COURT NOTES: On June 1, Economist Franklin Fisher of the Massachusetts Institute of Technology opened the antitrust trial's rebuttal phase for the government. He began by attacking the credibility of his former student Richard Schmalensee, another economist who testified for Microsoft earlier in the trial.
Fisher and government attorney David Boies both latched on to Schmalensee's evidence, particularly a survey that asked people using Windows 98 where they got their Web browsers. Less than 20 percent of the sample answered their browser came with the computer, despite the fact that Internet Explorer ships with Windows 98. Fisher also said that his former student is gullible, made painfully obvious in the fact that he actually believed Microsoft when it claimed to record software sales by hand on pieces of paper.
In his own testimony, Schmalensee cited Netscape's browser as a potential competitor to Windows, but Fisher said that the threat no longer exists because of how Microsoft damaged Netscape by leveraging its monopoly, giving away Internet Explorer, and essentially bribing big companies to squeeze Netscape out of the market. He said the only reason for spending billions on Internet Explorer would be to protect an existing monopoly product, Windows.
Before the trial continued on Wednesday, Microsoft lawyers introduced new evidence contradicting the depositions of America Online executives Barry Schuler and Steve Case. The document, listing several advantages of AOL acquiring Netscape, was was promised several weeks ago [see NewsSource, May 24]. Among them, Netscape's potential to compete with Microsoft Windows and its Office software suite. Also in contrast to the testimonies given by Case and Schuler, the evidence lists Netscape as "a viable alternative to Microsoft as a browser provider" for AOL.
Then after David Boies finished his questioning of Fisher, Michael Lacovara moved in on the economist and accused him of having a personal interest in the case. Upon questioning, Fisher admitted being on the board of Charles River Associates, a publicly traded consulting company, and conceded that several companies represented by the group could sue Microsoft if it is found guilty of antitrust law violations. But he said that he has been "kept separate" from the company since being named as a witness, and - as David Boies pointed out later - Microsoft has been paying its own economic witness Richard Schmalensee as an analyst for years.
On Thursday Michael Lacovara stuck his foot in his mouth again with the introduction of new evidence. That evidence, a memo from a Microsoft executive titled 'Linux is beating Windows', supposedly showed how Linux is now outselling Windows in several large computer chains. But the evidence was useless since it was written some two weeks ago, on May 20 1999. Judge Jackson didn't even try to hide his disbelief, smiling as the courtroom erupted into laughter.
But then Lacovara introduced more evidence that contradicted the testimony of former Netscape CEO James Barksdale. The evidence, another document from Goldman Sachs, said that last fall Netscape Navigator was being distributed by 22 percent of PC makers and 24 percent of the top ISPs. It also predicted that Netscape's browser would still hold at least 34% of the market by 2002 (a claim already disproven). That contrasted with Barksdale's statements last October that his company was forced out of those same browser distribution channels. After hearing the evidence, Fisher admitted that Barksdale's testimony may have been an "exaggeration."
On Friday Fisher recanted that remark after Boies took a closer look at Barksdale's original written testimony, which included a summary of Netscape's distribution agreements. In that statement, the former Netscape executive complained that none of the PC assembler agreements included an icon on the desktop, and in some cases required an additional CD to install Navigator. To reenforce the point, Boies introduced a Microsoft survey of Internet users, most of whom said the main reason they use Internet Explorer is because "it came with my computer." He then finished the reexamination by introducing a January 5 e-mail from Microsoft spokesman Greg Shaw asking a coworker for data that could show Netscape's browser as healthy. He received a reply later that day saying that the data didn't exist. As David Boies said, the e-mail speaks for itself.

On May 26, the federal judge handling Sun's antitrust lawsuit against Microsoft issued three tentative orders ahead of oral arguments that will be heard in the case on June 24. The orders are nonbinding and only serve as statements that will help the two sides focus their arguments during hearings.
US District Judge Ronald Whyte tentatively ruled that the Java implementation Microsoft distributed with Windows 98, Visual J++ and Internet Explorer infringed on Sun's copyrights by breaking a licensing agreement between the two companies. But Whyte also ruled that Microsoft can independently develop competing technology that works like Java and runs Java applets but does not rely on any of Sun's own copyrighted property.
The third tentative ruling addressed new versions of Java that Sun issues from time to time. At issue is how quickly Microsoft is required to incorporate Sun's changes in Java into Microsoft's versions. The judge issued a tentative ruling in favor of Microsoft, interpreting a disputed section of the contract.

And at the same time, another Microsoft lawsuit - Bristol Technology Inc. vs. Microsoft - picked a jury and began arguments. Microsoft tried to have the trial delayed, but U.S. District Judge Janet Hall would only allow a one-day delay, pushing the start date to June 2nd. She also ruled that Bristol attorneys can share information with lawyers involved in other antitrust trials being conducted by the government and Caldera.
When the trial began, Bristol lawyer Patrick Lynch explained to the jury how Microsoft contacted his company in 1991 and asked if they wanted to license the Windows NT source code. Bristol then used that source to create a product called Wind/U to help developers port software from NT to Unix. But when their original contract expired in 1997, Microsoft demanded a 700-percent increase in the licensing fees because of NT's growing popularity. Bristol refused to pay that much for it and accused Microsoft of making the code available when NT needed to penetrate the Unix market, but then cutting off small companies like Bristol after NT became popular. Microsoft claims that Bristol is only suing to get a more favorable rate on the source code, and says that the original pricing offer is still available.

Last week Microsoft chief technology office Nathan Myhrvold confirmed that he is taking a year-long break from running the company's massive research division. But Myhrvold denied Time magazine reports claiming Microsoft President Steve Ballmer forcibly removed him from the company. He rather said the sabbatical has nothing to do with Steve Ballmer, and that he and CEO Bill Gates discussed his plans to leave several years before Ballmer was promoted to President. Myhrvold, who joined Microsoft in 1986 and started the $3-billion research division in 1991, will be replaced by vice president of research Rick Rashid.

Bill and Melinda Gates have donated $5 billion to their family foundation, pushing it up to fourth place among US philanthropic groups. The donation to the William H. Gates Foundation, a group dedicated to 'world health', is the largest amount ever given by a living donor, besting the billion dollars media mogul Ted Turner gave to the UN several years ago. While the donation was being announced, a Seattle-based charity put out word that the Gates foundation gave it $50 million to support development and distribution of a malaria vaccine. The remaining $4,950,000 will probably be distributed to William H. Gates II, Bill's father, as payment for overseeing the endowment.

Tired of just dominating the market for software encyclopedias with Encarta, Microsoft now plans on conquering the dictionary market as well. According to sources, a standalone CD and 2500-page paper version of the Encarta World English Dictionary will go on sale this August. The paper version is expected to be only slightly more enthralling than Bill Gates' last book, Business @ the Speed of Thought.
As part of their recent reorganization, Microsoft has decided to 'eliminate the middleman' for products from its new consumer software division. Wholesalers like Ingram Micro and Merisel will reportedly be cut in favor of direct sales to major retailers.
On May 23, Bill and Melinda Gates released Baby Gates 2000, a long-awaited upgrade to the original Baby Gates, Jennifer. They apparently decided to end the Bill series with version III, choosing instead to name the latest edition Rory John.

_{Your Money's Worth from MS Trial
Microsoft issues fix for password glitch
Linux not MS's only open-source target
Chipping away at Microsoft
Microsoft considers renting software
Wintel Acquisitions on the Upswing
A million bucks to break bread with Gates}