you see that, sir?
a. I see the words there, yes.
q. Now, is that an accurate description -- realizing it's summary in form -- an accurate description of at least some of what happened at the june 21 meeting?
a. No, it is not.
Of course it is not because Microsoft was just trying to sign up another ISV, right? I guess when the loan shark visits to collect the weekly payment, he is just improving customer relations.
Is there really anything wrong with this meeting between Microsoft and Netscape? Well, to the extent that it was an attempt to divide the market or remove a competitor, yes. To the extent that Microsoft was just selling the value of their technology, no. That is why the Microsoft lawyers have tried to make sure that the Microsoft witnesses only admit to hard selling. The problem is that there is so much evidence that suggests that Microsoft was not just promoting its technology at all. Microsoft was trying to eliminate a possible competitor in browsers and platforms. Splitting markets is one way to do that. Fixing prices is another. No evidence here for that. Microsoft did not want Netscape to be able to earn revenue. Gaining an equity position in Netscape is another way. Getting a board seat is one way. Getting Netscape to renounce a technology is little more than an attempt at mind control (something that Microsoft really likes to get their partners to do). Disclosing plans to Microsoft is fine but Microsoft was not going to use any Netscape technology so this was just using its power to get advanced notice of future competition. And, finally, getting Netscape to not expose APIs is just another form of controlling their product. And, in exchange what does Netscape get? You can be our partner.
Microsoft sounds just like the big bully at the beach. He goes around kicking sand onto the towels and picking on weaker bathers. Then he asks for favors of everyone suggesting only that if they do precisely as he says, then he will consider them his friend. That is supposed to be some benefit.
Well. If the guy is truly a bully, then doing what he says is a choice.
AOL did what Microsoft wanted. Apple did what Microsoft wanted. Intuit did what Microsoft wanted. Compaq is doing what Microsoft wants.
Netscape is the only company that has had the guts to not go along with the illegal schemes of Microsoft Corporation.
How do you decide when a potential partnership is good or bad? Well. It is not easy. And, it is not always clear. But, whenever a monopolist offers to do anything in exchange for the other party discontinuing competitive activity or harming the ability of a third company to conduct their business, you have a problem. Do not focus upon the classification of a company as being a monopolist. Focus upon the impact of the act requested or required. Focus upon the discontinuation of competitive activity. Focus upon the harm being caused to a third party or their reduced capacity to conduct business.
There are many acts that only work if one party is a monopolist. Could Red Hat get IBM to pre-install Linux exclusive of Windows? Could Netscape get Dell to preload Navigator exclusively? Could Netscape get Dell to not do any business with Microsoft? Some deals just are not going to happen.
It is also appropriate to keep in mind that any deal that might be extremely effective in precluding competition may very well have antitrust problems. When Microsoft tried to get Netscape to drop any plans on being a competitor, it began to smell. It still smells today.
2:00 PM PST - "Absolutely not"? Is this before or after the memory slip?
q. Now, let me ask you to look on the third page of the exhibit and the bottom half of that page where Mr. Andreesen attributes to Microsoft, quote, "would you be interested in having a partnership
where Netscape gets all the nonwindows 95 stuff and Microsoft gets all the windows 95 stuff? If Netscape doesn't want to, then that is one thing. If Netscape does want to, then we can have our special
relationship. Threat that Microsoft will own the windows 95 client market and that Netscape should stay away." Did someone or someones at Microsoft convey that in words or substance to Netscape at
this meeting, sir?
a. Absolutely not.
This is where the witnesses credibility comes in. Or, more precisely where Mr. Don Rosen's credibility comes in. If what Mr. Rosen has testified to up until now makes sense, then this answer might be taken for what it is worth. His answer suggests he does not remember any such comment made at the meeting. However his own insistence that they were selling Microsoft technologies very hard is totally consistent with the notes from Andreessen. Did Microsoft want Netscape to use Microsoft technologies on the Windows 95 browser from Netscape? Absolutely. Could those technologies be used on non-Microsoft platforms? Well, perhaps. But, not likely. Certainly, Microsoft did not care much about that. They wanted their technology to require Windows. What is the basis for his "absolutely not" answer? It clearly was not the reverse. And, Microsoft was not in a position to support Netscape on the other platforms. A flat denial of a logical observation needs more than an emphatic statement from a less than credible witness.
1:40 PM PST - Dan Rosen's slip of memory is not significant
q. Now, when did you first see or have available to you a copy of Netscape's windows 95 browser?
a. Me personally, I think the first time I saw one was probably in about july of 1995.
q. After the june 21 meeting?
a. After the june 21 meeting.
Mr. Boies: may I ask that the witness be handed government's exhibit 1892, which I would offer.
Mr. Lacovara: may I just ask if this document is complete, Mr. Boies?
Mr. Boies: it is complete. It was produced to us from Microsoft.
Mr. Lacovara: then no objection, your honor.
the court: government's 1892 is admitted.
(whereupon, plaintiff's exhibit number 1892 was received in evidence.)
By Mr. Boies:
q. This is dated may 11, 1995, about five-or-six weeks before your may 21 meeting. This purports to be an e-mail from you. "subject: Netscape win95 client." do you see that, sir?
a. I do.
q. And you write to another Microsoft person, "can I borrow the copy of the Netscape windows 95 new client they gave us?" do you see that?
a. I do.
q. And you're referring here to Netscape's windows 95 browser, correct, sir?
a. I believe I am.
q. And does this refresh your recollection that you had a copy of Netscape's windows 95 browser prior to the june 21 meeting?
a. No, it doesn't. I know that tom johnson claimed to have gotten one, but as I recall, it was a beta product that didn't install. And it was quite some time before he got one that worked. And I don't like
to install things until i am sure they are going to work.
q. Well, you were asking for it in may of 1995?
a. I was.
q. And, indeed, it had been given to Microsoft sometime back in april or earlier, correct, sir?
a. No, I believe this was immediately after Mr. Johnson returned from a meeting at Netscape on stt. And he had told me that they had given him some code to try out.
q. You don't remember that, do you, sir? You're just making that up right now, aren't you?
a. No, I remember it.
q. You remember it?
a. Yes, I do.
q. You remember when they gave you a copy of their windows 95 browser?
a. I remember that Mr. Johnson went to Netscape in this time period to have a meeting on stt and got a copy of their early beta code for their windows 95 browser.
q. When you say "this time period," what are you referring to?
a. In very early may.
q. May?
a. Yes.
q. You're certain it was may and not before may?
a. I am fairly certain.
q. Well, I am just trying to get your best recollection as you sit here now.
a. And that's my best recollection.
q. Do you know one way or the other?
a. Yes.
q. Let me ask that the witness be shown government's exhibit 1891, which I offer.
Mr. Lacovara: no objection.
(showing exhibit to witness.)
the witness: I stand corrected.
by Mr. Boies:
q. Indeed --
the court: government's 1891 is admitted.
(whereupon, plaintiff's exhibit number 1891 was received in evidence.)
By Mr. Boies:
q. Indeed, Mr. Rosen, you were at the meeting when they gave you the windows 95 browser, correct?
a. I was.
q. And it occurred sometime before april 27th, correct?
a. It occurred in that week, I believe.
The press has made a big deal of this slip of memory. But, it just is not important. Any judge would accept a slip of the memory as to a date or even a sequence unless it is truly significant. However, this does show that Mr. Rosen was well aware of Netscape's browser in advance of the meeting with them during which they tried very hard to get Netscape to switch to Microsoft technology. The earlier date also discredits the "babe in the woods" story that Dan Rosen is trying to present. Dan Rosen was trying to hard to fabricate his testimony to favor Microsoft.
I guess if you are going to force consumers to buy products and change the use of common terms in the industry, there is little concern about being too cocky in court. It is an expensive lesson to learn. But, I am sure the judge is more focused upon the refusal by Microsoft witnesses to use common industry terms appropriately in the hope that they can avoid antitrust liability.
1:03 PM PST - I guess the industry will have to discontinue the use of any term that could describe the over all boundaries of a collection of technologies?
Transcript Feb 23, AM: The DOJ continues with re-cross
q. Okay. So you would agree that in the sense of influencing or persuading, there was an effort to influence or persuade Netscape not to compete with Microsoft, correct?
a. Correct in the sense that we wanted them to use our underlying technologies, yes.
q. And you characterized that or Mr. Jones characterized that as not competing with Microsoft, correct, sir?
a. He did, yes.
q. Now, back to what I was asking before. That means not competing in terms of browsers, correct, sir?
a. No, sir. It means not competing in the sense of the four underlying technologies that I have described thoroughly today.
q. And all of those technologies were in Netscape's browser, correct, sir?
a. They were in each one of Netscape's browser products, yes.
But, Microsoft does not have browser products, right? Is this what Dan Rosen expects the industry to believe? Did not Microsoft just this week make available for download IE 5.0? What is IE 5.0 anyway? Does Dan Rosen really think that Microsoft can avoid antitrust liability by calling IE 5.0, a collect of internet technologies? And, what is Microsoft Word? A collection of word processing technologies, right? They could come with the OS too, right? And, would not Microsoft try real hard to get WordPerfect to adopt the word processing technologies bundled with the OS?
This is nothing short of false testimony. The witness is not lying as such. He is just refusing to use common terms in the industry hoping semantics will fool the judge.
Normally when a collection of technologies is associated with a specific trademark such as IE, that collection of technologies is referred to as a product. That is what a trademark does. A trademark specifically identifies a product on the market such that, that product is not confused with other similar but different products. Microsoft purchased the "Internet Explorer" trademark just last year. That act clearly illustrates the attempt by Microsoft to brand a particular product. In this case, the product is an application.
I guess this is Microsoft way of telling customers when they do not have a choice over what they must purchase. If you have to purchase the item it is referred to as "technologies". If you have a choice, then it is a product.
I know that Microsoft wants to argue that IE and the OS are not tied because only one product exists, but Microsoft is not consistent in the marketplace. They may have discontinued the use of common industry terms, but they have not discontinued distributing IE as a stand alone application. They have only bundled it and tried very hard to only use the term "technologies" when bundled. And, as is very clear by now, the only reason for doing that is to fabricate a false and misleading defense against antitrust charges.
Well. Perjury and false testimony is not excused because it helps the defense or helps the prosecution.
12:50 PM PST - Microsoft was encouraging Netscape all along? Right?
q. And is the support given to Netscape, following the meeting, consistent with the allegation or the suggestion that Microsoft intended to make it difficult for Netscape to compete in the platform
space?
a. I'm sorry. I didn't understand your question.
(Whoops? My own lawyer is asking these embarrassing questions?)
q. Is the level of support given by Microsoft to Netscape, following the june 21st meeting, sir, consistent with an allegation that Microsoft sought to make it difficult for Netscape to compete in the
platform space?
a. No, everything we did, following the meeting, was consistent with encouraging them to write good software on Windows 95.
Yes. Provided that Netscape used all Microsoft technology and did not develop superior technology in their own, right? Of course. Because if Netscape used all Microsoft technology that would seriously disadvantage any browser development on non-Microsoft platforms. Just like all applications. It is cross platform applications like real browsers and Java that bother Microsoft.
12:40 PM PST - Microsoft approach is very clear - Use Microsoft technologies and do not develop your own.
q. And is the level of support given by Microsoft to Netscape, following the meeting, consistent with the allegation that Microsoft discouraged Netscape from building a browser that ran on Windows
95?
a. Quite the contrary. It shows a pattern of continuing to encourage them to use the technologies that existed.
Sorry, Mr. Rosen. It is not to the contrary. There is nothing wrong with Microsoft wanting to have Netscape use Microsoft technology. That is why they continue to harp on their view that, that is all they have done. Well. If that is all they have done, that would be fine. But, they didn't. And, haven't.
Weaker minded ISVs simply may not have any choice. Weaker financed ISVs may not have a choice. In fact, Microsoft tried very hard to deprive Netscape of a revenue source which would have whipped them back into the fold of weaker ISVs.
Microsoft continues to falsify their testimony. Microsoft only wanted Netscape to offer a browser if it was dependant upon Microsoft technology. Otherwise, absolutely not. That is very clear.
I would guess that if Microsoft bundled Microsoft Word with the OS, that trial will contain the same words in the record (I.E. "It shows a pattern of continuing to encourage them to use the technologies that existed. Meaning "only Microsoft technologies", of course.)
12:20 PM PST - "Do not compete with Microsoft and you can live"? I think that is the clear and consistent message that Microsoft Corporation gives everyone in the industry.
q. Did you at that meeting, sir, suggest that Netscape should stop developing browsing software that ran on windows 95 and should instead develop software that ran on other operating systems or
platforms?
a. No, quite the contrary. We encouraged them to write good browsing software for windows 95.
What Dan Rosen meant to say here was that as long as Netscape used all Microsoft technology as the rest of the weaker ISVs do, then Microsoft has no problem with Netscape.
12:03 PM PST - Giving Netscape a SDK is consistent with "brown nosing" them.
q. And sir, was the -- is the provision of early information about internet technologies in windows 95 to Netscape consistent with the allegation that Microsoft was attempting to discourage Netscape
from developing a browser that ran on windows 95?
a. No, it's completely inconsistent.
Well. Everything that Microsoft says Microsoft claims disproves the DOJ case. But, Mr. Rosen is incorrect here. Microsoft wanted Netscape to write a technology dependant browser. Providing a SDK clearly supports that view. Even Mr. Rosen suggests that he though Microsoft was so successful in selling Netscape on Microsoft's technology that they would not develop their own browser application. What is the most effective way to persuade Netscape not to develop their own technology? What is the best way to persuade all ISVs to stay out of the browser technology area? Well. If you play poker and want all players to fold you can show your hand early in which all players will fold unless they hold better cards, right? Providing an SDK to Netscape is consistent with any plan on Microsoft part to prevent competition. That clearly has worked with all of the other ISVs, right? All ISVs have either adopted Microsoft technologies or have stayed out of the browser related markets.
Mr. Rosen is trying too hard to disprove the DOJ case.
11:50 AM PST - If everyone uses Microsoft technology then Microsoft does not object
q. Now, sir, is that sort of -- to use your word - evangelization, consistent with an allegation that Microsoft attempted to discourage Netscape from building a browser that ran on Windows 95?
a. No, it's exactly the contrary.
If everyone uses all of the Microsoft technology that Microsoft wants to sell, then they do not object. What Microsoft objects to is competition. Microsoft will do everything it can to prevent competitors from having a marketplace. What is very clear from this testimony from Mr. Rosen is that if Netscape tied itself to Windows technology, then they would be acceptable "partners". Perhaps weaker ISVs have no choice. Perhaps stronger ISVs have no choice.
Even companies like Compaq, HP and even IBM do not wish to compete with Microsoft on any technology they might bundle in with the OS. Disc compression, networking, browsers and anything else.
Is word processing next? What about the spreadsheet? What about SQL data bases? What about Java? This whole industry suffers greatly as Microsoft uses its monopoly power to take over one product category after another. Browsers are already captured. Streaming video is on the bubble. Any and all internet technologies are fair targets for Microsoft. All it has to do is decide it is more important to rub out a competitor than to compete.
11:19 AM PST - Forcing the sale of IE forces the ownership of the platform.
q. Let me ask it this way. Does the notion of owning the platform have any relevance to the statement that's highlighted on the screen, "they support our platform and will use the features we commit to
deliver"?
a. Yes. What I'm saying there is that if we take ownership of the platform and tell them crisply what will be in it, then they will commit to deliver -- that we commit to deliver those features, they will
use them.
The language used in this question and answer assumes that Netscape has a choice to either use the Microsoft technologies or develop their own. As a developer, they clearly have that choice (even if Microsoft does not like it). But, the idea behind providing technology as part of the OS is also very much related to the desire of Microsoft to make certain they continue to own the consumer OS platform (I.E. their monopoly).
The primary reason Microsoft forces all consumers to buy IE is simply because that forces all consumers to have in place the various technologies that ISVs might want to depend upon. Unfortunately this increases the cost to all consumers (see Compaq's testimony that Microsoft raised the price to cover added features), provides an extra incentive to ISVs to write exclusively to the Windows platform (lower costs and larger market) and does precisely what Franklin M. Fisher said in his testimony (I.E. further increases barriers to entry).
This case is not about Netscape being rubbed out of a market. It is about a monopolist rubbing out a competitor and making it much more difficult for any other competitor to ever enter any market Microsoft is in (particularly the consumer OS market).
See? Dan Rosen understands how delivery of technology is important. If Netscape is going to rely upon Microsoft technology, then Microsoft is going to have to deliver. That is fine. What is not "fine" is the forced delivery of technology via bundling at the expense of consumers.
11:10 AM PST - Yes, the tune up kit is one way, but not the only one.
q. And is there any reason why Netscape cannot produce a product that has its own interface and exposes Netscape's own API's, but still relies on the technologies that the tune-up kit already uses in
Windows?
a. No, there's no technical reason I know of.
Is there any reason why all consumers can not use IE? No. Is there any reason why all developers can not use C++ from Microsoft? No. Is there any reason why all NT users can not use MS-SQL? No.
The question is not whether other applications are necessary. The question is why does Microsoft force all consumers to buy Microsoft technology.
Why should Microsoft even care if Netscape wants to write their own browser from the ground up? There is an answer for that question.
10:55 AM PST - It is okay for Microsoft to sell the virtues of Microsoft technology.
Transcript Feb 23, AM: Rosen on the stand. Re-direct by Microsoft
q. And, Mr. Rosen, if Netscape had agreed to use all the technologies that we have been discussing -- all of the client code, as you said in your memorandum to Mr. Gates and others -- would Netscape
still have been able to produce a windows 95 browser?
a. Oh, absolutely.
q. And would Netscape have been able to implement Java in such a browser?
a. No reason why they couldn't.
Microsoft is free to attempt to sell ISVs on the quality of Microsoft technology. Suggesting that Netscape not develop its own technology is where the problem starts.
10:30 AM PST - Dan Rosen backdates his use of "internet technologies" to a time prior to their being bundled with the OS?
q. And could you tell me what you meant by the phrase "client code" as you used it in that document?
a. I meant the set of technologies that we were embedding into windows 95 to access and display information from the internet.
In other words the "browser application"? Microsoft continues to assume that its use of semantics is going to permit them to bundle any application they want with the OS. The problem is that IE was not embedded into Windows 95 when it was first released. That was done afterwards. In fact it was done after Microsoft agreed to the consent decree with this same judge stating very clearly that Microsoft agreed not to make purchasing IE a pre-condition of buying their OS.
I guess Microsoft assumes that if you repeat a lie often enough it will eventually be believed.
February 23, 1999 - Tuesday
5:15 PM PST - Rosen admits to fabricating his story? Tell me something new.
5:00 PM PST - Direct testimony from Joachim Kempin released by Microsoft.
4:10 PM PST - I guess the question was whether Netscape was going to collude with Microsoft or not, right?
q. Second page. It says "conclusions, the critical question is"--and this is you writing; correct, sir?
a. That's correct.
q. --"do they want to align strategically with us or not?" okay? And by alignment, you meant netscape agreeing to use Microsoft's client code for windows 95; correct, sir?
a. More precisely, what i meant was netscape agreeing to use the internet technologies that Microsoft was building into windows 95 to build their browser product.
q. Well, very specifically what you say here is the test of this alignment will be Netscape's agreement to use Microsoft's client code on windows 95; correct?
a. Correct.
q. And you meant that at the time; correct?
a. Yes.
q. And if they used Microsoft's client code on windows 95, they would not be a platform competitor; correct, sir?
a. I don't know that. That's not correct.
q. You don't know that?
a. No.
q. Well, if they adopted Microsoft's client code on windows 95, then if they exposed any API's at all, they would be Microsoft's API's; right, sir?
a. Not necessarily, sir, no.
q. Well, i realize they might have another product that they exposed API's, and that's maybe what you're talking about, but at least with respect to their browser, if they used Microsoft's browser code on
windows 95--if Netscape did--then, if they exposed any browser API's, they would be Netscape's and Microsoft's API's; right?
a. I think that that is correct. They could either be Netscape or Microsoft api's. They could be both.
q. They would have to be both--right?--because they would be the same thing. Right?
a. No.
q. Mr. Rosen, if Microsoft adopts-I'm sorry. If netscape adopts Microsoft's client code--and you're referring here to the browser code--correct, sir?--right here in this document.
a. Repeat the question, please, sir.
q. You talk about the test of this alignment that you want to have is Netscape's agreement to use Microsoft's client code on windows 95; right?
a. Right.
q. And in this context, at least, the client refers to browser; correct, sir?
a. No. To make this very clear-
Mr. Boies: All right, your honor, I have no more
I think Mr. Boies just got fed up with the arrogance of this witness. Clearly Microsoft intention was to prevent Netscape from offering any unique or superior technology to the browser market. Dan Rosen vales this effort by suggesting that all Microsoft wanted was for Netscape to use Microsoft technology. That is fine. But, if Microsoft wants to provide technology it will have to compete for the business. Just about ever act conducted by Microsoft is designed to prevent competition and to prevent superior technology from being introduced by competitors.
Maybe Microsoft was asking nicely. Or, maybe they will just issuing threats to Netscape. But, it is not necessary for acts to be "threatening" in order to violate antitrust laws. If the purpose in the conduct was to preclude competition (and it is very clear that was the intent), then the act by Microsoft to entice it into dropping competitive plans and using Microsoft technology could and should be illegal acts. You know, forcing all consumers to buy a particular brand of toothpaste is not excused by a claim that the paste prevents cavities. Microsoft thinks that if it can just describe all of its activities as promoting its products, it is exempt from antitrust laws. That is not the case. Microsoft's clean intention was to remove a possible competitor "at all costs" (to use an expression from Dan Rosen).
Changing the use of the English language later in time in an attempt to avoid antitrust liability is not going to work. This is particularly the case when the
change in language is so obvious.
4:00 PM PST - Microsoft does think that they are the only software company on the planet?
q. So, it's your testimony that this was merely saying, "we want to tell you, netscape, that we will follow through and give you what you want"?
a. Yes, that plus "we would like to encourage you to use everything we build and, in addition, give us feedback about what things we may not be thinking about doing that you might want so that we
can build them as time goes forward."
The attitude that Microsoft has toward competitors and customers is the same. If you are a competitor, you must use our technology. If you are a customer, you must buy and use our technology.
No. You do not have any choice in the matter. We will dictate what you use. And, as features are added to what you must buy (I.E. IE), you will pay more and more.
(Did I paraphrase that answer well enough?)
3:50 PM PST - Microsoft does use words differently that most but "ownership" does not mean delivery.
q. And was that your first priority goal at this June 21, 1995, meeting?
a. Yes, it was, but I must put this in the context with which I meant it at the time. I was fairly new to Microsoft, and the word "ownership" in Microsoft terms means that you are going to deliver on
something you say you will. It's akin to responsibility for. And going into the meeting--
the court: The word "ownership" means delivering on something that you promise; is that correct?
the witness: Yes, that's correct.
the court: Thank you.
Bull. "Owning" implies a dominant position in the market.
3:30 PM PST - Any technology not owned and controlled by Microsoft is "non-standard" and therefor incompatible, right?
q. And if they used your technologies, if they used your platform, they would not be offering an alternative platform; correct, sir?
a. Sir, no, because as I said at the time--and I have said several times today-I did not think at that time Netscape was competing in platform space.
q. Well, whether or not--you say you didn't think they weren't competing in the platform space. Mr. Rosen, when one of your working goals is to move Netscape out of the windows 32 internet client
arena--and if we could go down to the middle of the page--and avoid battling Netscape in the next year, when you talk about avoid battling Netscape in the next year, isn't that a suggestion that there is
going to be competition?
a. Yes, and the interoperability thing such as agreeing on client interfaces and wire protocols.
the court: You mean that refers to interoperability problems?
the witness: Yes.
the court: All right.
the witness: It does.
I guess Microsoft is just arrogant enough to suggest that if any competition exists that only creates incompatibilities and that must be bad, right? Well. There are at least two ways to remove incompatibilities. One way is to remove the competition (a la Netscape). The other is to confirm to a standard like Java (which Microsoft continues to refuse to do).
The compatibility argument is totally bogus. Microsoft seeks out compatibility or incompatibility depending upon which removes competition from the market. Microsoft clearly does not hold up compatibility itself as having any value at all.
It is fair to call compatible systems as just being the lowest common denominator. And, lowest common denominator systems might be described as inferior to not the most advanced. But, here Microsoft claims that incompatible systems are bad.
This is not a minor point. Superior technology is almost always incompatible when first introduced. What Microsoft is hoping to do by their acts is preclude the introduction of superior technology. Superior technology can take the form of a new platform such as browsers or Java. But, it can also take the form of advanced internet services, etc.
What Microsoft is trying to do is establish itself as such a power on internet browsers that it can dictate a whole range of future technologies including platforms themselves. Microsoft clearly hates competition. All monopolists prefer to be the only company in the market. That is a given. And, that is why the antitrust laws attempt to prevent monopolies from using their power to preclude competition.
2:00 PM PST - This industry has a lot to fear from the Microsoft monopoly. It is called a monopoly in e-commerce. This dialog points out that this case is about a whole lot more than just a browser. Microsoft is bundling the browser to get rid of competitors in both browsers and in the internet itself.
q. But I just want the record to be clear. Microsoft was attempting to get a per-transaction revenue deal with Visa and Mastercard; correct?
a. No, sir.
q. No? Okay.
a. There were discussions going on between Microsoft and others about licensing them technology that would allow them to have fewer losses in the processing of electronic commerce transactions.
There was (sic) discussions, and wide-ranging discussions, about if we could find technologies that would allow them to reduce their losses, clearly they should be willing to compensate us for that
technology. i think per-fee transactions were only one way that had been discussed, there was a straight technology licensing that was also discussed, and there were many other ways that were also
discussed.
q. Mr. Rosen, Microsoft closed a deal on a per-transaction fee with visa in the spring of 1995; correct, sir?
a. I don't know. I don't recall.
Microsoft closes a deal for per-transaction fees with Visa and Dan Rosen does not recall?
q. Do you still have government exhibit 949 there?
a. Yes, i do.
q. Look at the bottom of the page where you'll see an e-mail to you from Ms. Fox, dated April 25, 1995, at 1:20 4 p.m.
a. Yes, I do.
q. And do you see there where she says she has that week closed the Visa deal for a per-transaction revenue deal?
a. Yes.
q. And do you see where she says that now she wants to bring in Mastercard but Mastercard has got an existing deal with Netscape. Do you see that?
a. I do.
Stop right there. If there was ever a justification for making certain that Netscape remains a viable competitor, this is it. What would be the result in 1995 if Netscape did have a deal with Mastercard? Well. The monopolist would have a signed deal with both Visa and Mastercard for a per transaction fee. This is pretty strong evidence that without competition in browsers (for example), a monopolist will quickly move into other markets and dominate there as well. Antitrust law has specific language precluding the use of monopoly power to gain yet another monopoly market. What we see here is the role that competition plays to prevent that from occuring.
q. Now, does that refresh your recollection that when six days later you wrote to Mr. Gates and Mr. Maritz in government exhibit 22 about the danger of "bottom line: if microsoft and netscape go to
war with each others, then other industry players will set the terms of engagement, including Visa and Mastercard on processing fees," you were referring to these per-transaction revenue deals that are
in Ms. Fox's e-mail to you?
a. It does--the question was, does it refresh my recollection?
q. Yes, sir.
a. Yes, it does refresh my recollection. I remember that Ms. Fox thought she had a deal signed with Visa, that, in fact, Visa backed out of during that period of time. My recollection is that they decided
not to do this deal with us. and, in fact, Mastercard decided not to do the deal with Netscape, and they got together to do something called SET, secure electronic transactions, instead.
Well. Why Visa backed out may need some investigation. Clearly Mr. Rosen is not going to provide one here. Maybe Visa talked to their antitrust lawyers? Maybe Visa was told that Mastercard would also sign? Maybe Visa was told Netscape would be adopting all of the Microsoft technologies? But, what is absolutely clear is that were it not for some competition in play, Microsoft would have closed the deal on both Visa and Mastercard.
q. And the reason they backed out of the deal, that visa backed out of the deal, was because you had not been able to get Netscape to agree to adopt your standards; correct, sir?
a. I don't-I don't know why visa backed out of the deal. They never told me why they did.
q. Well, if you go back to 949 and Ms. Fox's memo, she said that she'd closed the Visa deal, but now she had been tasked with bringing in Mastercard. Do you see that?
a. I do see that.
q. And that wasn't possible because Mastercard had an existing deal with Netscape; correct, sir?
a. I really don't know what agreement Mastercard had with Netscape.
Well. I assume Mr Rosen is not privy to the Netscape-Mastercard agreement, but it is fair to assume than one agreement might block the other.
q. Okay.
a. I do know that Mr. Barksdale told me that he really did not want to do a deal with Visa because he didn't trust them, but I don't know what deal they had with Mastercard.
This is an interesting observation. My guess is that few companies would want to deal with Microsoft because of a lack of trust.
q. Well, you already had a deal with Visa; right, sir?
a. Well, we had discussions with Visa that, to the best of my recollection, never wound up being a deal. I assumed by "deal" we mean signed contract.
q. Here Ms. Fox writes you that they've closed the deal; correct?
a. And I assume that given ms. Fox-
mr. Lacovara: Objection. Lack of foundation. Mr. Boies mischaracterized the document twice.
the court: What do you say he mischaracterized?
mr. Lacovara: He represented twice that Ms. Fox says they closed the deal. It doesn't say that. He is just misreading. I'm sure it's in error.
mr. Boies: Well, let me read what I'm talking about because I think maybe mr. Lacovara-
the court: "we did get the per-transaction revenue deal we wanted."
Sounds like the judge knows a deal when he sees a deal. Other than Compaq do you suppose that Microsoft insists upon oral agreements? Mr. Rosen seems to suggest that a written contract is required before a deal is valid. You would think it would. But, Compaq got on the stand just a few days earlier and justified their actions on the basis of an oral license agreement of some kind. That testimony sounded like a serious commitment on Comaq's part.
mr. Boies: Yes.
the court: That's what it says.
Sounds like a correct characterization to me too.
mr. Lacovara: I don't want to have a colloquy, your honor. I will defer to the witness to answer the question is posing.
the court: Objection is overruled.
the witness: I'm sorry? Your question again, sir?
by mr. Boies:
q. Let me try to bring this to a close. There was a Visa deal that Ms. Fox, at least, told you on April 25 that had been achieved; correct?
a. No, sir. She said that she was negotiating with Visa, and one of the terms that she was trying to get Visa to agree to was, in principle, per-transaction revenues.
Actually she said she had a deal ....not negotiating a deal.
q. In principle?
a. Well, one of the things she was asking for was per-transaction revenues as a component of a deal, and she, in this memo, I believe, does say we did get them. But the deal was never closed. There is
no deal.
q. Let me see if I can put it in a way that you would agree with. Microsoft did get the per-transaction revenue deal that you wanted from Visa, as Ms. Fox says, but Visa pulled out of that deal because
they were not able to bring Mastercard in because Mastercard had an existing deal with Netscape; fair?
a. No, not fair.
Just because the evidence does not favor Microsoft does not mean it is not fair. Microsoft does not know what "fair" is. Some people do complain that everything that does not go their way is "unfair". But, fairness is determined by a third party (I.E. that is why we have a judge sitting there).
q. Okay. All right, sir.
a. I mean, I will try to answer your question, clearly, if you have one.
q. Let me ask one question, and then I will stop.
a. Okay.
q. When she writes we did get the per-transaction revenue deal we wanted, she's clearly talking about Visa; right?
a. Yes.
q. Okay. She then says, "but they, Visa, are now tasked with bringing in Mastercard which has an existing deal with Netscape"; correct?
a. That's what she writes, yes.
q. Did you have any reason to believe that that statement, that entire sentence or anything in it, was not true?
a. At the time or now, sir?
q. At the time she wrote it.
a. At the time she wrote it, there were many, including myself, who were skeptical because Visa had already given us enormous difficulty in reaching an agreement, and many thought she was being
optimistic.
I suppose one could be skeptical about the deal. But, it does sound very much like Visa agreed to per-transaction revenues for Microsoft and a tentative deal did exist between Netscape and Mastercard. Did one cause the other to be canceled? Maybe. But, it sure sounds like competition in browsers prevented a possible monopoly. Or, at least it prevented another source of revenue that only the monopolist could take advantage of. Do not minimize the importance of this evidence. If Microsoft is not broken up and the threat created by the monopoly removed, this kind of evidence could support major legislation to regulate not only the computer software industry but internet commerce as well. The best thing that can happen to the industry is that Microsoft's monopoly power be eliminated.
q. Six days later, you, you personally, in government exhibit 22, write, "if we go to war with each other, then other industry players will set the terms of engagement; e.g., Visa and mastercard on
processing fees." And would it be fair to say that you are indicating here that if you do not go to war together, you'll be able to avoid that?
a. I think it's fair to say that it was my hope that if we could have reached agreement and found a common interoperability standard that customers would use, that customers would benefit and,
therefore, pay less through the bank processing industry, and there would be more revenue for people to share.
Well. If Dan Rosen is suggesting that some body determine common interoperability standards, the worse choice of that body would be monopolist. I suggest he is not even making that suggestion. Monopolist's often use the term "common standard" when they mean to say "our technology". There is a very big difference between the two. And Microsoft has a horrible reputation for the use of the English language in this trial.
1:30 PM PST - Maybe South Carolina should reconsider joining this case?
q. Did you believe that if Netscape and Microsoft, as you put it, went to war with each other, Visa and Mastercard would, as you describe it, set the terms of engagement on processing fees?
a. I certainly did because at the time internet transactions were paid for, and other network transactions were paid for on the same basis of phone-order transactions where there was no security on the
identity of the person using the card. So, the fees included a surcharge, if you will, for that uncertainty and to cover their losses. And I believe that if we could get a much more secure transaction, then it
would be possible to have those fees be more reasonable for the end-user customers and potentially for us to take a share of them.
q. Did you say "and potentially for us to take a share of them"?
a. Yes.
Microsoft, a monopolist, should get a share of e-commerce payments? Where is the South Carolina AG when you need him? There is a lot more to this Microsoft monopoly that simply the choice of browser. For some reason Microsoft thinks it deserves a cut of the action for all e-commerce transactions? Let me give you a little hint: Monopolist always get whatever they want until they are broken up (at least if they can possibly figure out how they can control the sale).
q. And the share, if any, that you were going to take of it was going to be less if Microsoft and Netscape, as you put it, went to war with each other; correct?
a. No, sir. I don't think that is all what I intended here. What I meant in--and I think I say it--is that if the two go to war, then there would be no standard adopted, and the banks will charge whatever fee
they choose to charge. And in this case, I saw great advantage to customers and to the industry as a whole, if there could be some interoperability between the software packages that were going on to
the market on electronic commerce.
Heaven forbid if a competitive marketplace ever sets prices? Is this what is bothering Mr. Rosen? Microsoft should have its monopoly so that Visa and
Mastercard can not? What makes Mr. Rosen even think that Banks setting prices competitively is bad? Sounds to me like breaking up Microsoft is just a
start. Visa and Mastercard need to be evaluated along this line as well (and I assume they are being so evaluated). But, if this testimony is supposed to
defend Microsoft in any way it clearly does not.
1:18 PM PST - Visa and MasterCard have their own antitrust problems.
q. You were also concerned, were you not, sir, that if netscape and Microsoft competed, the fees that they would be able to charge Visa and Mastercard would be lower?
a. No, sir, i don't think so, because I don't think that we knew exactly what the fee structure would be. Visa and Mastercard at this time were sort of coming to all the software companies and saying,
"we want to find software to adopt to help us do transactions across networks, interactive television and the internet," and this just was part of those overall discussions with all of the companies in that
area.
So. Microsoft, Visa and MasterCard have already decided just how electronic commerce will be conducted and have also decided the fee structure as well? Is this what Mr. Rosen is suggesting? Visa and MasterCard do have their own antitrust concerns. But, what is becoming more and more obvious is that Microsoft does indeed need to be broken up so that no company can dictate the terms or character of internet commerce. Breaking up Microsoft is a very good idea if the benefits of electronic commerce are to be realized. If it is necessary to have a single standard for electronic commerce, that standard clearly should not be determined or controlled by a monopolist and absolutely not one as arrogant, ruthless and lawless as Microsoft. That is absolutely clear.
1:03 PM PST - Microsoft's strategy to avoid competition on the internet is obvious
q. Certainly. were you attempting to agree to get Netscape to agree not to compete with Microsoft in this area, at least in significant part, because you were concerned that if you didn't get that
agreement, Visa and Mastercard and, perhaps, others would play one company off against the other?
a. No, sir. I think it's more important to say that what I wanted to do with this technology was have the two companies cooperate so that customers had a good way to do electronic commerce
transactions across the internet. I think that-I believe that as a consequence of us not finding common ground and cooperating, that many different standards would evolve, and customers would be
confused by it, and someone else would step up and try to define the way electronic commerce transactions would do. I saw it as a window of opportunity for us to do
Well if the Microsoft monopoly is going to be permitted to continue, Microsoft will see lots of opportunities to tie up technology in such a way to avoid competition now or in the future. What you have in this answer is just a precursor to what the software industry will be in regard to internet technologies if Microsoft is not broken up. It is simply too easy for a monopolist to control and dictate not only standards but the very products that get developed themselves. Look at what Dan Rosen is suggesting. He is suggesting that rather than have Netscape and Microsoft (or anyone else) offer superior technology and compete fairly and openly, Microsoft and Netscape should agree among themselves in regard to key technologies. And, of course Microsoft is holding all the cards since they have a monopoly on the client. So what he is really saying is that he wants Netscape to go along with whatever technology Microsoft wants to offer for cooperation (and stay away from any technologies which Microsoft does not want cooperation).
Just why does Dan Rosen even suggest that if a third party stepped up and tried to define the way electronic commerce would work, that would be bad? It is not bad. If any company could develop superior technology that is always good. It is never bad as Mr. Rosen suggests. Bad for the Microsoft monopoly maybe? But, what is good for Microsoft is not even relevant. There is no greater good in having Microsoft be successful.
The only question is whether superior technology and ideas (regardless of their source) can succeed in the marketplace. Mr. Rosen's thinking is "trust thinking" as in something that should be broken up not protected.
12:40 PM PST - Dan Rosen seems to contradict his own testimony time and time again
q. Now, this again purports to be an e-mail from you sent Friday, May 12, 1995, at 11:45 a.m. To Mr. Slivka, Paul Maritz, Thomas Reardon, Chris Jones and other people. do you see that?
a. I do.
q. Did you send this e-mail, sir?
a. I believe I did, yes.
q. And the first paragraph says, "if the world wide web continues on its current trajectory, it has the potential to superset windows allowing others to prevail in the next generation of desktop and home
applications. At all costs we must continue to lead the evolution of the desktop software." Did you write that, sir?
a. Yes, i did.
q. And did you believe it to be true at the time?
a. Yes, i did.
q. And when you referred to the possibility that others could be allowed to prevail in the next generation of desktop and home applications, who were the others that you were referring to?
a. I don't recall specifically who i had in mind, but I would assume I was thinking of companies like IBM and Sun.
q. Other competitors or potential competitors in the provision of operating systems; is that correct?
a. Yes. And i'm sure part of what i was thinking is AT&T as well, which at that time owned Unix.
q. What was the last part of your answer?
a. I believe at that time still owned Unix.
q. Now, let me ask you to look at the bottom of this first page, continuing on to the second page where you write, "would we want," and then go over to the second page at the top, "would we want
others (e.g., Netscape) to take our components, add a lot of value and then distribute to customers under their brand. (I believe we should do this on the server side, but not the client)." do you see that?
a. Yes, I do.
q. Did you write this at the time?
a. Yes, I did.
q. Did you believe this at the time?
a. Yes, I did.
q. Now, do you recall telling me this morning that in May and June of 1995, Microsoft was interested in having Netscape and others take your components and build internet browsers using those
components, using on those technologies?
a. Yes.
q. Now, where you say, "I believe we should do this on the server side but not the client," does "client" there include browsers?
a. In specific, I believe what I'm--the answer to your question is no. And in specific, I am talking again about the desktop internet client platform. and most specifically, I'm referring, I believe, to the
branding more than anything else on this statement.
Sounds more like he wants Netscape to help compete with Sun and IBM on the server business but stay out of Microsoft's way on the browser business. This thinking is consistent with the testimony from Netscape suggesting that they, Netscape, stay out of the Windows 95 market space for browsers. This email also disputes his early claim that Microsoft only wanted Netscape to use Microsoft technology. Microsoft clearly wanted to partner with Netscape in markets where competition did exist but just as vehemently wanted to keep Netscape out of the market where Microsoft held its monopoly.
11:50 AM PST - It is okay to think that Netscape was not a threat. But, Bill Gates clearly saw the reality of the situation.
q. All I am trying to do now is get what you can give me. if you cannot give me a single name of such a person, I'd like you to tell me. If you can give me a single name of such a person, i'd like you to
give me that name.
a. I cannot give you a single name.
Really?
q. Okay. Now, let me ask you to look at government's exhibit 20 that is already in evidence. And this is a memorandum from Mr. Bill gates dated may 26, 1995, entitled the internet tidal wave. Did you
see this document in 1995, sir?
a. I believe that I did.
q. Let me direct your attention to page 4, the third paragraph from the bottom that begins, "a new competitor born on the internet is Netscape. do you see that, sir?
a. I do.
q. And it continues: "their browser is dominant, with 70 percent usage share, allowing them to determine which network extensions will catch on. They are pursuing a multi-platform strategy where
they move the key api into the client to commoditize the underlying operating system." do you see that?
a. I do.
q. Were you aware in may of 1995 that this was Mr. Gates' view?
a. Yes. I read that at that time, and I think it's important to emphasize two points of context on this. First is that this is in the section on competition. And if you read through this, this is the
next-to-the-last paragraph, and I think most people in the company were focused on the ones in the first few paragraphs -- at&t, novell, unix, sun, acrobat, sgi, and all the other things leading up to this.
But, secondly, and probably more importantly, is I remember at the time I read this that Bill was probably wrong, because Jim Barksdale was telling me -- and I was the one talking to them -- that
Netscape didn't intend to compete in this way. That they saw their core competence as being in the servers and value-added functionality, not in the platform arena. So I remember at the time, and even
as I reflect on this now, that I probably had a better perspective than Mr. Gates did on Netscape's intentions.
To the extent that Netscape was or was not intending to incorporate APIs into the browser is not really an issue. To the extent that Microsoft thought Netscape was a threat is not an issue either. If you accept the fact that Microsoft viewed Netscape a threat, that does explain why it was so important to bundle IE with the OS. But, whether it was true or not does not provide a defense.
The antitrust laws are designed to prevent companies holding monopoly power from exercising that power to preclude competition. No act is excused if the acting monopoly was "misinformed" about the true inten
(Part of document lost, sorry)
February 22, 1999 - Monday
2:03 PM PST - I guess Microsoft has adopted a new defense strategy?
We will just lie about the past and our thoughts and hope the lawyers can force the issue on appeal? Would Microsoft try to conduct business that way?
I guess the Microsoft lawyers could argue that Microsoft has an absolute right to integrate any and all software they might want. But, if that is the case, why go through all the charades?
11:50 AM PST - Yet another Microsoft employees gets on the stand with an unbelievable story.
Microsoft should get an award for the most unbelievable evidence ever submitted to a court of law. I guess if the evidence does not support your case, just lie.
10:30 AM PST - Microsoft likes the "zero revenue model" for others. Perhaps they would support such a proposal to settle the case?
Perhaps we should take an idea from Microsoft. They thought it was cute to deprive Netscape of revenue. Perhaps we should require all revenue from OS sales for the next five years to be put into an R&D fund. That fund could be distributed by an industry panel to companies, individuals and organizations submitting business plans for the development of operating system technologies which will compete with Windows (only Microsoft would not qualify).
Microsoft still thinks it is fair to suggest that Netscape should be expected to compete without a source of revenue for fair chance in the market. So, Microsoft should go along with such a plan. No. Microsoft would not get anything in exchange for giving up its revenue. And, no, they could not alter the price of the OS depriving the fund of moneys. And, they would be free to spend all the money they want on their on-going R&D projects.
Do you think that would be fair? Do you think that would reestablish competition in the consumer OS marketplace? Which companies would submit proposals? How would Linux and OS/2 fair under such a plan? Do you think Compaq might develop its own consumer OS? Might HP? Would IBM give OS/2 another shot? R&D to spread around could be 7.5 billion or more.
Under such a plan Microsoft would not be split up. They would not be denied their right to innovate in any way they wanted to. They would not be denied from selling their other applications. They would only be required to operate under the same rules they themselves have proposed for Netscape (IE No revenue base). Linux operates that way now, almost. At least no money flows back to the developers for Linux or Navigator.
Microsoft should like the idea, right? They could propose it themselves as a possible settlement.
Or, are they so arrogant to think that only Microsoft has the right to earn revenue in the business. Or, are they so arrogant to think they can force the sale of unwanted products upon all consumers? And, keep all the money themselves?
Would the court order such a remedy? Not very likely. They may or may not have the power to impose such a remedy, but they certainly could approve any settlement that Microsoft accepted. Why would a monopolist ever accept such a proposal? They wouldn't. But, they will not accept splitting up the company either. Microsoft does not accept "fair competition". It knows that with fair competition, it might lose. It has even said so itself.
9:30 AM PST - ZDNet is conducting a poll asking whether Microsoft should be split up or not.
Daily Wrap and Flow - Week17 (Rose,Rosen)
Daily Wrap and Flow - Week16 (Myhrvold, Chase)
Daily Wrap and Flow - Week15 (Allchin 98Lite)
Daily Wrap and Flow - Week 14 (Maritz, 98Lite)
Daily Wrap and Flow - Week 13
Daily Wrap and Flow - Week 12
Daily Wrap and Flow - Week 11
Daily Wrap and Flow - Week 10
Daily Wrap and Flow - Week Nine
Daily Wrap and Flow - Week Eight
Daily Wrap and Flow - Week Seven
Daily Wrap and Flow - Week Six
Daily Wrap and Flow - Week Five
Daily Wrap and Flow - Week Four
Daily Wrap and Flow - Week Three
Daily Wrap and Flow - Week Two
Daily Wrap and Flow - Week One