By William Fellows No knockout blows were delivered by government or Microsoft Corp attorneys during closing arguments of the antitrust trial in Washington DC yesterday. Declaring simply the case is submitted, Judge Thomas Penfield Jackson strode out of the ceremonial courtroom past the statue of Moses, which overlooks the bench, at 5.15pm to begin his […]
By William Fellows
No knockout blows were delivered by government or Microsoft Corp attorneys during closing arguments of the antitrust trial in Washington DC yesterday. Declaring simply the case is submitted, Judge Thomas Penfield Jackson strode out of the ceremonial courtroom past the statue of Moses, which overlooks the bench, at 5.15pm to begin his deliberation on the 11-month- old trial. The case was brought against Microsoft Corp by the US Department of Justice and 19 states alleging actions that Microsoft employed to maintain its market share with Windows are illegal and that the company used the power of its monopoly share to try to dominate the internet browser market, and in the process restrained trade and harmed consumers.
George Washington University antitrust expert Professor William Kovacic told ComputerWire that he didn’t believe either side had materially improved on their arguments during the day. Many observers noted that the judge did not use the opportunity to question each side more closely on the merit of its case as often happens during the closing arguments of such trials.
Like a boxer wearing down his opponent by making him shoot the punches, lead attorney David Boies closed the government’s case by drawing from material contained exclusively in Microsoft’s own internal documents, a clever move to circumvent many of the Redmond-based company’s arguments.
Throughout, Microsoft has appeared to be fighting a rearguard action, knocked down on more than one occasion when witnesses were shown to have contradicted themselves and then again when evidence was embarrassingly shown to have been a reconstruction of purportedly live events. But lead attorney John Warden fought a smart final round. Final, that is, unless the case goes to appeal. In a flurry of counter arguments he sought to cast ambiguity over all of the government’s charges, in the full knowledge that in law, ambiguity gives the defendant the benefit of the doubt.
The government is trying to prove that Microsoft has a monopoly of the US market, that it attempted to monopolize the browser market, and that it practiced an unreasonable restraint of trade under sections one and two of the Sherman antitrust act. Lead attorney David Boies said: This case is about the real world. It’s not about legal and economic arguments. It’s about common sense and facts. Boies revisited internal Microsoft emails and other documents in a bid to show that Microsoft controls between 90% and 95% of the PC operating systems market. They also imply that the only real competition comes from pirated copies of Windows itself. Microsoft customers including Hewlett-Packard, Packard-Bell and Compaq Computer recognize in the evidence that they have no viable alternative to Windows and Microsoft’s own executives stated Windows is the only game in town. Boies claimed that Professor Fisher’s evidence for the plaintiffs showed clearly that Netscape and Java are not operating systems and therefore not competition to Windows.
The government said that powerful proof of monopoly power is also evident in Microsoft’s ability not to care about anyone else’s pricing. In fact it raised Windows 95 prices when Windows 98 was released: That’s not usual, said Boies. Boies came back time and again to the fateful meeting Microsoft held with Netscape executives on June 21, 1995 during which it unsuccessfully tried to carve up the browser market by offering Netscape equity, other deals and freedom to operate in the 16-bit and Macintosh markets. In return it wanted Netscape to concede to it the 32-bit Windows browser. Netscape rejected the deal. Microsoft attorney John Warden argued some of the Netscape notes pertaining to this meeting were created to buoy the government’s complaint.
In an attempt to quash Netscape and the ability of other companies to create cross-platform applications, including Java, which do not depend on Windows, Boies argued that Microsoft artificially and illegally tied its Internet Explorer browser to Windows, thereby restricting consumer choice and making it more difficult for newcomers to enter the market. It even held back the Memphis follow-on to Windows 95 until 1998 so IE could be integrated into it. I agree with the syncing plan, said Microsoft SVP Jim Allchin, it’s the only thing that makes sense even if OEMs suffer. Boies said nowhere does Microsoft say it will make a profit on the browser because it didn’t make it to do it. It’s a non-revenue product, marketed at a loss to stymie incipient competition.
The government used Jim Barksdale’s testimony to argue that technology is two years behind where it should be because of Microsoft’s actions. The most pernicious conduct, said Boies is that companies won’t invest in products Microsoft may see as threatening. Boies recalled the testimony of OEM witnesses including Symantec Corp, which said it was pressurized to make Microsoft Java and IE its defaults. Microsoft is very vigilant in protecting its monopoly power and has no limits when trying to eliminate the competition.
The market may have moved on since the case was brought, but Boies argued that current and future events cannot change past actions and despite America Online’s acquisition of Netscape. And that in spite of the latter’s partnership with Sun Microsystems Inc, still none of them competes with Microsoft in the PC operating system market. There are no other situations in which a company has done what Microsoft has done. Taken power over operating systems to squelch potential competition, prevent competition from emerging and stopped system-neutral programs. That is what antitrust laws prohibit. They have monopoly power because only with monopoly power could they do it or have a reason to do it.
The government concluded that Microsoft is like the emperor with no clothes. Everyone knows it is a monopoly. We know this. Microsoft knows this, it said. For Microsoft, John Warden said the government had relied on testimony of paid experts and witnesses who are Microsoft competitors. He said the government claims to be acting in the interests of consumers to remove Internet Explorer from Windows 98, but noted the only ISV the government called as a witness, Intuit CEO William Harris, said he’d choose Internet Explorer over Netscape because it works better with Quicken.
Our witnesses were different, Warden said. ISVs, OEMs and Microsoft executives. There were moments during the trial when government had the rapt attention of the gallery, but, he continued, it is telling how few of those arguments made it into the government’s final findings [submitted a couple of weeks ago]. None. Why? Because it’s time to confront the real world and the government had failed to present evidence to support its claims or those tossed in. Warden portrayed the government’s case a full of red herrings and mis-statements.
Wily Jim Barskdale (Netscape CEO) told this court Netscape was out of the OEM channel and laid the blame at Microsoft’s door. But within weeks of his testimony, Warden said, his colleagues told America Online that Netscape had 22% of the OEM channel with minimal promotion. Microsoft also claimed that Sun, IBM, Oracle and Netscape joined forces as the gang of four to attack Windows with Java. This is clearly competition, argued Warden, and yet the government wants Microsoft to play by different rules from everyone else.
The most important point of the case however, Warden said, is to realize that Windows and Internet Explorer is a single integrated product. When government expert witness Professor Edward Felten devised a program supposedly removing Internet Explorer functionality from Windows, many parts of Windows clearly could operate properly without it, Microsoft argued. Warden said that an earlier Court of Appeals ruling clearly indicated that integration happens at design. Moreover, asking consumers to assemble Windows piece by piece would not be a hit he said. It was a technical and commercial inevitability that Windows would include web functionality and it would be free, he argued.
To support Microsoft’s claims that the decision to integrate Internet Explorer into Windows was taken before Netscape even shipped a beta product, Warden replayed the video testimony of Netscape founder Jim Clark who said that Microsoft CEO Bill Gates had told him he’d give away Internet Explorer in the operating system. Clark said he’d do the same. That was before Netscape shipped a product. Moreover Netscape’s S1 IPO filing said it believed that Apple, IBM, even Unix would eventually include a browser in their operating systems.
Warden went on to accuse the government of gerrymandering on market definition arguing that it did not show there is any scarcity of assets needed to make an operating system; that there is no constraint on license agreements; there are no barriers to entry and that Microsoft does not price its products like a monopolist. He claimed that Java still has the potential to supplant Windows and that America Online clearly wants to be the de facto consumer environment. Why else were there 20,000 developers at JavaOne as Sun claims? Why are there a slew of new applications developed for iMac? Why are web applications and non-PC devices proliferating? And why is Linux becoming popular if Microsoft is violating the Sherman Act? Warden asked. Clearly in this context Microsoft is not going to encourage Java. Why would it? Warden said. The government is taking up the cudgels for Sun and taking up its business policies as public policies.
Microsoft said there was no evidence to suggest Netscape was prevented from getting its software into the hands of consumers pointing to Netscape documents relating to its purchase by America Online claiming that it distributes 160 million clients a year. It concluded that the charge that Microsoft actions have hurt consumers is an inversion. It turns the world on its head. Especially, Warden wryly noted, that the government did not call one consumer as a witness in its case.
Judge Jackson is expected to make a partial ruling on the findings of the case next month when he rules on what he considers to be the facts of the case based upon government and Microsoft filings a couple of weeks ago. Each side then gets to say how it thinks these facts should be interpreted in law. Some court officials were skeptical that this is likely in such a timeframe.
Meantime, the outcome of the case itself will be a classic decision on points, no one party having delivered a knockout blow or thrown in the towel. Much will depend on what weight the judge gives to the state of the market now, compared to when the case was brought and what penalties could realistically be levied. Subsequent appeals could of course drag the case out for years. We wonder on what outcome Moses would put his money.