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 governmentÕs 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." "DidnÕt 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 cleared up, attorney Boies rounded out the week with the rest of his Maritz cross examination. The witness again argued that Microsoft faces upstart competition in the high-tech industry, and that the company is actually under siege by Linux, OS/2 and other competing operating systems. Maritz then made the outrageous claim that his college-age son downloaded Linux in less than two hours and had the operating system set up in less than a day.
On Friday after court had recessed for the week, a three-judge panel Court of Appeals handed Microsoft a defeat, affirming an earlier decision by Judge Jackson to release all 20 hours of the Bill Gates video deposition. Microsoft has fought the release for months because of how bad BillG looks on the tape; sources that have seen large portions of it say that the Microsoft CEO appeared extremely unintelligent, forgetful, and combative.

JANUARY 25, 1999: Beginning the week on Tuesday because of a US holiday, lead government attorney David Boies finished up his cross-examination of Microsoft's first witness, Richard Schmalensee. Boies used an analogy to illustrate the integration of Internet Explorer into Windows, inquiring if consumers would benefit if Word was integrated in the operating system similarly to the way Explorer has been. Schmalensee said there could be benefits, but admitted under questioning that consumer harm could result if the integration caused other word processors to not work as well.
Boies asked the economist if Microsoft considered bundling the number one way to get computers users to try IE, then showed him a chart from Microsoft saying computer makers "are the best vehicle to gain browser share." Schmalensee claimed not to understand parts of the chart and denied Boies' suggestion that "Microsoft has taken the position that Internet Explorer was not really part of the operating system." The attorney then reminded Schmalensee of testimony in the ongoing Bristol antitrust trial where he described Microsoft's operating system and web browser as separate products. After further questioning he admitted that Microsoft spent money to induce Internet service providers to use Explorer over Netscape Navigator and bought out their contracts with Netscape.
Then on Wednesday, his 4th day on the witness stand, Schmalensee was questioned about Microsoft's latest earnings and if the massive profits could indicate some type of monopoly power. The witness replied that "you can't infer monopoly power from quarterly profits," which pushed Boies to ask if similar profits over time might indicate monopoly power. Schmalensee admitted that a "valuable piece of intellectual property" like Windows could indeed produce long periods of profitability. (The witness had testified earlier that Windows is far from being the "world's most valuable real estate" and has almost no value because consumers remain free to use any software they choose). In the written portions of his testimony, Schmalensee had claimed that if Microsoft has the monopoly power the government alleges, it would be charging 40 times what it currently charges for Windows - about $2000 per OEM copy.
During rebuttal questioning by Microsoft's own Richard Urowsky, Judge Jackson asked Schmalensee why he always assumes "that the monopolist maximizes price" and wondered if there could be reasons why a monopolist might not maximize prices, "in quest of some greater glory at some latter time." The witness agreed, answering that "most firms think about the consequences" of today's prices on tomorrow. Jackson went on, saying he "can think of a model of a cigarette company that would price at the low end of the scale, even if it is the only source of the product." Schmalensee responded that Windows doesn't cause an addiction like tobacco can. The judge then smiled and asked the economist if he had any children.
So far, Microsoft's own witness has done the company more harm than the government witnesses have...

JANUARY 18, 1999: Last week started out with a closed-door court session during which economics professor Franklin Fisher testified about Microsoft's pricing policy. Since the session was closed we don't know what went on, but the highly debated testimony reportedly showed how companies that Microsoft favors like Dell and Compaq (both of which fought the testimony) get a better price on Windows than other computer manufacturers like Gateway and IBM. Fisher then used that price disparity to boost his testimony that Microsoft is indeed a monopoly and has used that advantage to break into other markets. After the court was reopened to the public, Fisher acknowledged that consumers have, so far, benefited from Microsoft's decision to give away Internet Explorer. But he insisted that the benefit was simply a side effect of a tactic designed to undercut Netscape. After a final cross-examination, government attorneys submitted 365 documents and several new sections of the Gates video testimony as unseen evidence, then rested their case and gave the court to Microsoft.
After again failing with an attempt to have the case thrown out, Microsoft lead attorney John Warden called his first witness, Richard Schmalensee. Schmalensee, a former student of Franklin Fisher, has worked with Microsoft on and off since 1992 and is serving as the company's primary economic witness. He testified that Intel-based PC desktop operating systems shouldn't be considered as a "relevant market" because Microsoft is threatened by cross-platform technologies like Java, handheld computers and the internet. That argument is critical to the case against Microsoft because if no "relevant market" exists, the company cannot have a monopoly even though Windows runs on 90 percent of the world's personal computers.
Government attorney David Boies took aim at Schmalensee, asking him about companies that make products competing with Windows. In reply Schmalensee listed two "short-run" alternatives - Linux and BeOS, operating systems that have a maximum combined marketshare of 11 million users. Judge Jackson revealed some curiosity about Be, asking the witness if Be has made any money from its operating system so far. "I would be stunned if they were making a lot of money," Schmalensee conceded. But he said the significance of Be and Linux were not that they were making money or signing up millions of users, but that they appeared to be new entrants into the desktop operating system market that could rival Microsoft in years to come.
Boies destroyed the testimony by producing a 1987 article Schmalensee wrote for the Antitrust Law Journal that said the "presence of a few small competitors to a dominant firm doesn't mean there aren't significant barriers to entry for newcomers." Then digging deeper, Boies mentioned a deposition given by Schmalensee on October 7 1998 where the economist said other PC operating systems weren't a serious threat: "At the moment, except for specialized applications.... I'm not aware of anything at present that would count as viable competition." The witness retracted his statement, claiming that Microsoft has threats that cannot even be identified yet because software companies "come out of nowhere."
Finishing off a banner day, the Justice Department then introduced several e-mails from Bill Gates that shed doubt on a poll Schmalensee cited in his written testimony. The survey, which claims 85% of software developers support the integration of Internet Explorer into Windows, was apparently ordered up by Gates to soften the impact of his Senate testimony in March 1998. In one of the e-mails produced, Gates told several executives that "It would help me IMMENSLY [sic] to have a survey showing that 90% of developers believe that putting the browser into the OS makes sense." Coincidentally, later on Thursday Microsoft issued a press release announcing an [ahem] independent poll showing 73 percent of Americans believe Microsoft has benefited both consumers and the software industry.

JANUARY 11, 1999: On December 29, before trial resumed, the Justice Department submitted written testimony by Intuit CEO William Harris. In his statement, Harris told how he agreed to merge Intuit with Microsoft back in 1994 because the company feared Microsoft would exterminate it otherwise. He also suggested that The Behemoth offered preferential treatment to software vendors in exchange for browser loyalty to Internet Explorer. He closed the testimony with a plea to the Justice Department to enforce a principle he calls "operating system neutrality." Microsoft dismissed his charges, saying they were "speculative" and "hypothetical," then tried to have some 50 paragraphs of the statement removed from the court records.
When court came back into session on January 4, Harris testified in person how Compaq dropped Intuit's Quicken from new PCs because of Microsoft threats to withhold Windows licenses. He then explained that Intuit chose to ship Quicken '98 with only Internet Explorer in order to gain a favorable placement on the Active Channels bar in Windows. Then in cross examination Harris admitted that Netscape's browser wouldn't have worked as well with the software as Microsoft's, but said the decision was based on multiple factors. After the cross examination, government attorneys played another segment of the Gates video in which BillG denied having any recollection of the 1997 deal preventing Intuit from bundling Netscape. Government lawyers then produced evidence showing Gates approved of the deal, and Harris confirmed that Gates was behind it.
Then on Tuesday, Justice released written testimony from MIT economics professor Franklin Fisher. Inside the October deposition, Fischer testified that Microsoft set out to destroy Netscape and "undertook detailed studies of Netscape's sources of revenue and what Netscape required to survive" to see what would most effectively cripple the small software company. Justice also chose to release several subpoenaed e-mail messages from Microsoft, most notably one where senior vice predent Jim Allchin referred to cross-patform software as a "disease inside Microsoft."
While Fischer's written testimony was circulating through the press, Microsoft was fighting to limit what the economist could testify about. They asked Judge Thomas Penfield Jackson to make Fischer give his analysis of their contracts with hardware companies behind closed doors, since his analysis (which was omitted from the released reports) could contain "sensitive, proprietary data" about what the company charges computer manufacturers for Windows.
The economist's testimony went on as planned, with government attorneys asking only a few cursory questions to back up the written testimony. Then Microsoft's Michael Lacovara cross-examined the 12th witness with a barrage of questions, often asking another one before he had time to answer. With Judge Jackson getting obviously irate, Lacovara asked Fischer about the impact of Netscape's proposed merger with American Online. Before he could answer, Judge Jackson produced an interview with AOL's Steve Case, saying "The thrust of the article is that there is no indication that the new consortium is going to compete against Microsoft." He then asked lawyers on both sides if they plan to bring Case up as a witness and submitted the Washington Post article as evidence.
On Thursday, Microsoft took one last shot at Fischer. Michael Lacovara suggested that that many of the quotes he had used were similar to those picked by Frederick Warren-Boulton, an economist who testified earlier in the trial. Lacovara asked whether the two collaborated, "or was it 'great minds think alike?'" "I don't think I would characterize either of us as a great mind, being that I'm under oath," said Fisher, to laughter by the judge and courtroom. But he moved on to explain that it was not hard to pick out quotes that fit. The attorney continued, asking Fischer a series of questions and then suggesting that most computer companies would prefer to have a browser pre-installed with the operating system. Fisher replied that if Microsoft forced one browser on the world "that would make it simple ... but that's not what competition is about... We're going to live in a Microsoft world - It might be a nice world, but it's not competitive and not consumer-driven."
Coming up this week: final testimony from Fischer, followed by Microsoft's first of 12 witnesses, expected to be Richard Schmalensee, a professor and former student of Mr. Fischer. It's also expected that Microsoft will again ask Judge Thomas Penfield Jackson to dismiss the government's case before bringing its witnesses.

DECEMBER 21, 1998: Also On December 14, technical expert Edward Felten told Judge Jackson how Microsoft deliberately blended different functions into some of the same Windows files, making them more dependant on Internet Explorer than they would be otherwise. But the Princeton professor - who was given access to Microsoft's closely-guarded source code and Windows blueprints - testified that he found "no reason Microsoft was technologically compelled to design things that way. .. Some of the stuff relates to Web browsing and some of it doesn't."
Felten then showed a 30 minute video on a piece of software that removes IE-dependancies from Windows 98. Microsoft complained that FeltenÕs methods slowed down some Windows functions, but Felten said he hadnÕt noticed any performance problems. He said the procedure worked until he handed over a copy of his removal program to the company. The judge immediately jumped in: "Are you telling me that as part of discovery you provided this code in September, whereupon there appears to have been product changes by Microsoft?" To which Felten replied "Yes."
Following that, Felten compared using a web browser to using a screwdriver: "They [Microsoft] take the next step and glue the screwdriver to my hand. It's hard to use other screwdrivers or use other tools. ... ThereÕs no benefit to having a screwdriver glued into my hand." Testimony was cut short on Monday because Microsoft backed down after Judge Jackson said company attorney Dave Heiner was "playing word games" to trip the witness up.
The DOJ finished up the year Tuesday and Wednesday by showing more clips from Bill Gates' videotaped testimony. One clip showed lead government attorney David Boies asking Gates about a series of notes he wrote about IBM's relationship with Lotus back in 1994. "Why does IBM help Lotus so much," Gates wrote in a message to senior vice president Joachim Kempin. "Is there anything we can do about this?" Kempin wrote back that Microsoft needs a "WW [world wide] hit team to attack IBM as a large account, whereby the OEM relationship should be used to apply some pressure." In the video, Boies then asked Gates if Kemplin had been proposing "that the OEM relationship with IBM should be used to apply some pressure" to stop IBM from promoting Lotus products. After some prodding, Gates finally answered "It is one of the things he mentions, but it's not a proposal."
On Wednesday, Judge Jackson surprised the court by allowing Microsoft to examine papers filed by America Online concerning its buyout of Netscape. That ruling sent Microsoft stuck up $4.50 to a record high of $135.13, before it closed at $133.75. No word yet on whether or not AOL will fight to keep the documents secret. The year ended on Wednesday with several hours of video testimony from various industry executives, during which most people in the court went to sleep or left. Trial will resume on January 4th.

DECEMBER 14, 1998: On December 7th, Microsoft claimed that the integration of Internet Explorer into its operating system creates efficiency. But not according to David Forber, the government expert who testified Tuesday as witness to microsoft's claims. According to Forber, the integration of IE is not efficient to the end user, and rather results in many inefficiencies in performance, redundancy of code, and increased risk of bugs. To push the argument further he stated, in theory, that "Microsoft could bundle together all its existing and future applications with its current product sold as Windows 98." [a possibility we mentioned several weeks ago] This would become a very large waste of space indeed.
South Carolina has backed out of the lawsuit originally filed against Microsoft by the Justice Department and 20 other US states. South Carolina's Attorney general explained his withdrawal by saying the computer industry is competitive afterall, citing AOL's acquisition of Netscape and subsequent alliance with Sun on November 24. The state's abandonment bumped MSFT stock to a record high. Although South Carolina is the first state to back out of the trial it may not be the last, considering the ads Microsoft has been running as of late in major newspapers, quoting officials and experts opposed to the antitrust case.
Then on the 10th, Microsoft accused Sun Microsystems of a double standard in dealing with Netscape and Microsoft on Java implementation in their web browsers. Specifically, both companies have not completely implemented the Java code correctly. In 1997 Netscape told Sun it would be late in implementing the Java Native Interface, and Microsoft says Sun was more forgiving of Netscape than of Microsoft because of the companies' competition. But the DOJ stands by its charges that The Behemoth expanded Java for its own uses. According to Sun Vice President James Gosling, "Our view was that when Microsoft was holding out their hand there was a knife in the hand and they were expecting us to grab the blade." John Warden, Microsoft's lead attorney, later explained "Microsoft competed hard with Java and got ahead of Sun," but failed to mention that it was at the expense of cross-platform capabilities Sun and millions of others had worked so hard to achieve.

DECEMBER 07, 1998: Before beginning a new week in court, Microsoft spent several million dollars buying ad space in the Sunday editions of large around the country. Those ads, entitled "The March of the Marketplace," claimed that America Online's purchase of Netscape the week before prove how no one company dominates the computer industry. The ads correctly stated "the market will take care of consumers better and faster than the government ever can," but failed to mention how well Microsoft thinks it can take care of consumers. When trial resumed the following Monday, lead government attorney David Boies pointed out that the ads actually have nothing to do with the matter at hand, since AOL and Netscape have little or no impact on Microsoft's chokehold monopoly of desktop operating systems.
Following that, Boies called expert economic witness Frederick Warren-Boulton back to the stand. In his 5th day of testimony Warren-Boulton explained how Microsoft has such a monopoly that it "can raise the price of its operating system without much concern of fall-off" by PC makers. The questioning lasted until Tuesday, when Microsoft attorney Michael Lacovara asked him if AOL's buyout of Netscape would increase competition in the browser market. Warren-Boulton replied that he "wouldn't bet on it if I were a betting man."
To start off Wednesday, the government called Sun vice president and Java creator James Gosling to the stand. Gosling admitted that Java has not yet been sucessful in its write once-run anywhere promise, but said that achieving that is still their main goal. He testified that Microsoft is partially to blame for Java's failure so far because the company created a Windows-only version of the language, "precisely what the Java technology was designed to avoid."
In video shown later on Wednesday, Bill Gates admitted that his company worried at one time that Java could undermine Windows. But Gates denied that Microsoft ever pushed software developers away from designing products to use Java instead of Windows. In the video, Gates was shown e-mail written to by a Microsoft employee in 1996. The note, in part, mentioned that "the JDK [Java Development Kit] 1.2 has JFC, which weÕre going to be pissing on at every opportunity." When Gates was asked what the employee meant by "pissing," he suggested that it meant "we're going to be clear that weÕre not involved with it." We dare say that most dictionaries would have a different definition of the word in question.
On Thursday Microsoft did the opposite of what it had done the previous day and produced evidence to show that Java was a victim of its own slowness and incompatability. E-mails from Sun to Netscape and articles from various trade magazines were produced in an attempt to say Sun was more anticompetitive than Microsoft. David Boies again pointed out the evidence had strayed away from the antitrust case's main point, and "seems to suggest that Java really wasn't much of a threat."

NOVEMBER 23, 1998: Starting the antitrust trial's 5th week, government lawyers played 50 more minutes of Bill Gates' testimony for the court. Most of the clip showed Gates arguing with lead Justice Department attorney David Boies about the meaning of words he used in e-mails. Boies confronted Microsoft's CEO with an e-mail he wrote to a subordinate in 1996 that said in part, "winning Internet browser share is a very, very important goal for us." Gates said he didn't remember writing that specifically. Boies then asked him about what companies he would include in the term browser share. "There's no companies included in that," Gates responded. "Well, if you're winning browser share, that must mean that some other company is producing browsers and you're comparing your share of browsers with somebody else's share of browsers," Boies replied. "It doesn't appear I'm talking about any other companies in that sentence," Gates shot back.
The court's attention, however, was on Judge Thomas Penfield Jackson, who couldn't stop himself from laughing out loud as the billionare rocked while thinking up responses and acted as if he could barely even remember his own name. Once the video clip was finished, Jackson asked David Boies how long the deposition had taken to complete. Boies repsonded that the interview had consumed three days, mostly because Gates had problems with the meanings of words like 'concerned', 'competition', 'non-Microsoft' and 'we'. Boies later settled that issue by bringing out a copy of the Microsoft Press Computer Dictionary, which had clear definitions of the terms used. Microsoft attorneys then protested that the DOJ was simply playing games and tried to block the rest of the tape, but Judge Jackson said it seemed to be more a problem with the witness rather than with presentation of his testimony.
To rebutt Gates' statements, Boies brought Independant Software's Glenn Weadock out as an expert witness. Weadock testified that bundling Internet Explorer with Windows gives "few real-world benefits and several significant real-world costs and risks" to corporate customers. Weadock had earlier said in written statements that "managers at many organizations .. have told me that they value the flexibility to make browser decisions independently from operating system decisions." He went on to say "the forced inclusion of Internet Explorer with Windows 98 or Windows NT 5.0 forces organizations to either forego new technology, incur the costs of supporting two browsers or removing the unwanted one, or alter their choice of browsers." Then the following day Boeing manager Scott Vesey testified how his employer decided to use the first version of Windows 95 in order to avoid the IE integration.
Later on Tuesday the government played another eight minutes of the video testimony, where Gates, even after being shown an e-mail he wrote in 1996 calling IBM "rabid Java backers" and asking it to "tone down" the rhetoric, denied that Microsoft asked Big Blue to stop publicly supporting Java. They then called IBM executive John Soyring to the stand and asked his perspective on Microsoft's relationship with the computer company. Soyring testified that OS/2 has failed in the consumer market because of a minimal amount of software. He then explained how that problem is due to how Microsoft limits Windows software developers from porting products to that platform.
After the crossexamination of Soyring on Wednesday, government lawyers submitted written testimony from economist Frederick R. Warren-Boulton, chief US federal antitrust economist in the 1980s. In his statements Thursday, Warren-Boulton stated "consumers will be significantly harmed if Microsoft succeeds in crushing the cross-platform threat that independent browsers pose to the Windows operating system monopoly. ..The important point is that the market should not be prevented by Microsoft's anti-competitive practices from making that decision."
Also on Thursday the DOJ released a memo written by Senior Sales VP Joachim Kempin in 1997 to Bill Gates and Steve Ballmer. The memo suggested that Microsoft begin charging Windows users an annual fee to use the operating system. The annual charge, which Kemplin called an "annuity," was described as being "the best thing long term." When asked about the message, Microsoft spokesmen said that it was just a suggestion, not anything that the company would actually do. Microsoft then finished out the week by attempting to show that it doesn't have a monopoly on operating systems, explaining how the PDA OS market is still dominated by other products, and then claiming that Linux is actually threatening sales of Windows.
When trial resumed Monday, Microsoft attempted again to have the case thrown out, saying that the AOL/Netscape merger eliminates DOJ arguments about market dominance. Government lawyers correctly argued back that both America Online and Netscape are internet companies and the deal between them will have no impact on Microsoft's ability to sell desktop computer operating systems. Frederick Warren-Boulton was called back to the stand to explain the definition of monopoly, and debate over that topic consumed the remaining two days of trial time for this week (court was not in session Wednesday or Thursday to commemorate Thanksgiving, court is never in session on Friday).

NOVEMBER 16, 1998: Justice Department lawyers started up another week of the trial by playing a section of Bill Gates' videotaped testimony where he was asked if Microsoft made any effort to keep Intel from helping Sun on Java. Gates paused for 30 seconds, rocking, before answering "Not that I know of." Justice then produced Intel executive Steven McGeady, who testified how Microsoft did just that "repeatedly and on multiple occasions." He went on to explain how Ms threatened to yank vital technical support for Intel's MMX processors unless the chipmaker stopped development of Native Signal Processing, which competed with Microsoft products. "He became quite enraged at one point. ...Bill made it very clear that he would not support our next microprocessor offerings if we didn't get alignment." Intel stopped work on the technology but refused to close the lab that had done the work, so Microsoft introduced support for DEC's Alpha processor.
Following a short break, McGeady testified Microsoft tried to exterminate open standards like HTML by embracing, extending and exterminating. According to notes McGeady took, one Microsoft executive said during a 1995 meeting that the company wanted to "cut off Netscape's air supply" by giving browsers away and "kill HTML by extending it." Other plans "would have made Java applications written for Windows incompatible [with] other platforms," he said. Government lawyers then introduced more of McGeady's notes on the meeting, most notably of Gates's statements to Intel executives: "this antitrust thing will blow over," referring to the 1995 government actions against Microsoft. Gates then said that Microsoft should be more careful in the future about destroying incriminating e-mail like the type government lawyers have been producing for the last 6 weeks.
For its rebuttal, Microsoft said McGeady is just trying to get even with them because his job was reshuffled. Microsoft lawyers claimed that company executives told Intel that their software was poor quality, causing Intel to drop some software divisions and move some employees - including McGeady - to other jobs. Microsoft then produced memos written by McGeady calling then-Intel CEO Andy Grove a "mad dog" and one about Microsoft entitled "Sympathy for the Devil." They also showed e-mail from other Intel employees calling McGeady a "prima donna" who had "fucked things up."

NOVEMBER 09, 1998: Following the completion of Netscape CEO Jim Barksdale's testimony, the government called America Online executive David Colburn to explain why his company chose Internet Explorer over Netscape's Navigator. He said AOL was ready to enter into a deal with Netscape until they realized how devastating Microsoft's own online service would be to the company: "Because Microsoft was the largest operating system provider, Microsoft had a potentially decisive strategic advantage in competing against other online service providers such as AOL through its ability to bundle MSN with the Windows operating system and place an MSN icon in a prominent position on the desktop."
So even though Netscape was willing to produce a custom version of its browser just for AOL, the company decided to use IE because Microsoft demanded it in trade for a prominent location on the Windows 95 desktop. "AOL was willing to agree to virtual exclusivity with Microsoft Ñ something to which AOL would not have otherwise agreed - because AOL believed that inclusion in the Windows operating system and on the desktop was essential," Colburn testified. He also said that AOL's contract with The Behemoth prevented it from promoting Netscape products, although they are avilable for download deep inside the AOL web site.
After Mr. Colburn's testimony ended that Thursday, the DOJ played excerpts of Bill Gates' video testimony for jurors. The portions shown (reminiscent of the Clinton tapes from several months ago) feature a tense, snippy, defensive Bill Gates denying any knowledge of threats, illegal activity, persuasion, coercion, communication, conversation or (apparently) any activity at all inside Microsoft. Gates claimed he has no memory of sending the dozens of e-mails presented as evidence against him, has no knowledge of any agreements with Apple about Internet Explorer and is not in charge of any Microsoft products being released for the Mac. At one point during the tape, presiding judge Thomas Penfield Jackson turned away from the room and apprently shook his head with amazed amusement. After the viewing, Microsoft lawyers said Gates answered all questions accurately and truthfully, then claimed that the DOJ is attempting to use the tapes to 'demonize' Gates, as if it could hurt his image more than their actions already have.
When the trial started back up the following Monday, Avadie Tevanian Jr., Apple's senior VP of software engineering, took the witness stand. Tevanian testified that Microsoft pressured the computer company to stop developing its QuickTime multimedia technology. In exchange, Microsoft would let Apple have the much smaller market for video editing software. When Apple rejected that offer, Microsoft pressured other companies to stop using their multimedia software. Tevenian then said that Microsoft began to experience "bugs" in various programs that caused QuickTime to run slowly, have low image quality or just not run at all. When Apple programmers contacted Microsoft about the problems, the company told them that it would stop producing the Macintosh version of Office unless they let it invest $150 million dollars into Apple and agree to make Internet Explorer the MacOS' default browser.

A full transcript of the Gates video is available at The DoJ Web Site.

NOVEMBER 02, 1998: U.S. District Judge Richard Stearns has ruled that two college professors cannot be forced to give Microsoft copies of taped interviews made with Netscape executives. The interviews, recorded by professors David Yoffie of Harvard University and Michael Cusumano of the Massachusetts Institute of Technology, were made for an upcoming book, Competing on Internet Time: Lessons from Netscape and its Battle with Microsoft.
The Justice Department filed another subpoena against Microsoft requesting access to the company's sales database. Microsoft had given Justice lawyers printout from the files, but they had apparently been altered. Information contained in the 4GB files should give more valuable evidence about revenue the company received from licensing to key manufacturing partners. Microsoft argued that it would have to provide investigators with expensive hardware to view the files, but Justice countered that by requesting to view the files at Microsoft's Redmond headquarters, which already have such hardware available. Judge Jackson sided with the Justice lawyers and gave them full access, saying that what Microsoft provided "doesn't make any sense.. It's gibberish."
Improving its already poor standing in the computer press, earlier this month Microsoft decided to file suit against a computer journalist. Microsoft served C|Net News.com reporter Dan Goodin with a subpoena, requesting that he turn over documents referred to in his September 23rd story, 'Microsoft's Holy War on Java'. In that column, Goodin cited "evidence not yet public" in the Sun v. Microsoft case.
In his opening statement, head Microsoft lawyer John Warde referred to the government as "Netscape's bully," called in to protect it from a fierce - yet legally correct - competitor. Warde then called the Justice Department a group of "Luddites" and accused it of making a personal attack against Bill Gates, distorting e-mail, and taking evidence out of context. Later in the statement Microsoft lawyers defended "integrating" IE with Windows and downplayed a 1995 meeting in which Netscape says the company asked them to not make any products for Windows.
Following opening statements, government lawyers brought Netscape CEO Jim Barksdale to the stand as their first witness. In his testimony Barksdale explained how, in 1995, Microsoft tried to make an agreement with internet startup Netscape. The two companies had met several times that year to discuss technical standards, so when Microsoft proposed another meet on June 21 Barksdale gladly agreed. But in that meeting Microsoft did something unexpected. "They proposed that a 'line' be drawn between the area in which we developed products and competed and the area in which they developed products," Barksdale said in written testimony. "I have never been in a meeting in my 33-year business career in which a competitor had so blatantly implied that we should either stop competing with it or the competitor would kill us." Barksdale then said that Microsoft offered to invest in Netscape to sweeten their deal.
To reenforce Barksdale's testimony, DOJ attorney David Boies introduced a number of seemingly incriminating Microsoft documents. In one such document - an e-mail dated May 31, 1995 - Microsoft CEO Gates expresses an intrest in seeing some type of Netscape deal come about. Ms' Warden then attacked Barksdale, saying that they falsified notes on the 1995 meeting in order to bring them up if there was ever a need for evidence against The Behemoth. This is incredible foresight, as it means Netscape executives had to be planning a Microsoft antitrust case as far back as Spring 1995. DOJ lawyers rebutted this by explaining Netscape didn't even notify its lawyers about the incident until later that year after Compaq cancelled a bundling deal because of Microsoftian pressure.
Other witnesses showed Microsoft's trait of pressuring PC manufacturers and ISPs to dump support for Netscape products. An official at one of the ISPs, Earthlink, described their negotiations with Microsoft as "medieval, meaning that 'the King' [i.e., Microsoft] tells you what he wants and you are expected to comply." Roberta Katz, senior vice president for Netscape, also quoted Earthlink officials in an August 1996 e-mail as saying that in their negotiations with Microsoft the company was very explicit about its "plan to kill Netscape." Earthlink signed a contract with Microsoft anyway because, according to Katz, the officials said they had to maintain access to Microsoft's distribution channel through the sale of its operating system.
In other messages to Netscape, ISPs reported Microsoft offers of irresistible amounts of money for advertising, free product upgrades and other incentives if they switched to Internet Explorer; but the majority of them also complained about the Microsoft conditions, which included preventing the distribution of any Netscape products and putting IE logos on company home pages.

OCTOBER 12, 1998: Since the Microsoft trial has lately, to be honest, been frustrating to follow and report on, we have here a brief summary of the events since we last reported to you.
Microsoft's last attempts to limit the government's evidence died when Judge Thomas Penfield Jackson said that he will not make any rulings about evidence until the trial is underway. After that ruling, he agreed with the latest requests from both sides and delayed the case until October 19, next Monday.
At the same time, AOL Chairman Steve Case told reporters that his company decided to go with IE because Microsoft gave AOL's software a choicey position on the Windows 95 desktop. At a speech later in the week Case also stated that he sees no reason for computer companies to be exempt from the same antitrust laws as other firms.
Meanwhile, Judge Jackson ruled that Oracle has to make available "all agreements" it entered into with Apple, IBM, Novell, Netscape, Sun, HP, and Compaq regarding Unix marketing, software bundling and Java. Oracle lawyers argued correctly that this was just another attempt to muddy the waters and further confuse the trial.
And finally the news came out of a government investigation into possible evidence tampering by The Behemoth. According to sources, the Justice Department is checking for evidence that Ms deleted e-mail evidence of Java tampering. Sources say there are investigations into evidence tampering in the Caldera/Microsoft case as well.

SEPTEMBER 14, 1998: On Monday US District Judge Thomas Penfield Jackson rejected Microsoft's motion to have the antitrust case against it dismissed, but rejected one of the government's charges and then delayed the trial until October 15. Jackson later wrote that the states' charge Microsoft improperly leveraged one market to gain a foothold in another was not consistent with the Sherman Antitrust Act's theory of "monopoly leveraging." A similar charge by the Justice Department will remain in the lawsuit because it does not claim that Microsoft built a monopoly by leveraging. Microsoft officials, of course, played up the one piece of good news they got.
The new delay was requested by both Microsoft and the government, saying they were far from finished with depositions, evidence gathering, and other pretrial work. This is the second trial delay - it was originally scheduled for September 8th then delayed to next Wednesday, the 23rd. Microsoft is still seeking to limit the scope of the trial and has threatened to cause more delays if new evidence introduced by the government is allowed. A pretrial conference on that is planned for September 17, this Thursday.
Following the judge's rulings, Microsoft announced that it has subpoenaed several leading competitors, looking for evidence to defend itself. The new round of subpoenas require Netscape, IBM, Sun, Novell and Oracle to provide all records of meetings and communications involving efforts to develop new computer technologies with each other or with leading computer makers Apple, Compaq or Hewlett Packard. The companies said that they would try to comply with the requests, which Microsoft hopes will reveal, among other things, collusion among them to develop a "Global Unix" capable of outselling Windows.

SEPTEMBER 07, 1998: Justice Department attorneys, in a court filing made public last week, argued against Microsoft's request that the entire antitrust case against them be dismissed. Prosecutors say Ms has ignored key facts in the case and tried to redefine the law to meet its own needs. However the filing wasn't just an argument against dropping the case. The DOJ use evidence in that filing to expand its case against Microsoft and include new evidence about the company's crippling DR-DOS (see story below), asking Intuit, Apple and Intel to stop making competing products, and its attacks on Java. The filing also said that Gates and other Microsoft executives were extremely combative during their depositions, at one point denying that they know what a "browser" is, only acknowledging that the company markets "Internet Technologies that allow users to access the web."
The day after that new evidence was filed, Microsoft's lawyers tried to block it, saying prosecution is attempting to expand the case beyond their trial's original scope and that introducing new evidence this close to the trial will "deny Microsoft procedural due process." They also requested that the trial be delayed another six months and the witness limit be eliminated if new evidence is allowed. Justice attorneys replied by saying Microsoft is just attempting again to delay a case it knows it will not win. Behemoth lawyers replied to the reply by again asking the judge to toss out the whole case.

AUGUST 31, 1998: Last Thursday and Friday, Microsoft chairman Bill Gates gave several hours of testimony for a pretrial deposition in the Justice Department vs. Microsoft case. The deposition, which Gates gave from the company's Redmond campus, was conducted by New York state Deputy Attorney General Stephen Houck and several Justice Department lawyers. Sixteen other Microsoft executives, including newly named vice president Steve Ballmer and most of the IE 1.0 development team, gave additional testimony for the September 23rd trial.
Following the depositions, sources said Gates was extremely "evasive and nonresponsive" to the investigators' questions, making them ask some of the questions more than once before receiving an answer. No one from Microsoft or the DOJ would comment on Gates' testimony.

According to a report last Wednesday in The New York Times, the US Justice Department is now investigating Microsoft's relationship with Intel. According to the Times, during a 1995 meeting between Intel Chairman Andy Grove and Bill Gates, Gates made "vague threats" to work more closely with Intel's competitors unless Intel cancelled plans to invest in Internet-related technologies and businesses. The DOJ has reportedly subpoenaed Intel transcripts of the meeting, and several Intel executives have testified about the companies' relationship. Intel and DOJ represenatives had no comment, while Microsoft spokesmen neither conformed or denied the allegations, merely saying they didn't see how that evidence could harm the company's case.

AUGUST 24, 1998: Citing a law that dates back to 1913, U.S. District Judge Thomas Penfield Jackson ruled that reporters and members of the public are entitled to watch depositions by Bill Gates and other Microsoft executives. Company lawyers immediately filed an appeal, claiming the decision would create a "media circus" and that the "injury that Microsoft will suffer as a result of these disruptions will be irreparable .. even if Microsoft prevails on its appeal."
Wednesday the appelate court granted The Behemoth a stay on Judge Jackson's order, barring the public from witnessing any depositions from Microsoft employees. The court said that the testimony should be kept private until a final decision on the appeal has been made. If it later decides that depositions should have been public, videos and transcripts of them will be made available to the media and other interested parties.
Two days after the ruling, Judge Jackson, at the request of both Microsoft and the Justice Department, pushed the trial's start date back until September 23. Both sides had requested the delay to give them more time to gather evidence, plus Microsoft lawyers need more time to explain why the judge should throw out the case.

AUGUST 17, 1998: Last Thursday, Judge Thomas Penfield Jackson dismissed Microsoft's efforts to limit Bill Gates' testimony to 8 hours. The company's lawyers argued that Mr. Gates is a busy man because of his role inside the company, but lawyers for the Department of Justice said they needed more time with the billionare. Later in the day Jackson ruled that Microsoft must hand over source code from Windows 95 and 98 to government investigators. Microsoft had refused to give up the source unless investigators were prevented for working for a competitor for a year. He also said the starting date for the trial will remain September 8.
Following the ruling, Ms general counsel William "Delay" Neukom filed yet another motion requesting that Judge Jackson throw out the whole case. The motion, which was accompanied by a response to the DOJ's preliminary injunction, said the government case "fails to meet the criteria for injunctive relief" and claimed that its goal was never to hurt competition but to benefit the consumer. The company went so far as claiming that it had plans to integrate "Internet browsing technologies with Windows" as early as 1992, nearly two years before the first web browser was created. The filing also looked at how other companies like IBM and Sun have integrated internet software with their operating systems.

AUGUST 03, 1998: Last week Microsoft countersued the 20 state attorney's general charging it with violating antitrust laws. The suit, accompanied with a formal response to the states' charges, deny all allegations and claim that the lawsuits unconstitutionally undermine the company's intellectual property rights. (This is apparently another attempt to delay legal proceedings.) Central points of the filing basically say that Microsoft intended to integrate IE with Windows long before Netscape was founded and that the product gained some 40% marketshare on its own merits.
Microsoft did however admit that some company executives called attempts to garner market share from Netscape a "jihad" and that it has restricted computer makers from altering PC boot-up screens. Microsoft defends the latter practice, saying that end users are perfectly free to customize the desktop any way they like (once they can figure out Windows' option menus).

The Department of Justice is seeking two days to depose Microsoft Chairman Bill Gates in its antitrust suit, twice as long as the company wants to make him available. The DOJ says that Gates is scheduled to give a deposition on August 12, but they would prefer to have an additional day to question him because "Mr. Gates has personal knowledge about every aspect of this matter which cannot be obtained through other sources." Microsoft says that 8 hours should be more than enough time to get all the information needed.
The department also accused Microsoft of delaying deposition schedules from 16 other Microsoft employees like new company president Steve Ballmer. In addition to that, investigators requested source code from various versions of Windows 95 and 98. Microsoft says the request endangers "highly sensitive" trade secrets and demanded that government consultants sign a non-disclosure agreement, be prohibited from working on computer operating systems for 12 months and from working for Microsoft rivals until after the year 2000.

In a white paper circulated Wednesday by Netscape, former US judge Robert Bork said the lawsuit brought by the Justice Department and 20 states takes aim at a monopolist's attempt "to preserve its monopoly by destroying a potential rival." Inside the 70,000 word paper, Bork writes that "an analogy would be the owner of a toll bridge, which is the only bridge across a river, paying the owner of land to deny access to a site where a competitive bridge is partly built."
The former judge also called Microsoft on its "complex web of restrictive agreements" to undercut rival distributors of Internet browsers. He said Microsoft had failed to defeat Netscape in the open market and had been forced to bundle its Internet Explorer browser with its "monopoly operating system first in Windows 95 and now Windows 98 so that computer manufacturers are forced to take both in one package." Microsoft spokesmen were unavailable for comment.

JULY 27, 1998: At a Senate Judiciary Committee hearing on competition in the software industry, RealNetworks CEO Robert Glaser said Microsoft is preventing Internet surfers from using his company's software. Glaser, a Microsoft employee for 11 years before joining RealNetworks, testified that a new version of Microsoft's Media Player effectively and deliberately "breaks" the RealPlayer program. Apparently Media Player associates itself with RealPlayer-type files, so when a user clicks on the file Media Player loads instead of RealPlayer. This would be fine, only Media Player doesn't support the lastest versions of Real files because Microsoft refuses to license the technology. [Details of Glasers' claims are available at the RealNetworks web site.]
The hearing called by Senate Judiciary Comittee Chairman Orrin Hatch was officially about competition in the software industry, but was mainly to investigate deeper into Microsoft's business tactics. A similar meet was held back in March. Microsoft refused to send representatives or witnesses to this hearing, accusing Senator Hatch of holding "a campaign against Microsoft." The company also contends that it has "gone the extra mile" to help investigators.
Glaser was not alone in his harsh words against Microsoft. Oracle chairman Larry Ellison attacked Microsoft's claim that it should be allowed to innovate without government interference. "If an innovative piece of software comes along, Microsoft copies it and makes it part of Windows," Ellison said. "This is not innovation. This is the end of innovation." Other testimonials from Lotus CEO Jeff Papows, SPA's Ken Wasch, Netscape executives and a statement from Xing Technologies all reenforced Glaser's message. "The fact is," Hatch said, "our doors have not exactly been knocked down by companies willing to defend Microsoft's business practices."
But this week, undoubtedly after some pressure from Microsoft, Xing took back its statement about Media Player. "For both the XingMPEG Player and Windows Media Player, the last player installed will become the default MPEG player and each follow an identical behavior pattern in this regard." Microsoft's Gates later sent Glaser an e-mail suggesting that he visit the Smithsonian and National Gallery while in Washington so the trip wouldn't be a total waste.

In related news, the Justice Department is examining whether Microsoft tried to talk Apple into staying out of the consumer multimedia software market. The charge is similar to one made by Netscape saying Microsoft tried to make a deal with them that would divide up the browser market. Information obtained from Apple reportedly indicates Microsoft executives proposed three times, as recently as March this year, that Apple scrap plans for the Windows multimedia market in order to leave it open for Microsoft. The company would then endorse Apple software tools in exchange for the concession. (Apple obviously rejected the offer.)
Justice investigators are now checking into whether on-screen error messages or other technical incompatibilities in Windows or IE were designed to impede Apple and if Microsoft pressured PC makers to drop the Apple multimedia software. Neither Microsoft or Apple would comment on the allegations.

JUNE 29, 1998: In a strongly worded white paper released last Friday, the Software Publisher's Association urged the U.S. Department of Justice to expand its antitrust investigation of Microsoft into the company's server market maneuvers. "Microsoft has targeted the network market and is aggressively extending its reach into the network," said David Phelps, an SPA spokesman. "What we are concerned about is Microsoft's use and leverage of its desktop monopoly over onto the server side."
Before the letter was even released, Microsoft COO Robert Herbold (who failed to get a seat on the SPA board earlier this year) sent a letter to association President Ken Wasch protesting the document. "Windows NT has enjoyed great success because it offers the price and performance our customers demand," Herbold wrote. "Our competitors' business model has been and remains one of low volumes and high prices, and it is only natural they would do everything possible to unfairly discredit our efforts on behalf of customers." Herbold also attacked the SPA's repeated criticism of Microsoft, which he said was fueled by competitors like Sun Microsystems, which joined the SPA in February.

JUNE 22, 1998: Holding Microsoft's feet to the fire, consumer advocate Ralph Nader sent a letter to Joel Klein of the US Justice Department asking for an investigation into "barriers to entry faced by alternative operating systems" due to Microsoft. "Today it is impossible to buy a nationally branded personal computer without buying Microsoft Windows, and consumers cannot even return Windows for refunds," Nader said in the letter. "No nationally branded computer vendor sells PCs without non-Microsoft operating systems pre-installed, even as a dual boot option." Nader then pointed to alternative OSes such as FreeBSD, BeOS or freeware Linux, calling Windows the "Microsoft tax."
To back up his claims, Nader cited a study from his Consumer Project on Technology. The study, performed by UCLA student David Chun, polled 12 top computer assemblers about buying computer systems with a non-Microsoft operating system. The DOJ has not publically commented on the letter or CPT's study.

At a hearing in Washington last week, Judge Thomas Penfield Jackson set September 8 as the beginning of Microsoft's antitrust trial. Jackson also ordered them not to "plow old ground" and limited both sides to 12 witnesses each.

In related news, the US Department of Justice is expanding its antitrust probe to include Windows CE. Microsoft is giving away coupons for free copies of Windows 98 to everyone who buys a Wince computer between now and June 30. Courts usually allow companies to give away one product with another in the first few months of production, but Microsoft is a special case because of its monopoly status.

MAY 25, 1998: Microsoft held a rally in New York on May 6th in an attempt to stop the government from delaying the release of Windows 98. At the rally, known as "Windows 98 Innovation Day," The Behemoth trotted out the usual "support until death" partners in a pathetic try to sway public opinion in their favor. Among the highlights from the event, Compaq CEO Eckhard Pfeiffer claimed that "Delaying Windows 98 would clearly have a negative impact on the country as a whole" because of all the companies (like his own) that have spent millions promoting the product. To reinforce that message, CompUSA president Jim Halpin told everyone present how the computer industry is in a slump that only Windows 98 can bring it out of.
Following that, Bill Gates himself came out to explain how a two or three month delay in Windows 98 would make an opening for "foreign companies" and damage the US software industry. This, as usual, raises more questions: Will a three month delay by the government do more damage than Microsoft's own year-long delays? (Remember, Win98 was originally planed for early 1997) And if so, which foreign software companies are going to jump in with their own versions of Windows and hurt the industry? One of those billion-dollar Polish software companies? Pure BS, as usual.

On May 7 Microsoft asked an appellate court to stay a December ruling while the court decides if the ruling applies to Windows 95 or Windows 98. The ruling, handed down on December 11 by Judge Thomas Penfield Jackson, prevents Microsoft from licensing Windows in conjunction with Internet Explorer. The Department of Justice immediately filed a 24-page response opposing the stay because Microsoft waited 6 months after the initial decision to ask for it. In their response rhe DOJ said that they offered to join Microsoft in asking for a clarification in March, but the company decided to wait until the later date in order to create yet another delay, thus getting Windows 98 shipped before any new rulings could be made. Despite the DOJ's protests, the appeals court ruled on the 12th that the original injunction only affected Windows 95, not Windows 98.

Following the collapse of negotiations, attorney's general from 20 US states plus the District of Columbia joined the Department of Justice in filing antitrust suits against Microsoft. The two lawsuits contain almost identical allegations and seek similar remedies. They both use e-mail and memos from Microsoft CEO Bill Gates and other company executives as evidence, and both cases request that Microsoft be blocked from making computer OEMs bundle software such as Internet Explorer with Windows. The complaints also seek to end agreements that require manufacturers and online services to avoid competing products. The states' case also takes aim at Microsoft Office, saying that the company makes it "economically impractical" for computer vendors to license other office software.
In a press conference after the filings, Gates responded that the suit is without merit. "There isn't an industry in America today that is more competitive [and] more alive, and the amazing thing is that has all happened without any government intervention," he said. This message is quite different from the one expressed earlier in the month [see story above] at the "Windows 98 Innovation Day" rally, where BillG and CompUSA president Jim Halpin said that the US computer industry is in a slup only Windows 98 can bring it out of.
Microsoft asked the court for a seven month delay in any actions while the DOJ requested a June 18 court date. District judge Thomas Penfield Jackson, who is handling other Microsoft cases, made a compromise ruling that will have Microsoft and The Justice Department back in court next September 8th and combines both cases into one filing. The court battle, which is expected to take years, may also target Microsoft products such as Office, NT and servers that are bundled with NT. NewsSource will keep you updated on this case for however long it lasts.

In celebration of the lawsuits against Microsoft, Oracle CEO Larry Ellison treated all 29,431 of his employees to a screening of the new Godzilla movie, which, coincidentally, was partially made with Microsoft SoftImage.

MAY 04, 1998: After Vanstar president Jay Amato sent messages encouraging them to do so, a group of IT executives sent a letter to the Department of Justice claiming that any government delays in the shipment of Windows 98 will damage the computer industry and the US economy. The letter, which was addressed to Assistant US Attorney General Joel Klein and Attorneys General from 13 states considering action against Microsoft, was signed by the usual suspects; Intel's Andy Grove, Michael Dell, Compaq CEO Eckhard Pfeiffer and 23 other Microsoft asskissers.
Microsoft spokesman Mark Murray said that The Behemoth had an "active role" in writing the letter, similar to the one the Washington Post reported they had in pushing smaller companies to sign the letter. One government source said Microsoft is going out to crucial witnesses and badgering them into supporting the document.
The letter may backfire on Microsoft because it shows just how much control over the industry they actually have. Not only were they able to compell 26 of the world's most powerful business people to sign the letter, the letter itself says that most software companies are dependant upon "the on-time launch of Windows 98." So Microsoft isn't a monopoly, has no control over its competitors and at the same time can't have a new product delayed because the global economy and computer industry will collapse without it. Microsoft is, to use an old cliche, having its cake and eating it too. And will a government delay of a few months do more damage than the 18 month delay Microsoft already brought upon itself?
Attorneys General from the 13 targest states confirmed they have received the letters, but as Connecticut AG Richard Blumenthal said, "The lobbying and PR effort seems to be pretty obvious and orchestrated, so I'm not sure how much impact it will have."

According to The Wall Street Journal, the Justice Department's ongoing investigation of Microsoft is heading in a slightly new direction, perhaps focusing in on a 1995 meeting between The Behemoth and Netscape. In May of that year (before the company went public), Netscape executives say "high level" Microsoft executives met with them and tried to buy part of the company. "It was like a visit by Don Corleone," Netscape co-founder Marc Andreessen told The WSJ. "I expected to find a bloody computer monitor in my bed the next day." Andreessen went on to say Microsoft used its operating system dominance to threaten them: "You either let us invest in your company or we won't give you access [to Windows]."
Microsoft says that the report is being exaggerated by Netscape to further their political agenda, and that the investment was proposed by Netscape, not Microsoft, at a meeting about licensing Navigator to The Behemoth. Since Microsoft was supposedly uninterested in purchasing part of the company (a first for them) Netscape refused to license Navigator, forcing the company to create its own web browser. The Justice Department had no comment when asked about either report.

APRIL 27, 1998: Federal judges grilled both the government and Microsoft lawyers last Tuesday at The Behemoth's appeal of a court ruling from last December. The preliminary ruling, issued by U.S. District Court Judge Thomas Penfield Jackson, ordered Microsoft to "cease and desist" from requiring OEMs to bundle IE4 with Windows 95. The ruling also appointed a special master to do research on the DOJ's original contempt charges. Ms lawyers argued that the government had failed to prove irreparable damage and that the case should have been dismissed. A final decision from the three judge panel is expected by mid-May.

APRIL 13, 1998: As initially reported last Friday in a Los Angeles Times story, Microsoft has been secretly planning a massive media campaign creating the appearance of massive public support for the company. The extensive plan, which specifically targets states contemplating legal action against the company, calls for some of Microsoft's corporate customers to write "spontaneous" testimonials, opinion pieces and letters to the editor in an attempt to influence consumers and lawmakers. The proposed campaign would even have had freelance writers hired to compose the pieces. This "astroturf support" plan is part of a multi-million-dollar advertisement campaign prepared by the PR firm Edelman Public Relations.
When asked about this campaign by the Times Thursday afternoon, Ms spokesman Greg Shaw said that he was unaware of the plan, even though his name was mentioned throughout confidential documents obtained by the newspaper. Later in the day Mr. Shaw changed his remarks and said that he was aware of the proposal (he attended a meeting about it in Chicago the previous Monday), but that it's "not something we are moving on." Sources close to Microsoft said that the plan had, however, been presented to PR firms as "a done deal." If anything will show you what lengths Ms goes to to keep their control, this should.

Microsoft lawyers and executives met with officials from the Department of Justice last Friday as the DOJ pondered whether or not to bring more antitrust charges against the company. Neither Ms nor DOJ officials would discuss the 3 1/2 hour meeting beyond admitting that it had occurred. Possible topics were likely to have been Microsoft's changes in content provider contracts (see 'Briefly' story below), pending legal action against the company by 11 US states or the ongoing antitrust case initially filed by the DOJ last fall. A Microsoft spokesman later said that the meeting "was a helpful exchange for both sides," but wouldn't give any other information. In the past, Microsoft has reached agreements with authorities when it faced a serious court challenge, such as the settlement of a contempt citation in January.

APRIL 06, 1998: As reported Monday in the Wall Street Journal, investigators at the US Justice Department believe they have enough evidence to bring another case against Microsoft by the end of this month. According to WSJ sources close to the probe, The new case would allege "illegal maintenance and extension" of Microsoft's control of personal-computer operating software, which violates the Sherman Antitrust Act (what the DOJ should've gone after in the first place). It would also bring back charges that Microsoft broke the 1995 antitrust settlement by bundling Internet Explorer with Windows, only this time it would deal with Explorer in upcoming Windows 98, not Windows 95.
This time, having done more thurogh research, government investigators reportedly have obtained copies of memos and other documents from Microsoft executives describing a systematic plan to "break most of Netscape's licensing deals" and "make it clear [to corporate customers] that it does not make any sense to buy Netscape Navigator." Investigators have also sent more subpoenas to Compaq, HP and other companies close to The Behemoth. We will most certainly keep you updated on these events.

MARCH 30, 1998: In a letter sent Friday, US Senate Judiciary Committee Chairman Orrin Hatch asked Microsoft, Netscape and Sun to make it easier for the committee to investigate antitrust charges against Microsoft. The investigation has been held up by "non-disclosure agreements" between the companies and their customers, which require the customers to notify the companies before releasing any confidential business information, even to government investigators. Senator Hatch (R Utah) asked the companies to send letters to their customers and business partners (similar to ones sent out for the Justice Department) allowing them to talk freely with senate investigators.
Netscape responded immediately, saying that the company would "absolutely" comply with the congressional request. Microsoft spokesmen Jim Cullinan stated that his company would release any information investigators need, but couldn't say for sure if Ms would agree to the request in writing as the senators asked because of "the need to protect our trade secrets and confidential information." Representatives for Sun have yet to publically comment on the requests.

MARCH 30, 1998: Last Tuesday, Bill Gates appeared before the Senate Judiciary Committee to testify about Microsoft business practices. Led by committee chairman Sen. Orrin Hatch (R-Utah), senators questioned Gates for over an hour about whether Ms restricts IE channel content providers from advertising or promoting competing web browsers. Gates, clearly being overly defensive, was evasive and never actually answered the question, but did say "every internet content provider that has a business relationship with Microsoft is free to develop features that use competitors' technology." Then he also testified that "there are many content providers who are on the Microsoft channel bar that promote Netscape." But after repeated questioning, Gates admitted that channel bar content providers actually can't promote Netscape on the pages linked from the channel bar. "They are free to promote their content in other places, but not off the page we link to," he conceded. Gates also said a small number of "platinum" content providers were prevented from paying Netscape to be carried on Netscape content channels.
The Senators appeared frustrated that Gates refused to even admit that his company has a Monopoly on operating systems, avoiding questions by saying the computer industry changes too quickly for Microsoft to stay on top permanently. "This industry is built on ideas," BillG said. "No company owns the factory for ideas." Senator Hatch cited several published quotes from Gates and other Microsoft executives that apparently showed plans to drive Netscape out of business by giving away IE. "That sounds like predatory pricing to me," he later stated. Gates claimed Hatch misquoted him and said his customers use whatever software they think is best. "Customers have never had such a choice of great software... Anybody can choose whatever software they want." Gates also avoided answering questions by saying he didnt understand the legal terms or wasn't "an expert in that area" despite spending two years in law school at Harvard and having two lawyer parents.
CEOs of Microsoft adversaries Sun and Netscape also testified at the hearing. "I don't think Mr. Gates can make a case that his company is not a monopoly, and I don't think that Mr. Gates can make a case that he hasn't used that monopoly to enhance and extend his position," said Netscape CEO James Barksdale. "[Windows] is the axel at which all of the spokes of the information age touch," said Sun CEO Scott McNealy. "The only thing I'd rather own is the English language, or Chinese, or Spanish. Then I could start charging upgrade fees when I added letters like N and T."
After the hearing, Hatch stated he wasn't completely satisfied with Gates' testimony, saying "I would have liked it to have been stronger and more forthright." Hatch later called Tuesday's hearing a "fact-finding" session, and promised to hold further hearings.

In February, a US federal appeals court sided with a Microsoft motion to strike down Judge Thomas Penfield Jackson's appointment last year of a "special master" to the Microsoft contempt case. In a one-page ruling, the U.S. Court of Appeals in the DC Circuit granted the motion, suspending the work of "special master" Lawrence Lessig but explicitly saying the order should not impede discovery in the case. The court gave no reason for its decision.

In early February, 11 US states subpoenaed Microsoft. The states, Connecticut, California, Florida, Illinois, Massachusetts, Minnesota, New York, Oregon, South Carolina, Texas and Wisconsin, each sent The Behemoth identical subpoenas concerning Windows 98. Last week the department of justice and 16 other states joined with the original eleven state attorneys general to conduct a full-force investigation of several different Microsoft business practices.

DECEMBER 01, 1997: The Microsoft vs DoJ battle went on as usual last week. The government investigators produced evidence - in the form of interoffice e-mails - that Microsoft had no intention to integrate a web browser with Windows when the 1994 antitrust agreement was signed. "We view Microsoft as saying they can bundle anything they want, that they 'can sell Windows 95 and a ham sandwich' and it would be an integrated product," Justice Department officials said at a news briefing. Microsoft continued to deny all charges of wrongdoing and spewed their usual 'the government doesn't know anything about technology' and 'the government knew we were going to integrate a browser' lines. There will be a district court hearing on this case Friday, so expect a lot more news next week.

In related events, Thursday before last an employee of Microsoft PR firm Edelman Public Relations was caught sneaking into a Department of Justice press-only briefing on the investigation. DoJ officials escorted the man out without incident after it was revealed that he didn't have a press pass. "I think he knew that he was someplace he wasn't supposed to be," DoJ spokesman Michael Gordon later commented. We were unable to confirm if this was the same PR company that staged a protest outside the Appraising Microsoft conference almost 3 weeks ago.

The Computer and Communications Industry Association (CCIA) has charged Microsoft with extortion in its attempts to control the internet. Edward Black, head of the CCIA, said Microsoft was telling computer makers they must use its Web brower "or else." The association also filed a brief supporting the DoJ's investigation of the behemoth's business practices. The brief said Microsoft was using its monopoly position "to gain an unfair competitive advantage against other providers of Internet browsers." Association officials said they hope their brief will help convince Judge Thomas Penfield Jackson to rule in favor of the government this Friday. Ms executives defended the company by claiming the CCIA is just an extension of long-time Microsoft opponents Sun Microsystems and AT&T, forgetting about the hundreds of other organization members.
Retired US Senator Bob Dole also gave the government investigation his backing last week in an LA Times opinion column. In the column Senator Dole stated that his instincts usually lean away from government intervention, but in this case he makes an exception. "When a dominant company artificially dictates how, where, and even if consumers have choice in the online marketplace, it is time for the government to step in and enforce the antitrust laws," the former Republican presidential candidate wrote. Dole predicted that the internet will take a dominant role in the future of commerce and investing, and as such no company should have a monopoly to its access.

NOVEMBER 17, 1997: To defend itself against charges that it broke a 1994 antitrust agreement with the US Justice Department, Microsoft is having to prove that the government knew it intended to incorporate a web browser with Windows back when the agreement was signed. To do that, Ms must convince investigators that it was planning an internet strategy as far back as spring 1994. That contradicts the story about how Ms and BillG ignored the internet until 1995 and then turned the whole company around in a month. Behemoth executives are hinting that their apparent ignorance about the internet until mid-1995 was just a show to make competitors (mainly Netscape) think the company had gone soft.
Another line of defense against the government is to take advantage of the agreement's loose definition of an operating system. It defines an operating system as "software used to control data on or hardware connected to a computer." Microsoft is now insisting that also includes data on "hard disk drives, floppy disk drives, tape backup drives or CD-ROM drives -- or remote -- such as servers on local and wide area networks." The only way to access some of that data, like web pages on a server in Zimbabwe, is through a web browser like IE4, thus making it a legal part of the OS. However, it'll likely take all 15,000 of their lawyers to make a judge see it that way.
Spyglass co-founder Tim Krauskopf, who is apparently satisifed with the money Microsoft gave his company for developing IE, echoed the monopoly's claim that including a web browser with the OS is a natural step in computer evolution. He claimed Spyglass decided never to sell its Mosaic browser because the company determined that it was an embedded technology and not a stand-alone product (a few years ago he said it was because they didn't think anybody would pay for it).

NOVEMBER 10, 1997: Microsoft has happily admitted forcing computer OEMs to install Internet Exploder on their PCs by threatening to remove their vital Windows licenses. They claim that the web browser is a integral part of the operating system, and as such they have the right to require anyone installing the OS to also install the browser. Coincidentally, this vital feature sells separately as 'Internet Explorer Plus!' for $49.95 at retail and software stores around the country.
Microsoftie Steve Ballmer said "It is not, it is not, it is not illegal, nor is it bad for customers, if we package more technology at better prices each year. If the consumer is getting more from us each year, then the law is doing its job." He added that manufacturers were "completely free" to load competing software onto new machines, and he pointed out how Navigator was preloaded onto computers from major OEMs like Compaq, Toshiba and IBM.
Meanwhile, DOJ papers showed that computer makers Micron and Gateway 2000 repeatedly requested permission to install IE on their systems differently than their contracts stipulated. Microsoft denied the queries from both companies. Upon questioning, Ms denied that the companies had asked for the special priviliges and went back to their broken record of "it's an integral feature of Windows, so we can require them to install it however and whenever we want."

U.S. congressman Jack Metcalf, a Republican from Microsoft's home state of Washington, is investigating the DoJ probe against Ms. Represenative Metcalf is accusing Janet Reno of attacking Microsoft to divert attention from the President's own mounting legal problems. Certain anonymous congresspersons have, in turn, accused the Senator of being addicted to Microsoft's generous campaign donations.
The majority of US lawmakers don't feel such compassion against poor little Microsoft. In June U.S. Senators Conrad Burns (R-Montana), Ted Stevens (R-Alaska) and Craig Thomas (R-Wyoming), sent a letter to the Federal Trade Commission requesting that it step into the investigation, which it refused to do. The final decision on this issue will likely depend on how much money Microsoft and BillG give for the '98 congressional elections.

Another Senator, Orrin Hatch (R-Utah), is investigating Microsoft's marketing of IEIEO4 in the U.S. Senate Judiciary Committee, which he chairs. "Beyond Microsoft's apparent violation of the 1995 consent decree, I am concerned that Microsoft appears to be abusing its Windows monopoly to coerce companies not to distribute or promote competitive Internet products," Hatch said.
His committee has had difficulties in their investigation because of a 'Non-Disclosure Agreement' (NDA) Microsoft forced all its OEMs to sign. That agreement prevents the computer manufacturers from telling government investigators or rival software companies anything about their agreements with the behemoth. Hatch is moving to have the NDAs declared invalid in court so his investigation can proceed. Texas Attorney General Mike Morales, who has also been investigating the behomoth for several months, is also seeking to have the NDAs invalidated in a local court.
The Senate committee also is expected to probe the company's business practices and its habit of using exclusive licensing agreements with Internet content providers. As evidence of that, Hatch produced what he said was an exclusive licensing pact between Microsoft and EarthLink Network Inc. saying the company must not tell customers an alternative Internet browser is available. The contract also allows Earthlink to provide another web browser only when a customer specifically asks for one.