MARCH 12, 2001: Attorneys representing Microsoft and the government were back in court on February 26 and 27, presenting their oral arguments to a panel of seven judges from the U.S. Court of Appeals. The session was primarily just the judges asking questions to the attorneys from both sides, with inquiry centering around the original charge that Microsoft broke the law by preventing Netscape from distributing its products to consumers. Microsoft's lawyers defended their client's actions, claiming Netscape was able to distribute some 160 million copies of its Web browser in 1998. The defense at one point called Netscape a pressing threat against Microsoft, then later on said the same company never presented a serious risk because of its inferior technology. Microsoft's contract restrictions on modifying Windows by removing the browser were also defended as being permissible under US copyright law. One attorney tried to convince the judges that Microsoft is not a monopoly, but that one went nowhere - as did a claim that Internet Explorer is easily removed from Windows.
At the same time the Justice Department's own reasons for the case were questioned, and one judge asked if Sun or Netscape/AOL could create their own monopoly if Microsoft's is removed. They went on to question Judge Thomas Penfield Jackson's original finding of fact, conclusion of law, and remedy decisions, with focus on Microsoft's accusation that the he was biased against them from the beginning. Several of the appellate judges attacked statements and interviews Jackson gave before the trial was completed, agreeing with Microsoft about it showing bias. But that may not matter if Jackson was only biased against Microsoft because of what he saw during the trial, not before it began (as the government pointed out). All that notwithstanding, another judge commented that it would probably be impossible to have all of Jackson's findings dismissed no matter how biased his comments may have been, because they were not released until the appeal had already been applied for.
When the Court of Appeals releases its final decision in a month or two they'll likely remand the trial back down to another judge, who will hear the entire proceeding again from the beginning as if the last three years of courtroom antics had never occurred. If that happens, the DoJ will probably settle or drop the case to avoid spending more years and more millions on a decision that ultimately won't make a difference anyway.
ALSO SEE: The Standard, The Register, Wired News, InfoWorld, Wired News, Court Site

FEBRUARY 12, 2001: In a January 29 court filing responding to the government's main appellate brief from earlier in the month [see Jan. 15, 2001], Microsoft said that the government now acknowledges that bundling Internet Explorer with Windows was actually beneficial for consumers and has moved away from its original claims that the bundling itself was an illegal act. But even with that charge completely eliminated, Microsoft still has a half dozen other instances of anticompetitive tactics and illegal actions to explain away. Microsoft's rebuttal brief also attacked Judge Thomas Penfield Jackson again, using interviews the judge gave with several journalists as evidence of his obvious bias against the defendant.
Later in the week, attorneys representing Microsoft and the government reached an agreement to hold oral arguments before the seven-judge panel on February 26 and 27, with a total of 4 1/2 hours of oral argument from both sides. The proposed schedule called for three hours of argument in the first day, with half that time spent on Internet Explorer tying charges and the remainder used to discuss 'maintenance of a monopoly'. (Sounds like a weekend seminar for prospective Microsoft employees.) The second day would have half an hour of argument about Microsoft's specific monopoly, with the remaining hour going into a discussion of remedies. Surprisingly, Microsoft's lawyers requested none of the oral argument time to discuss Judge Jackson's conduct, the focus of their defense so far.
But the appeal judges apparently felt that a discussion about Jackson was necessary, because their finalized scheduling order handed down on February 6 included an extra hour on the second day to discuss issues about the judge. The appellate court also gave more time than requested to discuss monopoly maintenance and the remedies issue. The court's decision to include Jackson is a bad sign for the government, since it indicates that Microsoft's previous message has hit home and the panel of judges is eager to start ripping into Thomas Penfield Jackson and his ruling.
ALSO SEE: PC World, The Standard, CNET, The Register, PC World, The Register, Court Site

JANUARY 15, 2001: On the morning of Friday, January 12, the government filed a brief with the appeals court encouraging it to let Judge Thomas Penfield Jackson's breakup order in the original antitrust trial stand. The document mostly rehashed previous arguments, along with a strong defense of the judge and his behavior in the trial since that's what Microsoft's lawyers intend to focus their defense on. The government brief was a response to one filed by Microsoft in November that did little but attack Jackson, attempting to make his final ruling appear biased and invalid [see Dec. 04, 2000 ]. Jackson hasn't made things any easier by commenting to the press about the trial since its completion, but as the government filing said, Jackson's statements "aren't really biased, because if a judge hears all the evidence and concludes one party is a liar and says one party is a liar, that's not bias." Very well said, but the panel of judges in the appeals court may not feel that way. Microsoft will get a chance to respond to this filing on January 29, and then both sides will get a few days of oral arguments around the end of February. That will, we hope, be about the end of this thing, but Microsoft will probably find some reason to drag it on out a few more months and make the decision even less relevant to its current position.
ALSO SEE: InfoWorld, The Register, The Standard, Court Site

Meanwhile outside the courtroom, Judge Jackson made things harder for the government by giving yet another interview about the case and his opinions of Bill Gates, Microsoft's lawyers, and other issues surrounding the landmark antitrust trial. In the January 8 edition of The New Yorker, Jackson compared Gates' self perspective to Napoleon's, someone with "an arrogance that derives from power and unalloyed success, with no leavening hard experience." He then went on to attack other company executives who "don't act like grownups," such as chief lawyer William Neukom whom Jackson described as being not very smart. On the other hand, Jackson saved rare praise for government attorney David Boies, apparently one of the best the judge has ever seen. While his opinions may be valid (they're similar to ours), Jackson could end up destroying the government case by appearing to be biased against Microsoft. Even if it is a bias he picked up during the case, the appeals court may not see it that way and toss out the entire trial.
ALSO SEE: Wired News, InfoWorld

DECEMBER 04, 2000: The first written arguments of the antitrust trial appeal were filed on November 27 by Microsoft. That brief, a summary of why Microsoft is appealing the original decision, did everything legally permissible to attack the prosecution and original judge who ordered Microsoft split in two earlier this year [see Jun. 19, 2000]. Microsoft first attacked the foundation of the case with an argument that said tying Internet Explorer to Windows never violated federal antitrust laws or a consent decree the company signed with the government in 1994. The 150-page filing (accompanied by a 'friend of the court' paper from two industry groups) went on to question the way Judge Thomas Penfield Jackson interpreted facts of the case and the way he applied the law to those facts. It then attacked Jackson himself for comments he made in interviews before the trial was complete. Out of the document's six total sections, two do nothing except attack the judge. Beyond that, Microsoft's argument was just another rehash of points made in the original case - but those points may make more of an impact on the new panel of judges, several of whom ruled in Microsoft's favor several years ago in a related hearing. The Department of Justice now has until January 12 to file its own version of the case summary, with oral arguments of the same points scheduled to begin the following month.
ALSO SEE: The Register, Wired News, The Register, C|Net, Court Site

NOVEMBER 06, 2000: Before the appeals court on October 30, Microsoft objected to America Online's request to file an amicus brief (or friend-of-the-court statement) supporting the government case. An amicus brief generally accompanies filings from one side or another, adding supportive facts and additional viewpoints. ProComp, the Software & Information Industry Association (SIIA), and the Computer & Communications Industry Association (CCIA) filed amicus briefs in the original antitrust trial, and are expected to join with AOL in the current round of filings. Microsoft objected to the separate filings, saying that AOL can only offer a biased rehash of evidence presented in the trial by its own employees. Microsoft suggested instead that AOL, ProComp, SIIA and the CCIA all file one joint amicus brief, just like Microsoft's own supporters did. (But Microsoft failed to mention that the groups filing amicus briefs in its favor, the Association for Competitive Technology and the Computing Technology Industry Association, are both sponsored by Microsoft and as a result hold the exact same views.) The government, for its part, filed a brief giving no objections to any amicus briefs from either side.
On November 3, the court ruled in favor of Microsoft and granted AOL's request to file an amicus brief, but ordered that the brief be filed jointly with the other groups, and be limited to 25 pages. Microsoft's supporters were ordered to limit their joint brief to 25 pages as well. A second set of government supporters, The Association for Objective Law and Center for the Moral Defense of Capitalism were also ordered to file their own 25-page joint brief, while three individuals were allowed to file their documents separately.
ALSO SEE: C|Net, InfoWorld, The Register, InfoWorld, C|Net, Court Site

OCTOBER 30, 2000: On October 11 the U.S. Court of Appeals for the District of Columbia Circuit announced its schedule for Microsoft's appeal of the antitrust case ruling. As we predicted last issue [see Oct. 09 2000], the court decided to split the difference between Microsoft's excessive schedule and the speedy appeals process proposed by the government. That finalized schedule calls for Microsoft to file its primary brief on November 27, with the government's main brief coming on January 12. Oral arguments will begin in the last week of February, instead of the late March/mid-April start date required by Microsoft's proposal. Damaging Microsoft's plan of constant delay, the court added that it would not grant deadline extensions to either side for any reason. The ruling also limited Microsoft's filings to 150 pages, a cap closer to the one proposed by the government than the one Microsoft had requested.
A week later on the 18th, the court of appeals released a 2-page document, giving notice that it intends to seek a technical briefing from a computer science expert. That briefing - given by Michael H. Hites, CTO of the Illinois Institute of Technology - was intended to update the seven judges about 'automation', or a broad picture of technology and the computer industry. Or would have, if Microsoft or the government had allowed it to proceed. Microsoft applauded the court's interest in the subjects at hand, but objected to Mr. Hites presenting the information because of his previous work with Sun Micro, and his varying opinions of what constitutes an operating system. The government also objected because of the potential for Hites to present biased information. With both sides opposed to a briefing, the judges had no choice but to drop the plan and instead learn by reviewing transcripts from the original trial, as suggested by the DoJ.
ALSO SEE: C|Net, The Register, USA Today, InfoWorld, Court Site

[an error occurred while processing this directive]OCTOBER 09, 2000: At 10 AM Eastern Time on September 26, the US Supreme Court announced that it would not review Microsoft's appeal of the antitrust case ruling. That refusal handed the appeal to a lower court, which has sided with Microsoft previously in several related cases. The Department of Justice used a 1974 law to 'fast track' the case past those lower courts, but 8 of the 9 supreme court justices declined to hear it. The one dissenting judge, Justice Stephen Breyer, wanted to review the trial because the case "significantly affects an important sector of the economy." The rest - including Chief Justice William Rehnquist, whose son represents a law firm handling a separate Microsoft case - saw no compelling reason to handle the appeal.
After the Supremes announced their decision, but before it had even been officially registered, the overeager U.S. Court of Appeals for the DC Circuit immediately took complete jurisdiction over the case and ordered Microsoft to submit a proposed appeals schedule by October 2nd. Microsoft did as ordered, with a plan requesting that the word-count limit for briefs be quadrupled and asking for a 60 day break just to prepare the first brief, followed by another 30 days of delay. That, combined with holiday vacations, would drag the case well into late summer 2001.
The next day, four earlier than required, the government replied with its own schedule, ripping into Microsoft's "excessive" plans to "delay resolution" of the appeal. As they correctly pointed out, the appeal is not a 'retrial' that would require collecting piles of new evidence - Microsoft doesn't need two months to gather evidence and testimony it has already used. The DoJ's own schedule would have the case ready to start by mid-December, instead of the early-April date required by Microsoft's plan.
Microsoft's rebuttal to that schedule accused the government of trying to "short-circuit the appellate process" by not giving it enough time to set up a proper defense. The rebuttal also then accused the government of wasting more time than anyone with its failed attempts to go directly to the supreme court - a move that admittedly consumed a fairly large piece of time that could have been used preparing for the appeals court. Nonetheless, the appeals court is expected to set a finalized schedule for the appeal soon, probably splitting the difference between both sides.
ALSO SEE: Wired News, C|Net, The Standard, The Register

AUGUST 14, 2000: Microsoft on July 27 asked the Supreme Court to deny a government motion that would 'fast track' the appeals process directly to their jurisdiction. Microsoft's main argument in the filing was that the 'fast track' law being used applies only to the federal government's small portion of the case, and additionally the nation's highest court is too busy and not set up appropriately to handle the overwhelming numbers of "factual errors" presented in the original government antitrust case. The government now has until August 14 to file a response, with Microsoft given another 8 days after that to issue a rebuttal.
ALSO SEE: C|Net, WinInfo, C|Net

JUNE 19, 2000: On June 7, 56 years and 1 day after the D-Day invasion that led to the defeat of Nazi Germany in World War II, Judge Thomas Penfield Jackson handed down a decision almost as momentous, something that could eventually liberate the world from Microsoft. After more than two and a half years of legal maneuvering, Jackson issued a final ruling in the antitrust case: break Microsoft company apart. The judge's remedy is almost identical to the one proposed by the Department of Justice, splitting the company into two units with heavy restrictions on the behavior of both.
One company will retain the rights to Microsoft's operating system products - Windows 2000, 98, CE, and others under development - while the second group will hold on to everything else, including Office, MSN, Internet Explorer, and MediaPlayer. Both companies will be placed under heavy restrictions on their behavior, such as limiting contact with one another for 10 years, forcing them to publicize APIs and other software calls, and forcing the companies to have equal relationships with every OEM partner. Microsoft has four months to come up with the breakup plan and another 12 months to implement it if the judge approves. Controls on the company's business practices will be enacted 90 days after the ruling, unless Microsoft can get an appeals court to go against Jackson's decision before then.
During the week leading up to Jackson's monumental ruling, Microsoft had tried several times to have some of the "unjustified" government proposals tossed out, but the judge rejected every attempt. The DoJ did cave in to a few of the defendant's requests, but as Microsoft's own attorney said, they were "cosmetic changes" such as referring to the breakup as a 'divestiture' instead of a reorganization. Overall, the government only accepted 18 of 103 proposed changes.
Microsoft also filed a few documents designed to help its inevitable appeal of the ruling [see below], since the company's attorneys have already given up on making any progress with Judge Jackson. Those filings addressed the judge's rejection of a last-minute attempt to add more witnesses to the trial [see May 29 2000], a decision that could very well turn the appeals court towards Microsoft.

Judge Jackson's entire Final Judgment can be viewed online in either PDF or HTML format.

Now that the main case has been completed, Microsoft's only option is an appeal. Microsoft hopes to get its case to the U.S. Court of Appeals, since that panel of judges has ruled in the company's favor several times in recent history. If that body ruled in Microsoft's favor, the government would certainly appeal it to the Supreme Court, a setting that would be more sympathetic to the Department of Justice case. So the government would prefer that it go directly to that court, possibly saving several years of pointless litigation.
Microsoft immediately asked Jackson to hold off on implementing the behavioral remedies, and since he was expected to deny the motion, they filed the same petition with the appeals court a day later. The appellate court accepted the petition, and announced that it would hear the proposed stay AND parts of the antitrust case in front of its entire panel of 11 judges. But the government asked Jackson to withhold a ruling on the stay until Microsoft filed its entire appeal, since that is required before they can expedite the entire thing to the Supreme Court.
Jackson finally stepped in like a teacher between two fighting schoolchildren and made a compromise attractive to both sides. Microsoft will now appeal its case directly to the supreme court, and in exchange Jackson will wait until after the appeal process to implement any behavioral restrictions. That frees Microsoft from penalties until after the case has been heard, and speeds up the schedule by as much as 18 months. With both sides agreeing to file necessary paperwork months earlier than required, this case could be in the nation's highest court as soon as September. But if the court chooses not to hear the case (as it very well could do), the trial could stay at a standstill for years.

MAY 29, 2000: In their scheduled rebuttal to Microsoft's proposed antitrust remedy, attorneys representing the government again submitted reasons why the company should be split in two. According to that filing, Microsoft's remedy proposal [see May 15 2000] didn't go nearly far enough, and would do nothing to "undo the damage to competition caused by its past illegal conduct." The 70-page document also called Microsoft's plan to reschedule the proposal hearing "a transparent effort to delay the .. implementation of a remedy for its illegal acts as long as possible."
To keep the government from getting the last word before meeting in front of the judge, Microsoft filed a response to that rebuttal the following week. In their response, Microsoft again attacked the motives behind the entire case, accusing the government of picking a punishment that would benefit Microsoft's competitors while harming consumers. They cited internal Department of Justice documents from 1994 and 1995 that questioned the value of a split back before Microsoft was nearly as large as it is now. The response document also asked the judge once again to throw out the entire case, or at least disregard the suggested breakup proposals.
During the first remedy hearing on May 24, Microsoft presented Judge Jackson with an 'offer of proof' document that called for another dozen witnesses, including Bill Gates and Steve Ballmer, to come before the court. Jackson immediately told Microsoft's attorneys that he would not consider any more witnesses since the trial had gone on long enough already. He then curtly shot down their protests and demands for more time.
But Jackson also attacked the government's two-way breakup plan, questioning the automatic creation of competition if Microsoft was made into two units. He then asked lead government attorney David Boies why his team had rejected a similar plan creating three Microsofts with identical product lines. Boies explained splitting the company in two would be simpler than into three - to which Jackson replied that even the proposed spilt would be fairly complex. The judge then mentioned a plan proposed by two industry tradegroups that would split Microsoft into three different units. He asked Boies to consider a split of that nature in a 'clean copy' of the proposal that made several changes proposed during the day's session. The Judge set a May 26 deadline for the submission of that document, and then gave Microsoft 48 hours to respond to it.
But when that date came, the government's clean copy of the filing was barely changed from the original proposal. The plan retained a two-way split, along with most of the behavioral changes. The government did loosen a few restrictions, like raising the limit on individuals who can own stock in both companies from three percent to five (basically targeting Bill Gates and Steve Ballmer, since no one else owns more than four percent). The refiling also clarifies restrictions on licensing deals between the separated companies. Microsoft now has until May 29 to answer the refiled penalty proposal, after which Judge Jackson is expected to rule in favor of the government.

MAY 15, 2000: On May 10th, Microsoft filed a proposal in the antitrust trial in response to the government proposal that it be split into two separate companies. Microsoft's own weakened proposal agrees to everything in the government plan, with the exception of a split - something the company referred to as being "extreme," "unwarranted, outside the scope of this case, and very damaging to consumers." Many of the government's restrictions on behavior remained intact for Microsoft's plan, but they were reworded, possibly adding legal loopholes. Ironically, all of the remedies in Microsoft's proposal were on the table during settlement talks before the case was filed in 1998. If Microsoft had agreed to settle then, it would be held under some of the same restrictions it now proposes and could have saved two years and millions of dollars in legal fees.
Microsoft also asked the judge to give it more time to prepare for punishment by moving the remedy hearings back until at least August if he decides to go with its proposals, or to December if he chooses to pursue a breakup. But Judge Jackson is unlikely to add any more delays to the trial, since he seems to be quite irritated with Microsoft's delays already and has expressed a desire to finish the trial as soon as possible. Delays like those would give the company time to defend itself in the courts of public opinion and political action, since a December delay would certainly play into the company's attempt to save itself by waiting on a new presidential administration.
Shortly before Microsoft issued its remedy proposal, the government gave Judge Jackson a memorandum explaining its earlier recommendation. That lengthy memo, accompanied by six supportive declarations from technical and economical experts, backed the two-way breakup proposal by showing how Microsoft uses its operating system and office suite monopolies to harm competitors. As evidence, the government used a July 1999 e-mail from Bill Gates saying that Microsoft should redesign Office so it will no longer synchronize with the PalmPilot. That would result in slower sales for the Pilot and more demand for Microsoft's own Office-compatible handhelds. [We would quote from the e-mail but most of it was placed under seal by Microsoft attorneys.]
Microsoft responded not by denying the existence of the message, but rather saying that it was taken "out of context" and really is about how well Microsoft's own handhelds synchronize with Office. Spokesman Jim Cullinan went on to say that the e-mail must not mean what it says, since Office and the PalmPilot still work together as well as they ever did. The weak defense is not expected to have any impact on Judge Jackson, who is still expected to issue a final judgment before mid-July.

MAY 01, 2000: On Friday, April 28, after weeks of speculation, attorneys representing the US Department of Justice and 19 individual state governments delivered a 17-page remedy proposal to Judge Thomas Penfield Jackson. The plan, an apparent compromise between states with different remedy proposals, calls for Microsoft to be split into two separate companies, one with control of operating systems and the other retaining the rights to everything else - Office to MSN and everything between. The remedy plan also calls for restrictions on Microsoft's future developments, licensing deals, and exclusionary contracts. The plan would additionally limit Gates and other executives to owning stock in only one of the two groups.
Microsoft reacted in the usual way, accusing the government of demanding too much and claiming that such an "extreme" split would destroy Microsoft and the entire economy, a claim we find highly doubtful. Microsoft's non-stop protest of a split may be little more than a ruse to make the judge and prosecution favor that remedy, when it would in fact be beneficial to the company. Not only would the two groups be worth more apart than they are together, it would disarm Microsoft opponents into thinking of the companies as harmless. That may be far from the truth, as even a split Microsoft would still be quite powerful with retained monopolies in the office suite and operating system markets. And with the company's current executives still inside both groups, collusion is certainly possible, as most of them have been friends for decades (Bill Gates and Steve Ballmer went to college together, as an example).
But this deal is far from done. The government plan is just a proposal, and Judge Jackson is in no way committed to it. Microsoft still has a remedy plan of its own to present later this month, and Jackson may choose to take pieces of it as the solution, or he may go out on his own and use something completely unexpected. Considering the small amount of time set for the remedy process, he may be preparing for something far less complex than a split - opening the Windows source, as an example. We can definitely expect a few more surprises before this thing is done. That not withstanding, Microsoft has until May 17 to file its own remedy proposal, with a court hearing on both proposals scheduled for May 24th.

The entire text of Plaintiff's Proposed Final Judgment is available on the Department of Justice site.

APRIL 24, 2000: After a 10 minute meeting with attorneys from both sides, Judge Thomas Penfield Jackson announced that his ruling on penalties will be handed down in exactly 60 days, with a hearing scheduled for May 24. He set an April 28 deadline for the government to submit a proposal for punishment, with Microsoft scheduled to reply by May 10, and the government set to issue a rebuttal by May 17. Jackson also announced that he would be using the "best and final offers" from Microsoft's failed settlement talks to create a remedy, and that he would be releasing transcripts of his private talks with the attorneys to prevent more one-sided leaking. Jackson's insistence on a 60-day schedule for remedies suggests that he has already ruled out the possibility of a breakup, since such a solution would require much more time to work out all the details. In addition to those declarations about the penalty phase, one of the Justice Department's lawyers stated that both sides and the judge have agreed to fast-track any appeals directly to the supreme court, avoiding years of extra litigation.

APRIL 10, 2000: Following the collapse of settlement talks between the two sides, the judge overseeing Microsoft's government antitrust trial handed down his ruling on the conclusions of law in regards to the facts of the case. To the surprise of no one, Judge Thomas Penfield Jackson ruled against Microsoft on almost every charge aimed against it, including 23 of the 26 local violations brought by the 19 states. Jackson agreed that Microsoft used its operating system monopoly to dominate the browser market, agreed that the company used its power in the application market to preserve the preexisting operating system monopoly, and he conceded that Microsoft bundled Internet Explorer with Windows only to put Netscape out of business. The only major charge rejected by Jackson was the one claiming Microsoft broke antitrust laws by using exclusive agreements with ISPs to block Netscape from distributing its products, an area of the Sherman antitrust laws that will remain legally unclear. Jackson's next step will be concerning punishment, a decision he is expected to reach sometime this summer.
The Department of Justice applauded Jackson's decision, referring to the decision as "quite extraordinary" during a press conference. Although the media immediately began asking if they would be pushing for a breakup of the company, Assistant U.S. Attorney General Joel Klein refused to comment on his strategy for the trial's next stage.
Microsoft also refused to comment on strategy beyond vowing to appeal the decision and then blaming the settlement talk collapse on the 19 individual state attorneys general. Bill Gates issued a statement saying that the states and DoJ sabotaged those talks because they couldn't agree on what to settle for. Steve Ballmer added to that by suggesting that the company would still be interested in settling, if such an opportunity ever arises again. Microsoft then began trying to clean up its public image with a new ad campaign [see story below] and by issuing press releases that use the word 'innovate' far too many times.
The image campaign will be necessary to restore investor confidence in MSFT, since the stock dropped by more than fifteen percent during the days surrounding Jackson's decision and has continued to fall since then, finally going from the upper 90s to the mid-70s. Microsoft's stock has apparently dragged the rest of the market down with it, resulting in the worst point loss in history for both the Nasdaq and NYSE markets on April 14. That significant drop can be tied to bad news about inflation, the closeness of tax day, and rumors about new interest rate hikes, but Microsoft's stock performance certainly didn't help matters any. But on the good side, Bill Gates alone lost something in the range of $12 billion during the same week.

Judge Jackson's entire 'Conclusions of Law & Order' document is available in HTML or PDF format on the District Court Web site.

With its legal case in shambles after the ruling, Microsoft has decided to make an appeal to the court of public opinion with a new series of advertisements. The campaign began with statements from Bill Gates and Steve Ballmer in full-page newspaper ads, and has since spread to television. The television spot shows an uncomfortable looking Gates, dressed unusually well, talking about how Microsoft's goal is to is to "create the next generation of software" and "keep innovating and improving." None of the promotions mention the antitrust case, although they do bring up Microsoft's supposed role in the current boom economy. The image-builder television spots have, for the time being, replaced all of Microsoft's other TV promotions except for the MSN campaign.

Now that Microsoft is legally a convicted felon, suing the company has become all that much easier. Since all a lawyer has to do now is show that the proven illegal behavior did damage to a client, Microsoft is being deluged with lawsuits from consumer groups and small competitors. At our last count the number of cases filed against the company was at least 180, of which a quarter have been filed since the second verdict was handed down. There are even rumors going around about larger competitors like IBM or AOL-owned Netscape filing their own cases, and we've seen legitimate news reports about Sun considering a second case against the company. Microsoft is also still fighting antitrust investigations launched recently by the European Union, price inflation charges levied by the Swiss government, and an ongoing investigation by the US SEC into possible irregularities in its accounting methods.

24 hours after Judge Jackson's second ruling was issued, Bill Gates flew to Washington DC and attended meetings less than a mile from the courtroom where the decision was made. While he was in town Gates paid visits to some of DC's most influential lawmakers, but he reportedly only talked about "the future of technology" and not the trial. But since anything happening inside the beltway is common knowledge, most of the politicians he talked with were aware of the latest happenings inside the courtroom without them being directly mentioned. The next day, 'coincidentally', some of those very same lawmakers called for an investigation of whether the Department of Justice had gone too far in prosecuting Microsoft.
Gates also visited the Whitehouse to eat with vice president Gore, an old friend who helped him set up the Internet. A Whitehouse spokesman defended the visit by claiming Gates was invited for of his charity work, not because of the trial. And speaking of charity work, not long after the DC trip Microsoft's total political donations for the year hit $3 million.

APRIL 03, 2000: With Judge Thomas Penfield Jackson's settlement deadline looming less than a week away, Microsoft on March 25 faxed a detailed settlement agreement to attorneys representing the government. According to sources close to the settlement discussions, Microsoft said it would agree to remove Web browsing technology from Windows (something it argued would be impossible earlier in the trial), adopt universal licensing contracts, and open up the code for SOME software - so long as it could avoid having to admit that any laws were broken. At the request of mediator Judge Richard Posner, Judge Jackson agreed to push his deadline back from March 28 to April 7 so the prosecution would have enough time to study Microsoft's proposal. But with that 10 day extension nearly gone, the Department of Justice and 19 states involved in the trial have apparently rejected the offer because it failed to go far enough. That puts the trial back into the hands of Judge Jackson, who is expected to hand down his 'conclusion of law' ruling on or before the adjusted April 7 deadline.

MARCH 06, 2000: As settlement talks continued in Chicago, attorneys from both sides of the Microsoft antitrust case gathered in Washington DC on February 22 to give the trial's last oral arguments. This final round of courtroom maneuvering was a deliberately short session intended to do only one thing: clarify the position of both sides in regard to the legality of Microsoft's actions. Microsoft chose as its defense "plausible benefit," a legal term that means any potentially anticompetitive action taken by the company is within the antitrust law so long as it resulted in something beneficial for consumers. Microsoft's John Warden also brought up copyright issues during his argument, but Judge Jackson questioned the purpose of such an addition, since no evidence concerning copyright law was presented during the original trial or the period after his first ruling. The government half of the arguments broke no new ground, again covering things discussed earlier in the trial - a monotonous yet effective strategy, as it keeps Microsoft's defense attorneys from dragging the trial too far from its original topic and keeps everyone focused.
Following the oral arguments, Jackson thanked the participants and then went into his chambers for a brief consultation with lawyers from both sides - ending the formal trial portions of the case. the judge will now issue a ruling on how Microsoft's actions hold up under the law, and whether or not any laws were violated by them. That ruling could come any day now, assuming no settlement is reached.

FEBRUARY 21, 2000: One week before its scheduled return to the courtroom, Microsoft sent letters begging for help to members of the United States Congress. According to those letters, the antitrust trial is "entering a critical stage" that could result in a breakup of the company, something Microsoft considers as a "regulatory death sentence" that would benefit competitors but "would be harmful to consumers." The message goes on to claim Microsoft is serious about reaching a settlement, but only one that would prevent such a damaging breakup. The letters were a waste of paper since no member of congress can affect any case being handled by the Department of Justice anyway. Considering the company's recent restructuring moves, this may just be a red herring to make the DoJ push harder for a breakup Microsoft really wants to see happen.

FEBRUARY 07, 2000: Last Monday, the Association for Competitive Technology trade group filed a 'friend of the court' document in the Microsoft antitrust trial. A 'friend of the court' filing, or amicus curiae, is not required by law but is often presented to the court in an attempt to clarify certain issues. The amicus curiae in question here, while conceding that Ms is a monopoly and did many of the things it was accused of, nevertheless asked Judge Jackson to find Microsoft not guilty of illegal conduct because that activity benefits consumers. ACT is backed by legal advisors and attorneys general from past presidential administrations, but the trade group's credibility is questionable because of its membership list: ACT was formed only two years ago, about the same time Microsoft's legal trouble starting building, and Microsoft is one of its most prominent dues-paying members.
Then another amicus curiae was submitted to the court by a competing trade group, the Software and Information Industry Association. The SIIA also receives dues from Microsoft, but this one was filed was to support the government's case. In fact, the SIIA filing directly attacks ACT, pointing out (as we did above) that the group was created "specifically to oppose the enforcement of the antitrust laws against Microsoft."
The next day, two more amicus curiae documents were filed along with Microsoft's required rebut to the DoJ's earlier 'finding of law' rebuttal document [see Jan. 31 2000]. Microsoft's rebuttal did nothing but rewalk the same defense first brought out earlier in this case, accusing the DoJ of trying to rewrite antitrust law and force the courts to implement unprecedented restrictions on technology products. Microsoft also filed a separate document based on copyright law asking for the dismissal of several claims filed by the individual states.
That was followed by an amicus curiae from Internet law expert Lawrence Lessig, who was recruited in 1998 to provide Judge Jackson with advisory briefings throughout the trial. That document too broke no new ground, once again summarizing the evolution of Internet Explorer from a standalone browser to an artificially integrated 'system component'. An additional document on behalf of the government's case was later handed in by Judge Robert Bork, a long time critic of Microsoft. His filing essentially echoed that of the SIAA.

JANUARY 31, 2000: Working through a blinding snowstorm, attorneys representing the Department of Justice last week filed another series of legal documents in the antitrust trial against Microsoft. This filing, a rebuttal to last week's 'finding of law' from the defendant [see Jan. 24 2000], went exactly as expected with the government again attacking Microsoft's finding by citing Jackson's earlier decision that the company is indeed a monopoly. Microsoft now has until February 1 to file its own rebuttal, followed by (assuming there is no settlement) oral arguments about the finding of fact beginning on February 22.

JANUARY 24, 2000: With settlement discussions apparently heading nowhere, Microsoft last Tuesday filed its 'proposed conclusions of law' document with antitrust trial judge Thomas Penfield Jackson. The filing, rebuttal to a similar document handed in last month by the government, is intended to give Judge Jackson Microsoft's perspective about laws it could have violated with the activity he ruled about late last year in a 'finding of fact' decision [see Nov. 08 1999].
The filing started with Microsoft accusing the government of simply rehashing Jackson's decision in its own filing - then moved on to do exactly the same thing, essentially recapping arguments made earlier in the trial. Microsoft has apparently decided to play its entire case in preparation for appeal since the filing went so far as attacking Jackson's earlier ruling, saying that it was "unsupported by the record." While that certainly will not make the judge feel any favor towards Microsoft, it could eventually influence an appeals judge to give the case a second look - again helping Microsoft by delaying this case's unavoidable outcome. The government will now file a rebuttal to Microsoft's document, followed by Microsoft's rebuttal to that rebuttal (legal tennis anyone?). After those are completed, oral arguments on the conclusions of law will commence on February 22.

JANUARY 17, 2000: Several days before the executive title-swapping was announced, rumors started flying fast and furious about that still-ongoing antitrust trial against Microsoft. According to the rumors and a USA TODAY report, the federal Department of Justice and 19 individual states involved in the trial have finally agreed to push for Microsoft to be broken up into two groups as punishment for its illegal activity. A representative of the DoJ said part of the report is "inaccurate" but would not reveal what facts were wrong or even acknowledge if the department and states have agreed on any one punishment. Microsoft refused to comment on the rumors, choosing only to say that a breakup of the company would be "an extreme and radical proposal" in the same vein as drawing a moustache on the Mona Lisa. As with most rumors, this report has a high likelihood of being inaccurate - although Bill Gates' abrupt change of job titles [see NewsSource, Jan. 17 2000] did nothing to ease speculation about the possibility of a two or three-way split.

DECEMBER 20, 1999: As requested by Judge Thomas Penfield Jackson, the US Justice Department and attorneys general from 19 states filed papers earlier this month summarizing their positions on specific antitrust laws Microsoft's behavior violated. Last month Jackson handed down a ruling on the facts of the case [see Nov. 08 1999], and he is expected to give his judgment about what laws Microsoft violated with that behavior once Microsoft's attorneys file their own position on the law. Microsoft has until January 17 of next year to hand over the documents, and with their repeated attempts to delay the trial we feel sure the defendants will wait until the last minute to comply.
In its proposed finding of law papers, the Department of Justice accused Microsoft of violating two sections of the Sherman Antitrust Act in four ways: illegally maintaining its monopoly in PC operating systems; tying Internet Explorer to Windows "to monopolize the browser market;" entering into unlawful exclusionary agreements with PC assemblers, ISPs and content providers; and impairing competitors' access to consumers. A separate 42-page filing from the 19 states involved in the antitrust case lists individual state laws violated by Microsoft's actions. Their charges for the most part duplicate those of the DoJ, with the addition of a charge about Microsoft's unbending control over the PC boot sequence.

DECEMBER 06, 1999: Since the government antitrust case began, Microsoft and the Department of Justice have entered several laughable attempts to settle the case before the judge's final ruling. But the latest discussion, started in Chicago on November 30, is expected to at least come close to some kind of settlement agreement because of its newly appointed moderator - appeals court judge Richard Posner [see Nov. 22 1999].
Security is so tight at this series of talks that the participants are required to use passwords to even get meeting dates, and everyone involved is under orders (presumably from Posner) not to comment on anything about the meets. That prevents us from knowing much about the meetings right now except Bill Gates has, so far, not attended any of them, and all future meetings are expected to continue in Chicago, since that city lies roughly halfway between Redmond and Washington DC.

NOVEMBER 22, 1999: In their only meeting since the first antitrust trial ruling was handed down [see Nov. 08 1999], attorneys representing Microsoft and the Department of Justice gathered before Judge Thomas Penfield Jackson to schedule the next phase of the antitrust trial. In the quickest court session held in two years (25 minutes), Jackson set the due dates for each party's filings concerning the next segment of the trial and placed a size limit on each set of briefs. He also agreed to hear oral arguments concerning the filings sometime before handing down the next ruling, which we expect to see in late February or March.
The next day Judge Jackson announced an unusual decision related to the case, naming a sitting judge to be the special moderator over ongoing settlement negotiations between Microsoft and the government. Judge Richard Posner will take a break from his duties as a Chicago Appeals Court judge to oversee messy settlement discussions that have repeatedly stalled since the lawsuit was first filed back in October 1997. According to reports, Posner is an open-minded social conservative who believes in antitrust laws (shades of Robert Bork) but would be against splitting Microsoft apart as a punishment. Posner's appointment gave both sides new hope for settlement, pushing Microsoft's stock ahead nearly four points to 89.69.

NOVEMBER 08, 1999: Just as he promised last month [see Oct. 25 1999], Judge Thomas Penfield Jackson handed down the first of three judgments in the Microsoft antitrust case at 6:30PM eastern time on a Friday. This particular Friday, November 5, will long be remembered in Redmond as a very dark day.
In his detailed 207-page finding-of-fact ruling, Judge Jackson sliced through Microsoft's defense, siding with the Department of Justice on nearly every point presented during the lengthy trial. In order, Jackson ruled that Microsoft does indeed hold a monopoly over PC operating systems, used that monopoly to exclude competitors like Netscape through software bundling, bullied Intel to stay out of the software market, polluted Sun's Java programming language, and threatened Apple, Compaq and IBM (among others) to get its own way. Jackson went on, saying innovations benefitting consumers "never occur for the sole reason that they do not coincide with Microsoft's self-interest." Most injurious, the judge found that Microsoft even reduced the quality of its own products just to hurt competitors - bundling a Web browser into Windows 98 did not benefit consumers, but in fact slowed down the operating system, decreased system stability and made it easier for "malicious viruses" on the Internet to attack computers. So much for the defense.
Microsoft reacted in their customary way, ignoring the facts in favor of attacking motives behind the case. In a special Saturday morning press conference, Bill Gates told a large gathering of sleepy reporters that the Department of Justice was only interested in "punishing a successful American company" that has continued to "improve products for the benefit of its consumers." The world's richest man went on to explain how Microsoft has, since its creation, struggled to make computers more affordable and easier to use through pure innovation. However, Gates added that "Microsoft is committed to resolving this case in a fair and responsible manner," leading many to wonder if Bill will now entertain the possibility of settling the entire matter before the judge hands down his next ruling.
That ruling, determining what laws were broken by Microsoft's behavior, will come shortly after the two sides present their own interpretation of the law in relation to Friday's ruling. The deadline for that part of the case is January 31, but if both parties complete their presentations it could come earlier. Following that decision, the sides will come back and present their proposed punishments for any laws Microsoft is found guilty of breaking. Judge Jackson would use those presentations to make a ruling about punishment, which Microsoft will immediately appeal. Unless the Department of Justice can speed up the appeals process, it could then be as long as five years before the case is finally finished - most likely in front of the United States Supreme Court. But by that time, none of the original charges will make an impact on Microsoft's business anyway.

OCTOBER 25, 2000: On October 19, nearly two years after the original lawsuit was filed and exactly one year to the day since the antitrust trial began, US District Court Judge Thomas Penfield Jackson's court posted a brief statement on its Web site revealing when the first decision will be handed down. Sort of. According to the site, Jackson's finding of fact will be handed down on a Friday evening at exactly 6:30 PM, two hours after being revealed to the opposing sides in the case. Unfortunately, the notice failed to specify which Friday the decision would be handed down. That was not a mistake on the part of Judge Jackson, but rather (we believe) a calculated move to push the sides closer to a settlement. But whatever Friday the decision is announced, you can rest assured we will cover it.[an error occurred while processing this directive]

OCTOBER 11, 2000: In the first public accounting of money spent, the US Department of Justice revealed Thursday that some $12.9 million has been spent over the last decade investigating and prosecuting Microsoft. About $7 million of that was used in the most recent trial and investigation started in June 1995. While $13 million isn't exactly lunch money, it is a discount compared to other high profile antitrust cases, like the $34 million investigation, trial, and eventual breakup of AT&T. Legal experts agree that Microsoft has certainly spent much more than that on defense, particularly for the salaries of its high profile lawyers. Some of those soon-to-be-unemployed ambulance chasers charge hundreds of dollars per hour, while the DoJ agreed in advance to pay its chief attorney a set sum of only $104,000. Defending against this case - along with a half-dozen other trials that have popped up over the last year - raised Microsoft's legal expenses by 59 percent to $689 million in fiscal year 1999.[an error occurred while processing this directive]

Shortly before that relevation, the New York Attorney General's office announced a key player in the state case against Microsoft, Stephen Houck, had resigned. Houck was replaced as the New York AG's antitrust division chief after an election earlier this year, but continued leading the states' part of the antitrust case until closing arguments were completed late last month. While most of his work was done behind the scenes, Houck did play a crucial role to the case - particularly the taped Bill Gates interview he conducted with Department of Justice hired gun David Boies. Assistant antitrust bureau chief Richard Schwartz (who had been working on possible punishments for Microsoft) is expected to replace Houck as lead attorney for the states, but Houck could still be recalled by the government to testify about antitrust law during the expected sentencing phase.[an error occurred while processing this directive]

SEPTEMBER 27, 1999: Appearing for the trial's last scheduled court session on September 21, Microsoft and the United States Department of Justice presented their closing arguments to District Judge Thomas Penfield Jackson. Just as in the rebuttal presentation of fact on September 10 [See Sep. 13 1999], government attorneys accused Microsoft of using ruthless methods to protect its monopoly, while Microsoft denied all charges and accused the DoJ of being a puppet for Microsoft's competitors.
Notably, state attorney Stephen Houck compared Microsoft's denial of an operating system monopoly to the "emperor without clothes." Top Microsoft lawyer John Warden again reminded the judge about Netscape's merger with AOL, and called the government case an "astounding failures of proof." To liven things up and refresh Jackson's memory, Justice also replayed a few key clips from the taped Bill Gates deposition, where the world's richest man squirmed, evaded questions, and eventually said that he never felt Netscape was a threat to his company.
Judge Jackson, unusually quiet during the proceedings, is expected to issue the first half of a two-part ruling sometime before next year. That decision about the facts of the case will give the two sides yet another opportunity to settle, followed by a ruling on punishment - assuming a settlement is not reached. If Microsoft is found guilty, as most people now expect, the case will certainly be appealed and could drag on for several more years as Microsoft takes it to one appeals court after another.

SEPTEMBER 13, 1999: The scheduled court session on September 10 came and went without any surprises, with both sides (as always) accusing the other of twisting the facts to make their case. The event, rebuttal to a fact-finding session on August 10 [see Aug. 16 1999], had both sides filing their opinion on the evidence summaries handed in early last month.
In its filing, the Justice Department said Microsoft has "ignored most of the evidence against it" in arguments to the judge and has "mischaracterized much of the evidence that is not ignored." They specifically accused Bill Gates of being dishonest on the stand, referring to his "bizarre" taped claims of never considering Netscape a threat - despite e-mail and other evidence to the contrary.
Microsoft's lawyers in their own filing accused Justice of undermining its case with the testimony presented, then introduced new evidence supposedly showing the computer operating systems market to be thriving. Among the evidence was a copy of Dell's August 9 announcement of supporting Linux and a New York Times report about the wildly successful RedHat Software IPO. Both sides will meet again on Tuesday September 21 to give their closing arguments, with Judge Jackson issuing a preliminary ruling sometime shortly thereafter.

AUGUST 16, 1999: Tuesday August 10, attorneys from Microsoft and the US Department of Justice were back in court to present their summaries of what happened during the 76-day antitrust trial. As expected, lawyers representing the DoJ and 19 US states said that the evidence and testimony presented in the trial showed Microsoft guilty of unlawful conduct aimed at destroying competitors and consumer choice.
Of course Microsoft's attorneys stuck to their claims of innocence, maintaining that the government failed to prove its case and Microsoft never raised prices or excluded competitors to transfer a monopoly on operating systems over to Web browsers and other software. They also accused the government of "using courtroom theatrics and bits of evidence out of context" to influence the media.
On September 10th both sides will hand in more filings amended for arguments presented by their respective opponent. Attorneys for the DoJ and Microsoft will then congregate again on September 21 to argue for their versions of the trial events, after which U.S. District Court Judge Thomas Penfield Jackson will hand down his decision about the events. That will give the opposing sides another chance to settle the case before Jackson issues a final law-based judgment and then - if by some chance Microsoft is found guilty of anything - a punishment.

AUGUST 09, 1999: Last week a USA Today report said the US Justice Department has recently contacted several investment banks and financial experts on the best way to split Microsoft apart. A DOJ official confirmed the reports, but wouldn't say exactly what they had discussed, only commenting that the antitrust case against The Behemoth is still waiting on a verdict, and that they haven't ruled out any potential punishment. According to antitrust law experts, it's standard practice for Justice to weigh all the viable remedies in advance of any major verdict.

JULY 05, 1999: Launching a final week of testimony in the antitrust trial, Microsoft attorneys recalled economist Richard Schmalensee as its last rebuttal witness. Schmalensee, whose testimony in January was ripped apart by government attorney David Boies [see Jan. 25 1999], was called back to the stand to explain once again how Microsoft's 'natural' monopoly benefits consumers. One of the witness' points was to try and show how Microsoft - despite controlling the market - has kept prices for its operating systems steady for the last five years. He also cited Linux and Java as serious competitors to the Windows platform, even though Microsoft (until recently) referred to Java as a non-platform programming language.
To support his claims about the price of Windows, Schmalensee had to disprove statements made by government economic witness Franklin Fisher, who earlier said Windows is the most expensive component of the average new computer. Schmalensee attacked that argument, accusing Fisher of using the average prices of monitorless computers in his figures. He concluded that if Microsoft did indeed have a competition-free monopoly, Windows would be around $265 per copy instead of the $65 they currently charge manufacturers for the operating system.
When Microsoft finished with the witness, Judge Thomas Penfield Jackson took a few minutes to ask some questions of his own. Schmalensee had claimed that Microsoft doesn't use predatory pricing because it doesn't flood the market with free versions of Windows to to put competitors out of business. Jackson asked the economist why Microsoft's actions weren't exactly that, pointing out the price of Internet Explorer as a possible example of market flooding. Schmalensee answered that question with the typical explanation of how IE integration increases Windows sales and brings people in to Microsoft's Internet properties.
Schmalensee was looking pretty good, until government attorney David Boies began his own cross-examination. Boies began by getting the witness to admit that computer operating systems will be important for at least another ten years, and that there is no viable alternative to Windows. That finished, Boies moved on to ask the witness about money Microsoft has paid him over the last few years to serve as an "analyst." Schmalensee replied that he wasn't sure exactly how much he has been paid, but after more questions finally admitted to making over $100,000 a year for seven years in a row. He also confessed to making $200,000 a year for the last two years, and eventually mentioned that he received a $300,000 bonus last year from the consulting company that pays him to work with Microsoft.
With Schmalensee's conflict of interest exposed, Boies moved in for the kill. The government attorney compared two charts, both prepared by Schmalensee's consulting company, showing Web browser market share versus the number of computers purchased. The charts - as used by the witness various times during the trial - showed more people receiving Netscape products with their computer than had actually bought computers in a year. Eliminating any shred of credibility Schmalensee had left, Boies finally forced him to admit that he had done no study, had no projections of numbers, and had no knowledge about the authors or details of the technologies he cited in his testimony.
Following that bloodbath, judge Jackson requested that lawyers from both sides return to court for a 'fact finding session on August 10 and for closing arguments in the 21-week trial on September 21, almost two years after the original government lawsuit. he then called the court into recess. After the closing arguments Jackson is expected to rule against Microsoft, then issue a judgment and the possible punishment. But that could take until next spring, by which time Microsoft could own the government anyway.

JUNE 28, 1999: On Monday June 14, Microsoft called AOL executive David Colburn as the first of its three rebuttal witnesses. Microsoft lawyer John Warden presented Colburn with documents in an effort to show how AOL considered dumping Internet Explorer in favor of Netscape, but decided to renew a contract out of public relations concerns shortly before merging with Netscape. He also presented an AOL plan to make a line of computers that only ran Netscape and their own Internet access software.
But Colburn was a waste of Microsoft's time since he had no knowledge of the documents Warden kept showing him. Judge Jackson suggested that perhaps AOL chairman Steve Case would have been a more appropriate witness, since he was involved with most of the documents in question. Colburn's testimony was so useless that Justice Department attorney David Boies cancelled his plans to cross-examine because Colburn's lack of knowledge on the evidence proved everything Boies intended to show.
When court resumed Wednesday (the cancelled cross-examination was scheduled for Tuesday), Microsoft's attorneys called former Symantec president Gordon Eubanks Jr. to the stand. Eubanks, who left Symantec in April to start Oblix, testified that Microsoft's "natural monopoly" in operating systems actually promotes growth in the computer industry by setting standards that make software development easy. He also claimed Microsoft's dominance will be short lived, since the company is being besieged by competition on all sides. Eubanks said technologies like handheld PCs and open-source development could dislodge Microsoft, and said that dismissing Linux as a non-threat would be "like discounting Windows in 1985."
The government's David Boies immediately questioned his impartiality, pointing out that both Symantec and Oblix depend on Microsoft's business - a fact Eubanks conceded during cross-examination. Boies then asked the witness if Symantec had ever had a 'First Wave Agreement' with Microsoft, giving it access to new software before competitors while requiring the company to give preferences to Internet Explorer. Eubanks denied that such an agreement ever existed, until Boies produced a copy of the contract in question. He also produced e-mail from several Oblix executives, discussing the acquirement of a similar contract for that company as well. Boies then revealed that when Bill Gates asked Eubanks to write a pro-Microsoft editorial for the New York Times, Eubanks responded with concerns about a deal Microsoft had struck to include competing McAfee anti-virus software in a Windows Plus Pack. The deal was promptly killed and Eubanks proceeded to write the article. When Boies asked if those occurences were coincidental, Eubanks replied that 'coincidental' was "an excellent choice of words."
On Friday court went into recess for the usual 3-day weekend with plans to resume the following Monday with Microsoft's final witness, economist Richard Schmalsee.

JUNE 14, 1999: On Monday June 7, IBM's Garry Norris took the witness stand to testify against Microsoft. The former software strategies program director for IBM's PC division testified that during his tenure, Microsoft used its market weight to force IBM into paying outrageous prices for Windows 3.11, 95 and NT 4. He said that negotiations for a Windows 95 contract were difficult, with Microsoft demanding that IBM stop using and marketing its own competing operating system, OS/2. However, the negotiations went from bad to worse after IBM acquired Lotus Development and announced that they would bundle Lotus products with their PCs. Microsoft suddenly remembered some $50 million of unpaid royalties IBM owed and refused to work out the contract until an extensive audit had been performed. IBM finally settled the royalties issue with a lump sum exceeding the amount owed, and Microsoft agreed to give them contract for Windows 95 literally hours before the product was released, but at a cost of 800% more than originally promised because IBM had refused to wait six months before bundling any Lotus software.
On his second day of testimony, Norris said that the pressure from Microsoft continued into 1997, with executives telling IBM they could reduce the licensing fees by dropping competitive software like Lotus Notes, Lotus SmartSuite and WorldBook Encyclopedia. They also promised deep price cuts if IBM would stop supporting Netscape Navigator and promote Internet Explorer. Norris provided notes from a meeting where a Microsoft executive told him Bill Gates and Steve Ballmer had demanded that they stop working with IBM because of the competing deals. At one point Microsoft even offered IBM access to NT 4 source code and the ability to self-certify its computers as Windows-compatible if they would bundle only Microsoft products. The self certification was especially important to IBM because Microsoft habitually took three months to certify their systems, while IBM competitors received approval in as little as two weeks. IBM did eventually sign the agreements, but refused to ship Microsoft products exclusively.
It was Microsoft's turn to grill Norris on Wednesday, but they made the mistake of sending in a poorly qualified lawyer to do the job. The attorney in question, Rick Pepperman, tried to prove that IBM's relationship with Microsoft collapsed not because of the Lotus buyout, but rather due to a "smear campaign" the company waged against Windows 95. Pepperman at one point tried to use evidence that he hadn't submitted to the court, however Judge Jackson - paying more attention than usual - would have none of the inexperienced lawyer's stumbling and bumbling. One document that Pepperman did manage to introduce supposedly showed a proposed agreement allowing IBM to promote and install software from its own divisions, but Norris said he couldn't verify the documents because he had never seen them before. The evidence was eventually discounted since it had been prepared by Microsoft itself and Pepperman was unable to link them directly to anyone who ever worked for IBM.
Thursday the government called its last witness, Princeton computer expert Edward Felten, to the stand. Felten, who also testified earlier in the trial, was called up to show that Microsoft's "integration" of Internet Explorer was unnecessary. He argued that Microsoft can give users "the choice they want" similarly to how users can decide whether to install Microsoft Word or Excel as separate programs or part of Microsoft Office. "The same is true with IE and Windows," said Felten. He also testified that tests of Windows 98, with and without the browser, showed a significant speed increase without a browser. The government also introduced several e-mails from Microsoft executives debating whether or not to include IE with 'Memphis', the code name for Windows 98.
While the government was questioning Felten, Judge Thomas Penfield Jackson stepped in with a few questions of his own, asking if browser integration could increase security risks, like a higher possibility of virus infection. The witness answered that it does cause problems, particularly for administrators in large organizations may prefer not to have an integrated browser to reduce possible security problems. The judge then asked if other integrated browsers like the one included with Caldera's version of Linux pose possible security risks. Felten replied that there isn't any one standard to judge security, so it would be difficult for him to make that judgment. Jackson's comments could mean that he is trying to decide if Microsoft's decision to integrate Explorer was truly a benefit to the general public or simply a way to extend its monopoly.
During their cross-examination, Microsoft attorneys asked Felten if a computer with an integrated browser would be secure if not connected to the Internet. Felten agreed, but pointed out that there would be no reason to even include a browser in the first place on a PC without an Internet connection. A Microsoft lawyer then asked him to run an improved version of the IE removal program used during his previous testimony. Felten protested the test, pointing out that the computer he was using had several other programs installed on it, including another browser that relies on IE technology. Judge Jackson allowed the tests to be run anyway, and the program successfully removed Internet Explorer icons from the desktop, but - just like the previous test - failed to completely uninstall the program. Felten said that the failure could be caused by bugs in his removal program, since bugs are common in software. The witness, who had examined the Windows 98 source code under a court order, said that he found some 3,000 marked bugs in the source, and that was just in the 1/7th of Windows 98 he had examined. He offered no explanation why Microsoft's own programmers had marked - but not corrected - those 3,000 bugs.

JUNE 07, 1999: 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 May 24, 1999]. 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.

MAY 24, 1999: Continuing their preparations for the antitrust trial to restart on June 1st, Microsoft lawyers interviewed America Online CEO Steve Case last week in a Washington DC hotel room. Case, who is expected to be the trial's last witness, reportedly told Microsoft little new information regarding AOL or its merger with Netscape. Among his statements, Case said that his company did notify the Department of Justice about "sensitive discussions," but said the exact purpose of the talks wasn't mentioned because they were worried about press leaks. He added that government attorneys were "quite surprised" when they heard that the discussions were about a merger instead of AOL plans to use the Netscape browser.
Speaking on behalf of the government, lead DOJ attorney David Boies pointed out later that it would have been in the government's best interest to have known more about the merger discussions as they took place, since that could have enabled them to handle the issue as it occurred instead of leaving it until now. Boies called the questions about Netscape's merger a "side show" designed to "detract from the central issue."
Case also said that those merger talks weren't centered around the trial or Netscape's browser products, instead focusing on their Netcenter Web portal, highly trained employees, e-commerce software, and valuable brand name. He maintained that AOL was never interested in the browser business and had no desire to compete with Microsoft in that area, but was willing to take the risk in order to acquire Netscape's other valuable assets.
Later that day a Microsoft attorney claimed to have obtained documents proving AOL was interested in the browser side of Netscape, but she was unable to produce the evidence for public inspection since they were sealed under an order by Judge Jackson.

MAY 17, 1999: After pushing the resume date back several times, US District Judge Thomas Penfield Jackson has apparently decided that the Microsoft antitrust trial will resume on June 1. The trial took an extended recess in February and was originally scheduled to continue in April, but Judge Jackson delayed it several times because of conflicting schedules and to force the two sides into a settlement. But since no settlement was reached, the trial will now start back in about two weeks.
Meanwhile, Microsoft and the Department of Justice have continued preparing for the trial, finally announcing their list of rebuttal witnesses. Microsoft plans to call America Online Senior Vice President David Colburn as a hostile witness to discuss the Netscape/AOL merger, along with former Symantec president/CEO Gordon Eubanks. Microsoft will also call economist Richard Schmalensee back to the stand, which is a surprise considering how much his previous testimony hurt their case [see Jan. 25 1999]. The government intends to recall its own economic witness, Franklin Fisher, and former IBM director Garry Norris.

MAY 03, 1999: The Microsoft antitrust trial, despite being on extended recess, was pushed back into the news last week after 10,000 pages of key testimony were unsealed. Microsoft and several computer manufacturers tried to block the release, but an appeals court ruled in favor of a media group that sued to have them made public. The released evidence includes depositions from people working for IBM, Packard Bell, America Online, HP, and Sun, among others. While the testimony varied from person to person, they all at one time or another showed various ways Microsoft has hampered or put restrictions on decisions made by their respective companies. Depositions taken from Microsoft witnesses - including the 20-hour Bill Gates video - were also released.
Later in the week Judge Thomas Penfield Jackson pushed the deadline for submitting a rebuttal witness list back until May 3rd, this Monday. The deadline was originally April 23, but Jackson delayed it because of another scheduling problem. While it still hasn't been officially announced, most people expect the judge to also push the trial's resume date back until the end of May to give the two sides more chances to reach a settlement. But don't hold your breath waiting for that; While Microsoft and the Department of Justice are both still publicly claiming negotiations, Microsoft has already gone ahead with its plan to gather testimony about browser competition and the Netscape/AOL merger from Netscape and Sun executives.
The first witness, former Netscape CFO Peter Currie, told a Microsoft lawyer that merger negotiations between the companies began in August 1998, but weren't publicly acknowledged until that November. He also testified that while Netscape was worried Microsoft could force America Online to cancel the merger, the antitrust trial itself was never a major factor in their negotiations. Currie's testimony revealed new information about the merger, but unfortunately for Microsoft it never contradicted anything former Netscape CEO Jim Barksdale said in his own testimony last year.
Microsoft attorneys attempted to question Sun COO Mike Popov on Friday, but his deposition was delayed when Sun attorneys requested that the courtroom be closed to the media because of some confidential product information. Once the media had been removed, the deposition continued for only 40 minutes before everyone remaining was forced to leave the building because of a bomb threat. The deposition continued to about 12:30 pacific time, but we don't know what happened inside the courtroom because of the confidentiality rules. But whatever was said, the good parts will come out after the trial resumes sometime later this month.

APRIL 29, 1999: As expected, in the last week of March District Judge Thomas Penfield Jackson pushed the resume date for Microsoft's antitrust trial into May. The trial, which began last October, took an extended recess on February 26 with plans to continue with the trial last Monday, April 12. But because of a conflicting schedule Jackson said that court will not resume until at least May 10th. However, there is still a slight possibility the opposing sides will settle out of court, although that's highly unlikely since all sources are saying that the Justice Department has demanded more than Microsoft is willing to give. Talks are ongoing, but Microsoft, the government, Judge Jackson and all the states involved have stopped publicly commenting on their progress.

While Microsoft is talking settlement, there's yet to be a slowdown in their fight. Last week at the same time that the software giant was attempting to reach a settlement, they were also trying to gain more information about Netscape's merger with AOL (and the subsequent deal with Sun) to use as leverage in the court case. According to a petition filed by Microsoft, the messages and documents requested contain information relevant to its case with the justice department, specifically about the merged company's plans to continue developing and distributing Netscape's browser and future sources of "platform competition" that go beyond the PC arena. In addition to those documents, Microsoft also subpoenaed Sun to provide an officer or manager knowledgeable about the merger as a witness when the trial resumes.
Microsoft delivered its subpoena after filing an emergency notion requesting the production of all pertinent information relating to the purchase of Netscape by AOL and the technology exchange with Sun that followed. In that filing, Microsoft charged that only three boxes of relevant information about the merger have been delivered, as compared to the 120 boxes Netscape and America Online gave the Department of Justice when it reviewed their plans. Microsoft also claimed to have sent the three companies a number of letters over the last few weeks, requesting the delivery of documents and e-mail mentioned by the subpoena.
Late last year Judge Thomas Penfield Jackson granted a similar request from Microsoft seeking information in regard to the merger. The judge also issued an order instructing the Department of Justice to pass some relevant documents from the then-pending merger over to Microsoft attorneys. However, Microsoft's request to depose seven witnesses from the three companies and their banks was curtailed by Jackson, allowing Microsoft to use only one witness each from AOL, Sun and Netscape.

MARCH 22, 1999: A report last week said that the remaining 19 states involved in the US governmentŐs antitrust suit against Microsoft will only be happy if Microsoft's operations are severely modified. According to the article in Tuesday's New York Times, state officials will only accept a settlement splitting Microsoft into several smaller companies or forcing Windows into the public domain as open source software. The report also said several of the states want to fine Microsoft under their own laws for every violation. Some legal analysts say that a violation could be as broadly defined as one sale of Windows, meaning some states could charge Microsoft thousands of dollars for each copy of Windows ever shipped. If the 19 states involved fined Microsoft, say, $2000 for every copy of Windows sold, that would be something like 60 million copies of Windows (Microsoft's own numbers on 9X) times $2000 for each of the 19 states. That all adds up to nice round sum of $2,280,000,000,000 - or two-trillion, two-hundred eighty billion US dollars. That's nearly 30 times Bill Gates' current networth of $80 billion. Wonder how many years it would take him to pay that off making eight bucks an hour at Starbucks...

MARCH 15, 1999: Less than a week after the Microsoft trial went into its 6 week recess [see Mar. 01, 1999], rumors began surfacing that the two sides had entered settlement talks. Those stories were given some weight by news the previous day that Intel had settled its own antitrust suit, but Tuesday sources close to Microsoft said that there had been no talks between Microsoft and the Department of Justice. A government informant confirmed what the Microsoft sources said, and also noted that the DOJ expected any offers made by Microsoft would be small.
Then The Wall Street Journal reported that Microsoft has already asked part of its legal team to develop an appeals strategy, meaning that the company not only has no plans to settle, but that it also expects to lose the current case. The Journal reported that an appeal is likely to focus on the issue of computer assemblers changing Microsoft settings, as well as a 1984 ruling concerning the Sherman antitrust laws.
There was also a lot of speculation last week that Microsoft's latest reorganization [see NewsSource, Feb. 15, 1999] is intended less to make the company more efficient than to make it more difficult to split apart. An 'integrated' Microsoft so intertwined that it would be impossible to separate? Or perhaps, as some rumors said, the reorganization would make it easier for Microsoft to voluntarily split itself apart to avoid an antitrust decision and make a buffer against any forthcoming Y2K lawsuits.
Meanwhile back in Washington DC, Washington state senator Slade Gorton proposed cutting the Department of Justice antitrust division's budget. Later in the week nine senators sent a letter to Gorton's budget committee attacking his proposal, saying that it would interfere with a pending trial. The senator from Microsoft's home state then took the senate floor and suggested that the trial's six-week recess should be "made permanent."

MARCH 01, 1999: Microsoft started out another bad week in court by calling general manager Dan Rosen to the stand. There Rosen testified that he typed - but never sent out - a 1995 e-mail that proposed splitting the browser market with Netscape. Government lawyers then produced a document number proving that the message came from the inbox of another Microsoft official, meaning that the message had been delivered. The witness quickly changed his story, saying that he had apparently sent the message, but only to that one person. Rosen proceeded, claiming that he never felt Netscape was a serious competitive threat to his company. That contradicted the testimonies of Microsoft executives Paul Maritz and Brad Chase and an e-mail from Bill Gates.
Rosen then told government attorney David Boies that he never saw the Windows 95 version of Netscape Navigator until July 1995. Boies asked him if he recalled it correctly, and if it was in April or May 1995. Rosen replied that it definately happened it in May. Boies produced an e-mail Rosen wrote in April of the same year discussing a meeting with Netscape where he received a copy of the new program. Following the admission of these two exhibits Rosen said he had been mistaken, a remark which produced laughter from the courtroom and a loud sigh from Judge Thomas Penfield Jackson. Shortly thereafter Boies ended his cross examination an hour early saying that the witness had proven his lack of credibility.
Tuesday Microsoft executive Eric Engstrom took the witness stand. Although Engstrom's written testimony primarily concerned allegations that Microsoft asked Apple to divide up the multimedia software market, Malone spent most of that afternoon dealing with the company's relations with Netscape and Intel. One 1997 e-mail Engstrom wrote proposed that Microsoft buy DimensionX before Sun could. Boies speculated that Microsoft wanted DimensionX because the software tools company had a product that some within Microsoft thought would be important for writing sites to run on Netscape's browser.
The next day Engstrom combatted the testimony of Apple's Avadis Tevanian, who back in November said Microsoft built hooks into Windows to give error messages when Apple's Quicktime is used [see Nov. 11 1998]. The witness then claimed that his job was placed at risk because of Tevaian's earlier testimony. But Engstrom did acknowledge that Microsoft wanted Apple to abandon part of QuickTime and use a product from Microsoft instead, saying that it was "silly" for the companies to duplicate their efforts.
Following a recess for lunch, German-born Microsoft senior vice president Joachim Kempin was called to testify. He began by showing another Microsoft-produced video (looks like they would have learned by now) supposedly showing how Acer, Compaq and Sony each bundle non-Microsoft Web browsers with their machines. Videos also showed how each of those companies let users sign up for Internet services other than those provided through Windows' built-in Internet Connection Wizard.
In short, said Kempin, Microsoft's relations showed that it was not a monopoly, but a competitor in a difficult market. But when asked, Kempin conceded that computer makers couldn't change their registration routines until Windows 98 shipped - eight months after the Department of Justice sued Microsoft in 1997. The witness also confirmed that the registration technique used by Compaq wasn't allowed in its original contract with Microsoft, and instead had to be negotiated separately. But he defended those actions, explaining that his company was only protecting its intellectual property rights; letting a computer assembler change a startup screen or remove an icon would be like removing a chapter from the novel 'Moby Dick'.
Kempin then acknowledged that Microsoft paid incentives to OEMs so they would make changes to the startup screens to bring them into compliance with its licensing agreements. But a short while later when Boies asked why Microsoft had to "bribe" computer companies to use IE, the witness changed his testimony: "Our license agreements never allowed personal computer makers to do this." "DidnŐt you tell me two minutes ago they could?" Boies asked. "If I said that it was wrong," replied Kempin. The testimony then progressed to debating whether or not Kemplin understood the questions since English is not his native language.
On Friday yet another Microsoft senior vice president, Robert Muglia, testified about Java. Following that unremarkable piece of testimony, Judge Jackson called the court into recess for six weeks to allow everyone involved in the trial time to handle other unrelated business.
Lawyers from both sides said that they have yet to decide what witnesses to call for their rebuttals when the trial resumes in mid-April. Most speculation centered around Bill Gates, but we doubt the Microsoft CEO will be called to the stand because he hurts the case for his side, and would be a hostile witness for the prosecution. We have heard several rumors that America Online's Steve Case could testify, but so far nothing that Case could give new information about has been produced. However things go, we'll be back in this spot six weeks from now to cover it.

FEBRUARY 22, 1999: Court resumed last Tuesday after a US holiday with an allegory from Judge Jackson: "When you discover you are riding a dead horse, the best strategy is to dismount. But lawyers have other strategies, including buying a stronger whip, changing riders ... declaring that the horse is better, faster and cheaper dead, and, finally, harnessing several dead horses together for increased speed." The justice department then played a video of its own, showing what really happens when someone tries to download and install the AOL version of Netscape Navigator. Several inconsistancies in the earlier Microsoft-made video were made obvious, forcing Microsoft Vice President Brad Chase to admit that some of his earlier testimony was "incorrect."
The government then introduced a memo written to Bill Gates by former Microsoft executive Mike Slade. The message described a meeting with Intuit executives and explained how Microsoft tied to split financial services market with them. Brad Chase was called back to the stand but Judge Jackson cut his testimony short when it appeared government attorney David Boies was making no progress with him.
On Wednesday Chase was on the stand again explaining that America Online originally chose Internet Explorer over Netscape because it was technologically superior, not because Microsoft offered the company a prime spot on the Windows 95 desktop as America Online executive David Colburn testified back in November [see Nov. 09 1998]. Chase also testified that AOL chose to continue using Explorer earlier this year - despite the fact that it will soon own Netscape - because it helped the government case (something that we pointed out back in January).
When court began on Thursday, Judge Jackson announced that he would begin holding sessions on Fridays to speed up the trial. After that announcement, (notice how fast Microsoft is rushing through its witnesses now), Compaq senior vice president John Rose admitted that his company has no alternative to shipping its personal computers with Windows. But Rose testified that he disagrees with an internal memo that described the latest licensing terms as "improper use of a monopoly position." Rose then conceded the DOJ's charge that Microsoft threatened to remove Compaq's Windows 95 license in 1996 because the computer manufacturer removed the Internet Explorer and MSN icons from the desktop. But he defended Microsoft's actions, saying that the letter was justified because removing the icons violated Compaq's contract.
David Boies then produced evidence showing that Rose had recently flown to meet with Microsoft executives about his testimony in the trial. Rose said that he only spoke with Microsoft's Paul Maritz, and that he had flown up to discuss Windows NT and SQL Server. Boies, in a now familiar move, then produced an e-mail from Gates thanking Mr. Rose for his trips to Seattle and his "willingness to extract a lot of time" for the antitrust case. Boies produced more evidence, one concerning confedential documents about the BeOS that Compaq slipped to Microsoft. Judge Jackson stopped the proceedings to request that Boies not ask any more questions about the Be incident since Rose said he had no knowledge of it.
But the next day Compaq lawyers brought the Be issue back up, admitting that they told Microsoft about their discussions with the small software company, but that they never gave out any important information. Meanwhile Compaq's Rose finished up his testimony, saying that Microsoft had actually only complained about Compaq's removal of those icons from the desktop, not about the Netscape icon. He then claimed that AOL, rather than Microsoft, complained about the Netsape icon because of a "miscommunication."

FEBRUARY 15, 1999: After Microsoft's experience in court the previous week, most people felt that their case couldn't get any weaker. Those people were proven were proven wrong the first day when Microsoft executive William Poole admitted to one of the DOJ's core charges against his employer, acknowledging that Microsoft bribed companies with listings on the ActiveDesktop Channel Bar to stop promoting and distributing Netscape products. One piece of evidence produced was an e-mail from Bill Gates, saying that he would be willing to do Intuit a "favor" costing around a million dollars in exchange for a version of Quicken requiring IE instead of Netscape Navigator. Poole spent the next day and a half unsucessfully trying to defend the wording of that message.
After Poole's testimony, Microsoft's lawyers played yet another video for the court in an attempt to show some speed advantages of integrating Internet Explorer with Windows 98. However - instead of showing Windows 98 with and without IE, or comparing 98 to a version of 95 without Explorer - Microsoft compared Windows 98 to elderly Windows 3.1. The executive shown on tape said that installing a web browser and getting online takes an additional 14 minutes more than with an integrated browser. But when David Boies questioned Ms executive Cameron Myrhvold about the modems used for the test, he admitted that the Windows 98 system was using a 33.6K modem, while the PC running Windows 3.1 only had a 28.8. Myhrvold downplayed the differences in modem speed, saying that the main issue is the amount of time spent installing software, not the time it takes to connect and download it.
Myrhvold further cemented the government's case against Microsoft when he admitted that IE had no chance when evenly pitted against Netscape. The witness said Microsoft was concerned that Netscape products would win side-by-side comparisons against Explorer because of Netscape's name recognition. Since Microsoft was late getting to the internet, they felt the only way to gain in that market was to prevent ISPs from distributing Netscape more than Explorer.
Thursday began with still another Microsoft video, this one showing how easy it is to download and install Netscape Navigator on a Windows 98 system. Microsoft's attorneys showed that the video had been edited to make the wait shorter and explained the amount of time that had elapsed. But when Microsoft Vice President Brad Chase took the stand, Boies asked him if the 10MBPS connection speed in Microsoft's video really showed a typical user experience. Chase disputed that, and said no matter what the connection speed, millions of people download browsers all the time. That prompted Boies to produce e-mail from another Microsoft employee saying that most people aren't willing to spend two hours downloading a browser when one is already available on their computer. Boies then asked permission to introduce a tape of his own, showing what really happens when you download and install a web browser.
After Judge Jackson closed the court to allow Microsoft attorneys a chance to preview the tape, everyone agreed to play the video publicly next Tuesday when court resumes after a US holiday.

FEBRUARY 08, 1999: Microsoft really blew it in court this week, starting off with Senior Vice President James Allchin admitting that running Internet Explorer in Windows 95 is almost the same thing as having Windows 98 upgrade. Then on Tuesday before Allchin resumed his testimony, Microsoft's lawyers played a tape supposedly showing how Windows 98 is slowed down and disabled when Internet Explorer has been removed. Unfortunately for Microsoft and Allchin, government attorney David Boies pointed out to the court that the video had apparently been doctored to show clips from several different computers, some of which were still running IE.
Mr. Allchin admitted that the tape had mistakes, but professed innocence and claimed that one of his employees must have grabbed the wrong video clips. Upon further questioning he also admitted that several of the computers shown in the video were not only running Internet Explorer but also Office 97, further slowing the taped test.
Wednesday Microsoft's lawyers came with with an explaination, saying that Internet Explorer had been removed from the machines in question, but installation of Prodigy internet access software changed a single titlebar to make the operating system appear as if IE was still installed. They also claimed that the video was just a "reenacment" of a lab test, so it shouldn't have counted anyway. Then Allchin retook the stand and changed his story, saying that maybe there was nothing wrong with the tape aterall. After more questioning, Judge Jackson agreed to allow Microsoft to redo the tests in front of impartial witnesses.
On Thursday the redone tape was produced and played before the court, with Allchin himself performing the test. Using two brand new IBM ThinkPads connected to the internet with MSN, the executive showed that Windows is unstable without IE, but he failed to prove that Windows' performance was slowed 200 percent to 300 percent by the removal as he had previously claimed. Microsoft attorneys blamed it on the lack of a consistant internet connection (should have used AOL instead of the Microsoft Network), and said that the second tape was just a "simulation" anyway.
The week ended with Microsoft trying to change the subject and promising to submit yet another version of the tape, but that may be too little too late. By Friday morning legal analysts and technical publications around the globe were declaring Microsoft's case dead and speculating on their eventual appeal strategy.

And on top of the other trial-related troubles, we're hearing that Gateway is mad at Microsoft over it. Sources from inside the computer maufacturer are saying it is none too pleased to learn about trial documents showing Gateway pays more for Windows licenses than Dell and Compaq do. Gateway apparently had a clause in its contract providing some preferential pricing that apparently didn't materialize. Gateway may soon be asking The Behemoth for money back on all those overpriced copies of Windows 95.

FEBRUARY 01, 1999: When called as Microsoft's second witness Monday, company vice president Paul Maritz repeated what was released the previous week in his written testimony. In his testimony and in the written document Maritz contradicted the testimony of almost every witness so far, from Netscape executive James Barksdale to Apple's Avadis Tevanian. The witness also denied that he ever threatened to "cut off Netscape's air supply," as was alleged by Intel vice president Steven McGeady. Justice Department attorney David Boies noted that the Microsoft vice president wasn't so sure of himself during a deposition back in October, choosing at the time to answer questions with "It's possible, but I just don't recall." Maritz replied that since then he has reviewed testimony from three Intel executives and now feels that he did not make the comment.
On Tuesday Boies produced a deposition from another Intel executive, Russell Barck, claiming Maritz was the author of the term "embrace and smother" to describe Microsoft's internet policy. The witness was then asked if he felt that limiting other companies' ability to use Netscape was a good way to increase Internet Explorer's market share. He replied that "Yes, in certain specific situations ... we did." He was then asked him if Microsoft kept track of IE's market share in comparison to Netscape's. Maritz responded that the company does actually track market share, but in general terms not compared to Netscape. Boies then asked why, if Internet Explorer is a part of Windows, would the company need to track its standalone market reach.
To back his point, the lawyer produced a 22-page document Maritz wrote back in 1996 entitled 'Internet Browsers.' The front page of the Maritz-authored document included graphs that directly compared what Maritz had labeled the "browser market share" of Netscape and Microsoft. Boies kept going, asking Maritz if Microsoft wanted to see Netscape's stock price drop. The witness replied that he couldn't recall that as a &qupt;specific objective." To help Mr. Maritz's memory, he was then shown a story from the Seattle Times. That report detailed a lunch in 1995 where Maritz gave a very positive response to being alerted by an employee of significant Netscape stock declines.
On Wednesday Maritz let his defenses slip, admitting that in 1995 Microsoft did indeed press Intel to stop work on its Native Signal Processing internet software and eventually to back away from the adoption of Java. But he said they opposed the software not because it would compete with Microsoft products but because it was poorly designed and would only work in Windows 3.x. That claim was destroyed with the showing of an e-mail from Bill Gates. The message explained how Intel was feeling pressure because computer manufacturers were forbidden by Microsoft from supporting Intel technology like MMX unless Intel agreed to drop development of Native Signal processing. Other messages from Gates described a "show stopper" for the chip company: Microsoft would support AMD's 3DX CPU extensions unless Intel backed off from its work on Java.
Thursday began with debate over a critical piece of evidence, a spreadsheet file showing which functions in certain DLL files were shared between Windows and Internet Explorer. Judge Jackson forced Microsoft to give the file to its opponents, boosting several areas of the government case. The spreadsheet will show that Microsoft does, contrary to earlier testimony, know how much of the browser code is shared by the operating system. It would also underscore the government's claim that Microsoft "had no plausible reason to weld the entire Internet Explorer into the operating system."
After that was cle