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Daily Wrap and Flow

Reading the Daily Wrap and Flow is a quick and easy way to follow the ebb and flow of the trial. This link will always contain the latest commentary making it easy to bookmark. This column is updated throughout the day with the latest commentary placed at the top. If you prefer external links to use a full screen see help.

June 18, 1999 - Friday (The court will resume with testimony from Dean Schmalensee on Monday)

2:18 PM PDT - Oh look! Microsoft wants you to write your congressman and tell him or her how much you want competition to be restored to the consumer OS and browser markets.

Or did I misunderstand. Maybe Microsoft wants you to write and help force your neighbor to buy the software you like? Or, just what is it that Microsoft wants you to want, anyway?

6:29 AM PDT - Testimony from Gordon Eubanks a waste of time and a lost opportunity

I have had an opportunity to reflect upon the testimony offered by Gordon Eubanks and have concluded that the effort was both a waste of time and a lost opportunity.

The reasons for this conclusion do take some explanation.

First, Gordon Eubanks was the CEO of Symantec both a competitor and ISV for Microsoft. He is also not directly involved in this litigation which itself has its benefits. He may have been asked by Bill Gates to testify on the behalf of Microsoft Corporation but he is clearly capable of expressing his own views regarding competition or lack thereof in the computer software industry. This testimony was an excellent opportunity for the court. Unfortunately it was wasted.

Let me point out that Gordon Eubanks testified about how Microsoft and Symantec both compete against each other and cooperate as well. This dual roll is quite common in the industry. The dual roll is not universal. Many companies only cooperate with Microsoft and offer no competition at all. Some companies such as Symantec and IBM as well as several others do both. IBM has tried to compete with Microsoft in the consumer OS marketplace but we have seen from the testimony offered by Mr. Norris that Microsoft did everything it could to preclude competition in the OS space.

Gordon Eubanks did testify that he thought it was very beneficial to customers to have Symantec and Microsoft compete. They competed directly with their respective Java Development tools and even with Anti-Virus software to a certain extent. The testimony coming from Gordon Eubanks clearly implied that competition (active and fair competition) was beneficial to both the industry and the consumer. He made a particular point about how important it was that competitors kept each other on their toes.

What Gordon Eubanks failed to do however is explain why competition is good in the Anti-virus and Java business but not in the consumer OS marketplace. In the OS marketplace, he basically testified that having only one company offer a product is the best possible outcome simply because it benefits so many people. People he mentioned include ISVs who only need to develop software for one platform as opposed to two, three or more. And, I believe he claimed that consumer somehow benefitted by being forced to pre-purchase Microsoft software (including APIs) so that ISV can count on that being the case.

The missed opportunity comes from the failure on the part of Mr. Eubanks to explain the difference between those markets where he thinks competition is a benefit and those markets where he thinks precisely the opposite. Which is it, Mr. Eubanks? Is competition good or is the lack of competition best? And, if you suggest one is good for your company but not good for someone else's, just how do you make that decision?

Mr. Eubanks did testify that he is only interested in entering businesses where he thinks he has a chance of being successful. Well. Venture capitalists do that all the time when they elect not to fund any venture that competes directly with Microsoft, just as Mr. Eubanks does. Unfortunately, that process (known to be taking place for a long time in this industry) tends to leave the monopolist with its market all to itself.

The question not put to Gordon Eubanks is whether this is good or bad. He clearly testified that competition was "good" in the Anti-Virus and Java markets. But, he implied that competition is bad when discussing operating systems. Is his testimony just bought and paid for by Bill Gates or does he have an explanation for the difference?

Another observation that could have been drawn from Mr. Eubanks relates directly to one of the key issues of this trial. Gordon testified that his new company writes software that runs under and works with internet browsers. Gordon even made a point to tell the court that his new company supports browser based applications running in both IE and Navigator. Well? Is this good or bad? Should there be only one browser available to all consumers? Or, should there be active competition for browser technology? Are browsers like Anti-virus software where competition is healthy or are browsers like operating systems where only one choice is supposed to be the best possible solution? Well. You guess. After all, he is on the stand at the request of Bill Gates.

But, lets assume that consumers might benefit from active competition in browser technology. (I truly hope that no one in the industry disagrees with this assumption.) If consumers benefit from having more than one company offer a browser or related technology, then just how does Gordon Eubanks feel about the reality of Microsoft forcing all consumers to buy IE thereby recovering their R&D but leaving Netscape without any recovery of R&D. The real question here is whether Symantec would spend half a billion if they were not going to sell the resultant product. Or, whether Symantec or his present company would invest the R&D for a product that a monopolist already forces all consumers to buy. Would Gordon Eubanks want to market a product that required the mass donation of R&D by a community similar to that behind open source? Is this the kind of industry that Gordon Eubanks thinks is a healthy one? Or, for his money and time, does he insist upon a different model? You know. A model where the company "sells" the product they develop.

Just what does Gordon Eubanks think? Does he think that only one company should sell a product and other companies should go away? Does he really think that competition is good or not? He testified it was "good" for Symantec. But, his very presence on the stand would suggest that he actually thinks that Netscape had not right to sell their products and that for any market that Microsoft enters, a monopoly is the best solution.

The testimony from Gordon Eubanks was worthless. It does not explain his philosophy as it relates to competition and monopolies. And, it does not explain why his company should be able to sell products but others should not. And, it clearly does not explain why competition in good in some markets but bad in others. In sum, it offers no guidance to the court at all.

June 17, 1999 - Thursday (Transcripts from Wednesday not yet available)

3:16 PM - I guess Mr. Eubanks does not think there should be a monopoly in operating systems after all

by Mr. Boies:

q. Okay. Let me focus on the second question and answer, which is the one i really wanted to focus on, Mr. Eubanks, (reading):

"question: but we are not really going to see that, are we? Won't pc's run different software and run on different microprocessors that will make it tough to share information? and then you were quoted as saying, quote: i think you will see it. Microsoft has its own operating system for IBM pc's, but they make a ton of money writing software for the apple macintosh, too. There will be battles, but for market share, not to see who is the single winner. Customers would not win if there was only one standard. do you see that?

a. Yes, sir.

q. Do you have any reason to believe that you did not give that answer to that question?

a. I mean, I don't remember giving this. I have no reason to believe that I didn't give it.

Okay. So Gordon Eubanks is a little confused on just how the consumer benefits and from what. After all, he was only testifying to help out a friend.

2:32 PM PDT - Okay, Gordon, finish ...

q. Okay. If you say "no," sir, let's look at government exhibit 2293.

a. Can i finish my answer?

the witness: is it all right if i finish?

the court: sure.

by Mr. Holley: [Boies]

q. I thought you had.

a. We looked for areas where we could be successful. An obvious criteria in success is who else is in the market. So, as part of that, we wouldn't get ourselves in the operating system business, because we don't think that's a business we would have been successful in. In the java tools development business, we went in there full-knowing that we would compete head-to-head with Sun and Microsoft. We felt we could be competitive and add value, and we were successful.

q. Have you now finished?

a. Yes, thank you.

I think the entire industry agrees that getting into the consumer OS business is not a very good opportunity. I though Gordon Eubanks was supposed to be a witness "for" Microsoft. Here Mr. Eubanks is simply suggesting that no person should try to enter the OS marketplace as long as Microsoft holds its monopoly.

What? No one wants to enter a market with the potential of billions and billions in revenue?

His comparison with the Java market is not a good one. No company held a monopoly position in Java. And, it was a new market. A very young market too.

Gordon Eubanks testimony here strongly supports the absolute need to enforce the antitrust laws against any company in an established market where they hold monopoly power.

2:22 PM PDT - Gordon Eubanks is really no different than just about everyone in the business - STAY OUT OF MICROSOFT'S WAY

q. Well, sir, you say even though you competed with Microsoft, you made a conscious effort to avoid competing with Microsoft because you were afraid that they would step on you.

a. Absolutely not true. That is absolutely not true. we made a conscious effort not to engage in bashing of anyone in the industry, even though sometimes people tried our patience. Our business strategy is not to engage in bickering with each other, but to focus on serving the customer. We competed directly with Microsoft in the java business development, the tools business, head-to-head, 100 percent.

q. Just so that we are clear, sir, i didn't ask you about whether you wanted to bicker with Microsoft or not. what i said is, while you did compete with Microsoft, you didn't look to do that. And indeed, you looked to do the opposite. You looked to find segments where you could operate without being stepped on by Microsoft; correct?

a. We looked to find--

q. Right?

a. No, sir. We looked to find segments where we could be successful.

Well. So do all venture capitalists. And, they avoid competing with Microsoft for some very simple reasons only one of which is Microsoft's willingness to violate the law as necessary to remove a potential competitor from the marketplace. If Gordon wants to call that doing the things left over by Microsoft, that is fine.

Some companies are truly intimidated by Microsoft. Others are not. Most of those are precluded illegally from the marketplace by explicit acts of Microsoft from bundling to zero prices to dirty tricks and FUD.

1:59 PM PDT - Gordon Eubanks, former CEO of Symantec does not know about key agreements they had with Microsoft?

q. Now, having looked at this document, does it refresh your recollection that Symantec had a first-wave agreement with Microsoft?

a. This document says that Symantec had a first wave, so would believe that's true, and I know we had a working relationship with them. I didn't use the term "first wave" myself in conversations, but clearly that's what's this document is about.

q. When you were the chief executive officer of Symantec, regardless of whether you knew that this was called a first-wave agreement or not, did you know that an agreement existed between Microsoft and Symantec that provided what this agreement provides?

a. I don't know if i was aware of a formal contract. I know that we worked with Microsoft and other vendors to provide agreements, when necessary, to protect intellectual property and to protect the marketing and developer programs that might be around them.

Does Gordon know what a CEO does? I would hope so. But, he has just turned from a witness who does not care about the harm that monopoly power plays on the industry and the consumer to a person who is simply not believable.

1:47 PM PDT - Mr. Boies will conduct the cross examination of Gordon Eubanks

Sorry to disappoint everyone but so far nothing Gordon Eubanks has said is relevant to this case. Certainly nothing he has said helps Microsoft with their defense. Microsoft still holds a monopoly position. Microsoft still forces all consumers to buy IE. Microsoft still eliminated the ability of any company to sell browser technology (with the exception of Microsoft). If Gordon Eubanks is not concerned about that he is entitled to be not concerned.

He did talk about the use of the browser as a platform. I guess he just wants Microsoft to have that monopoly too. If you want to give Microsoft another monopoly, you are entitled to want that, I suppose.

12:42 PM PDT - Microsoft calls Gordon Eubanks as a witness. Mr. Holley will conduct the direct examination for Microsoft.

9:51 AM PDT - Eubanks friend or foe?

We really do need to read the transcripts in detail.

7:26 AM PDT - Gordon Eubanks crumbles?

Most likely not the words I would use but the transcripts are not yet available. The testimony from Gordon Eubanks, formerly of Symantec will be reviewed here in detail. Following that Dean Schmalensee returns to the stand. You remember the Dean? He was the fellow that tried to convince everyone how easy it was to offer a consumer OS in competition with Microsoft.

June 15, 1999 - Tuesday (Transcripts from Monday, June 14, 1999)

11:38 AM PDT - Microsofts examination of Mr. Colburn is largely just not relevant.

Microsoft spent a lot of time trying to suggest that AOL was going to be this great and powerful competitor due to the recent merger with Netscape. So what? If everything that Microsoft wanted to suggest by its questions was going to take place, the testimony is still not relevant.

Is competition in the browser market assured by the merger? Maybe. Maybe not. But, Microsoft is not being charged with having a monopoly in the browser market. Microsoft is charged with using its monopoly in the consumer OS market to rub out competition (Netscape) and attempt to gain yet another monopoly (the browser market). It has clearly done that without any help from AOL or anyone else.

Has Microsoft been successful in removing all competition? No. And, the removal of all competition is not required. Has it turned out to be more difficult to drive Netscape out of business than Microsoft thought? Perhaps. But, again, that is not relevant.

Antitrust law focuses upon the acts by monopolists in precluding or preventing competition. No such acts are excused just because such acts do not work all of time. Nor are such acts excused when the industry changes and somehow competition is able to resurface in other ways. In fact, antitrust law is supposed to make it easier for competition to occur.

11:03 AM PDT - Oh. So now Microsoft wants to change the reasons why AOL chose IE? I thought it was superior technology?

q. Well, if you're back here tomorrow, will you let us know whose phone number it is? now, do you agree, Mr. Colburn, that as a result of the netscape acquisition, aol has the power to dramatically shift browser market share between netscape and Microsoft from about 50/50 today to 65/35 in favor of netscape?

a. It seems, as i recall, you might be reading from a steve case e-mail on this, but let me just go with the statement itself. i think if you count raw numbers, and if you determine that aol now integrated netscape instead of ie--of course, we decided to stay with ie--then there is a basic number shift from whatever we get credit for. whether that's meaningful to anything or not is another question.

I guess Microsoft wants everyone to think that Microsoft is in antitrust trouble due to a "trap" set by AOL?

Well. Microsoft gave AOL the option to extend the IE deal a couple more years. They really should not complain if AOL takes it. AOL does get a nice browser, right? And, AOL gets a placement on the Windows desktop, right?

Does AOL have the choice to shift the percentages to favor Netscape (or disfavor Microsoft)? Lets assume they do. So what? They did not do that.

Microsoft Corporation is not being charged for antitrust violations they did not commit. They are charged for doing what they did including tying up AOL with IE.

If Microsoft wants out of the AOL deal, perhaps they can weasel out, right? This is clearly something in the control of Microsoft. There is no reason for Microsoft in a court of law to blame AOL for what Microsoft is doing right now.

9:53 AM PDT - Microsoft calling David Colburn to the stand seems to be largely a waste of time

(but, assuming you might be interested in the games some lawyers play, have at it)

Mr. Boies: May we approach the bench, your honor?

the court: Certainly.

(at the bench.)

Mr. Boies: I don't want to interfere if this is helpful to the court. On the other hand, they had an opportunity to examine Mr. Case, who was the author of most of these documents, at his deposition. i don't think it's particularly relevant what this witness thinks about Mr. Case's e-mails that he didn't have an opportunity to see or comment on at the time. they did depose Mr. Case. They had every opportunity to ask these questions of Mr. Case, who was the author or recipient of these documents, and i think not to ask him these questions, but save them for somebody who doesn't really know about them, is not a particularly healthy way to proceed.

the court: I am inclined to agree. I am not going to foreclose you, if you want to continue to examine him, but you have shown him one document after another that he has never seen before and he doesn't know anything about.

Mr. Warden: A good number of them he has seen, but be that as it may, he was presented here as the corporate witness last fall to speak for the corporation. he testified he was in the middle of this transaction and had an important responsibility in it. These are the documents they produced in response to the subpoenas about the transaction.

the court: Well, it may very well be, but most of them do not show him as an addressee or a recipient of copies, and he professes time and time again that he has no knowledge of what it is you're showing him.

Mr. Warden: to the extent he lacks knowledge, the documents will speak for themselves. But i want to find out if he has knowledge, or if he can, as he did with the pittman response to the case e-mail, identify and comment on what's there.

the court: Do you want to call case? Do you want to bring case in here as an additional rebuttal witness?

Mr. Warden: We will see about that at the end of this examination.

the court: Because he might be the point man insofar as explicating what the transaction is all about. I would be willing to let you substitute, if you want. His deposition has been taken. Everybody knows what his testimony is going to be.

Mr. Warden: Well, his discovery deposition was taken for a limited purpose by us -

the court: All right.

Mr. Warden: -- With the understanding it wouldn't last more than three hours, and it didn't last more than an hour and a half or two, i think.

the court: I am not going to foreclose you. We will go ahead and listen to it, but it does seem to me that it is not very illuminating, in view of the fact that he doesn't know what he is talking about here, or he doesn't know what he is talking about in the sense that he is being shown these that he has never seen before and is not knowledgeable about it. Either that or --

Mr. Warden: He testified he had an important role in this transaction.

Mr. Boies: I would not have raised it if we had not already had the deposition of Mr. Case where they had every opportunity to ask these questions.

the court: Well, let me warden try his own case.

Mr. Boies: Okay.

All of the testimony regarding the AOL-Netscape merger is largely just not relevant. AOL-Netscape has no plans to develop and market a consumer operating system. At least no such plans have been announced. Even if AOL-Netscape had such plans they would not be useful to the decisions this court is facing. This testimony appears to be presented by Microsoft in a vain attempt to suggest that some competition in the browser market might still remain. Well. It might.

If AOL announced that it was dropping IE in favor of Navigator and would immediately buttress the Navigator share in the marketplace, the testimony might be relevant. But, that is not the case.

I think it is clear that the judge feels that Microsoft is wasting its time with this testimony. However, to avoid a decision from being overturned because Microsoft was not permitted to submit "relevant" evidence, the judge is just letting Microsoft run off their stuff.

9:33 AM PDT - David Colburn again confirms AOL will stick with IE for at least the next 2 years.

q. And that's the analysis that comes two days after Mr. Case -- the request, rather, that comes two days after Mr. Case said such an analysis should be made -- "push down on all possibilities before deciding" were his words. and that's the analysis you didn't make; is that correct?

a. That's correct because, as you see from Mr. Pittman's e-mail back to Mr. Case -- and, of course, i report to Mr. Pittman -- we've done the analysis. And the analysis is it does not make sense to leave the IE browser and to leave our exclusivity. and, yes, as everybody keeps asking us, that potentially certainly steve wanted to revisit it, but we had done the analysis. And it was our belief in operations, right, that, (a) we've had a consensus for a long time in staying with the browser, (b) we really had no plans to switch it out -- you know, a full plan -- other than working on an alternative, and then, (c) we ultimately did stay with it.

q. Well, you stayed with it for what? '99 and 2000, or some part thereof?

a. Well, certainly for the length of the contract.

q. And what is the length of the contract?

a. I think there's at least two more years in which we're assured of being in the online services folder at a minimum.

q. Two years from january 1, 1999?

a. I believe that's correct.

I am not sure what Microsoft hopes to gain by testimony from David Colburn, but this is not it. Mr. Colburn confirms AOL will stick with IE for the next two years.

The testimony (most of which is not included here) deals with the consideration AOL made with possibly switching to the Netscape browser after the acquisition of Netscape. Clearly one would expect them to look very hard at this possibility. But, the evidence points out that AOL does not want to give up its position on the Windows desktop just to switch to another browser (even if they do own it).

9:05 AM PDT - AOL-Netscape merger appears to have to impact on AOL promoting and using IE exclusively

q. There has been a big change, hasn't there -- your acquisition of netscape?

a. Correct. But there was nothing with the acquisition of netscape that led us to believe we were going to change our pattern here.

Well. I assume Mr. Warden representing Microsoft knew this answer all along. So there must be some other reason for calling David Colburn.

8:39 AM PDT - David Colburn called to the stand. This time Mr. Colburn is called by Microsoft as a hostile witness

The DOJ and Microsoft has agreed to each call 3 witnesses during this rebuttal phase of the trial. The DOJ originally called David Colburn as a witness but Microsoft now feels that recalling Mr. Colburn is better for their case than recalling a Microsoft witness. Since the DOJ did not recall Mr. Colburn Microsoft was required to call him assuming there are a few points they need him to make.

Microsoft is calling David Colburn as an adverse or hostile witness since he previously testified for the DOJ. This does not mean that Mr. Colburn has changed his mind on anything. But, the AOL-Netscape merger has progressed and Microsoft wants to ask Mr. Colburn additional questions. This is an abnormal process but is commonly done in practice. About the only real significance to having done this is that Microsoft can ask Mr. Colburn leading questions even on direct. And, of course, they can take the Q&A in any direction they wish subject only to the line of questions being relevant to this case. If the DOJ had recalled Mr. Colburn, Microsoft could have accomplished the same without using up one of their "witnesses". But, the DOJ did not.

On with the testimony.

Home - Lewis A. Mettler, Esq.