You have to read this paper! Microsoft - A History of Anticompetitive Behavior and
Consumer Harm [PDF], and it's from the European Committee for Interoperable Systems, or ECIS.
ECIS has written it in support of the EU Commission's recent preliminary findings, on January 15, 2009, that Microsoft violated antitrust law by tying IE to Windows. It is, to the best of my knowledge, the first time that the issue of Microsoft's patent threats against Linux have been framed in a context of anticompetitive conduct. It presents a history, albeit not totally comprehensive, of some of the notable anticompetitive conduct from the past, like against DR-DOS and Netscape and WordPerfect, but it also presents current issues, including the saga of how ISO/IEC DIS 29500, formerly known as OOXML, got approved as a standard:
The EC is also investigating Microsoft's actions to manipulate the vote
of the International Organization for Standardization / International Electrotechnical
Commission on the recent standardization of Office "Open" XML ("OOXML"). As reported
widely in the press and on the Internet, Microsoft's manipulation of the standards setting process
in favor of OOXML included financial inducements, threats, misleading information, and
committee-stuffing. These investigations are compelling examples of Microsoft's continued
misconduct related to its monopolies in operating systems and other products. We've been overrun recently on Groklaw with trolls, including some rather prominent ones, insisting that there was nothing wrong with that process or that it did the best it could. Some repeatedly opined that the EU Commission has no authority to even investigate in this area. So this is for you. You know who you are.
The paper mentions the netbook market in the section on the patent threats. Not only are the patents Microsoft claims are infringed not identified, they are of questionable value after recent court decisions, and no one can make sense of the current patent climate in the US to even know if they are or are not violating someone's patents, and that is just as true of proprietary as with Open Source software, the paper notes, ending that section like this: Microsoft has
sought to exploit the current absence of clarity in patent law in order to deter consumers from
taking up offerings competing with Microsoft's own products. I'd be very happy to see raised also the issue of what is happening to Linux in the netbook market. Seriously, try to buy a netbook with Linux preinstalled, even ones that used to be available, from any store you find and see what happens. Then try to buy one with XP on it. Note a difference? Why might that be? Read this paper, I suggest, and you may get some ideas.
To any who might be tempted to imagine there is a "new" Microsoft, I would like you to read this sentence from the section on WordPerfect:
Microsoft also used its monopoly power to control
industry standards, thus requiring WordPerfect to implement proprietary technology or risk
incompatibility with Windows. Later in the document, it talks about a similar strategy with IE:Once Microsoft had achieved wide distribution for its own browser through these tactics,
it then moved to "extend" (in effect, customize) industry standards for HyperText Markup
Language ("HTML") and Cascading StyleSheets ("CSS") to ensure that users would become
reliant on Microsoft's own web browser. Microsoft also introduced its ActiveX technology
extensions, which allowed software written much like traditional computer programs to run in
the Internet Explorer browser, but that only worked on Microsoft's monopoly operating
system.
Now, think about OOXML. A "customized standard" would be one that allows proprietary extensions, don't you think? OOXML is a standard that does allow for proprietary extensions. Why? Obviously because someone intends to use them to customize OOXML. After that, will ODF-preferring folks be able to interoperate? For that matter, can they now?
Then when it came to servers, we find similar conduct: In the mid to late 1990s, computer networks were growing in speed and Microsoft sensed
a threat to its core operating system monopoly from more centralized, server-based computing.
Determined to head off any potential competition, Microsoft decided that it needed to add server
operating systems to the "moat" surrounding its Windows operating system monopoly. To
gain inroads into this market, Microsoft embraced industry standards for file-and-print sharing,
user management, and identity verification so that its products would be compatible with the
then-prominent Unix server operating systems. But as Microsoft's server systems started to
gain a foothold in the market, Microsoft quietly started to "extend" support for industry standard
protocols in its Windows operating system so that Windows clients would have a better
experience when connected to Microsoft's servers. Eventually, by changing its Windows
personal computer operating system so that Windows computers could not fully connect to any
server that did not use Microsoft's proprietary extensions unless the users installed special
software on their machines, Microsoft established and reinforced its dominance in the work
group server operating system market, where Microsoft maintains a share of approximately
77%.
Of course, that is the conduct that drew the attention of the EU Commission and resulted in a determination of a violation of antitrust law against Microsoft. And bringing us up-to-date, here's a sentence for you, from the section about IE 8 and false promises of interoperability:Even when Microsoft claims to be implementing a standard, the reality is that Microsoft's
implementations routinely either only partially conform or else somehow extend the standard, so
that software developed to work with Microsoft's version of the standard will not work with
other vendors' implementations of the same standard. As just one example, Microsoft recently
announced that Internet Explorer 8 would support a feature called "local storage," which allows
websites to store a limited amount of data on users' computers so that users can interact with
those sites offline, a feature that could help web applications become effective replacements for
traditional desktop applications....
Unfortunately, Microsoft's implementation is
subtly incompatible with the standard, which could lead web developers who test their sites in
Internet Explorer 8 to write their sites in a way that will not work in other browsers. There is nothing new under the sun when it comes to Microsoft. There is no new Microsoft. They don't intend to interoperate unless someone forces them to. And that has implications for OOXML and ODF.
When I look at the current efforts by the same folks at SC34 who gave us OOXML to take over maintenance of ODF, I believe I see the same early steps in the usual Microsoft power play going on. Consider the current suggestion by the SC34 folks maintaining OOXML that they 'fix' a mistake made at the BRM so as to bring the standard into conformity with what Microsoft's software actually does. What does that tell you about the standard as "approved" at the BRM? What does it tell you about what that standard is for? What might the plan be?
Microsoft takes the long view. How about you? And how soon should the market notice such things and do something before it is too late, would you say? If you are a government or an agency, how are you going to avoid lock-in with the Microsoft standard? What evidence of change are you relying on? No. Seriously.
ECIS has just been granted standing as "an interested third party" in the EU Commission's current antitrust investigation of Microsoft, which resulted in preliminary findings that Microsoft is violating EU antitrust law by tying IE to Windows. This paper is in support of those findings. The opening words and the conclusion explain the purpose of this filing and the hopes behind it: On January 15, 2009, the European Commission issued a new Statement of Objections to
Microsoft, outlining the Commission's "preliminary view that Microsoft's tying of its web
browser Internet Explorer to its dominant operating system Windows infringes the EC Treaty
rules on abuse of a dominant position (Article 82)" and "distorts competition on the merits
between competing web browsers." The European Commission's recent Statement of
Objections validates the ongoing and urgent need to address Microsoft's practices that affect the
openness of the Internet, consumer choice, and competition in general. This paper provides a
brief history of Microsoft's misconduct and demonstrates that, in light of Microsoft's long and
continuing use of anticompetitive tactics, the Commission's concerns are well justified....
Microsoft's conduct over the last two decades has demonstrated Microsoft's willingness
and ability to engage in unlawful conduct to protect and extend its core monopolies. This
conduct has caused real harm to consumers, who continue to pay high prices and use lower
quality products than would have prevailed in a competitive market. By understanding
Microsoft's history of anticompetitive conduct, developers, consumer groups, and government
authorities will be better equipped to recognize current and future Microsoft misconduct at an
early stage and intervene to prevent Microsoft from using tactics other than competition on the
merits. ECIS remains hopeful that the European Commission's latest Statement of Objections
addressing Microsoft's misconduct will finally mark the beginning of the end of Microsoft's two
decades of anticompetitive behavior and consumer harm. How important it is to have an accessible record, so that a paper of this kind can be offered. Groklaw made a filing in the Burst v. Microsoft case available to the public, for example, and it is referenced in footnote 119. How I wish PACER would make it easier for the public to access court filings, but until they do, we will continue to do what we do here. I view it as a public service. Another footnote is the transcript of Bill Gates' videotaped 1998 deposition in the US antitrust case. I thought I'd mention that you don't need to rely only on a written transcript. You can get the full effect by watching the video, or listening to the audio, and after enormous effort, Groklaw was able to find it and it's here. Perhaps someone can explain someday how it could be that this video, and others, disappeared from the internet when they were part of a court case. [Update: There are transcripts and video of portions of the deposition used at trial here, thanks to the Washington Post. You need RealPlayer.] Groklaw also has a collection of legal filings in the Caldera v. Microsoft case regarding DR-DOS, which are also referenced, so those of you who don't have PACER accounts can read what is available and follow along. Also referenced is Novell v. Microsoft, the antitrust case regarding WordPerfect, and we have that too. The reference to smiling at Novell while pulling the trigger can be found in Novell's complaint, but if you'd like to read it in full, you'll find it on this Groklaw page, a report on the Comes v. Microsoft antitrust trial in Iowa, where portions of this Jim Allchin email were read to the jury: "We need to slaughter Novell before they get stronger....If you're going to kill someone, there isn't much reason to get all worked up about it and angry. You just pull the trigger. Any discussions beforehand are a waste of time. We need to smile at Novell while we pull the trigger." Also, we have a large collection of ODF/OOXML resources. Much more can be found on our Microsoft Litigation page, including the Comes v. Microsoft exhibits and the Minnesota antitrust exhibits from Gordon v. Microsoft, which we are still working on.
One can learn from history. ECIS notes this about the US antitrust case:
Unfortunately, however, as discussed further below and as noted by several prominent
commentators, the U.S. browser case was settled with a consent decree that has been wholly
ineffective in restoring competition to the state that prevailed prior to Microsoft's unlawful
actions. Larry Ellison, according to this Silicon Valley article, learned from the botched US antitrust outcome the following lesson:
Ellison and Sun co-founder and Chairman Scott McNealy were among the valley business leaders who pushed for the Department of Justice to file its antitrust suit against Microsoft in 1998. In the end, Ellison found the 2001 settlement of the case "astonishing." Microsoft, he complained, "lost the trial, but the government paid them a reward for violating the law."
Prominent valley business attorney Gary L. Reback notes Ellison's comments in his new book "Fight the Market!" Two years later, Reback points out, Ellison would draw "inspiration for the Antitrust Division's indolence" and publicly proclaim his plans to "roll up" the market for complex mission-critical business software "into very, very few companies with one dominant player," Oracle.
I gather he learned the lesson that if no one really cared and there are no consequences, he might as well jump in the pool and start swimming. But is that not an additional good reason for the EU Commission's findings to be sustained, if only to prevent others from thinking that there is no consequence to violating antitrust law?
Here it is as text, so the entire world can read it, including those who depend on screen readers and so that it is easily searchable. There are 176 footnotes! This text version, then, was indeed a labor of love. We made the following change: we collected all the footnotes at the end, with links that will take you back and forth easily. Just click on the footnote number. That makes it easier for the blind to read a long and complex document like this one, without footnotes interspersed confusingly in the middle of sentences. Other than that, we hope it's exactly the same, as we strive for accuracy. But as we always say, for anything that matters, please rely on the PDF. Perfection is a mighty high bar.
****************************
Microsoft
A History of Anticompetitive Behavior and
Consumer Harm
March 31, 2009
TABLE OF CONTENTS
I. INTRODUCTION ........................................................................1
II. MICROSOFT'S HISTORY OF ANTICOMPETITIVE CONDUCT .................................3
A. Microsoft's Campaign To Destroy DR-DOS ..........................................................3
B. Microsoft's Anticompetitive Per Processor License Fees .......................................5
C. Microsoft's Retaliation And Price Discrimination Against IBM ............................6
D. Microsoft's Organized Collective Boycott Against Intel ........................................7
E. Microsoft's Elimination Of Word Perfect ...............................................................7
F. Microsoft's Deceptive WISE Software Program.....................................................9
G. Microsoft's Elimination Of Netscape ....................................................................10
H. Microsoft's Attempts To Extinguish Java .............................................................14
I. Microsoft's Elimination Of Rival Media Players ..................................................16
J. Microsoft's Campaign Against Rival Server Operating Systems..........................18
III. MICROSOFT CONTINUES TO ENGAGE IN ANTICOMPETITIVE CONDUCT ......19
A. Microsoft's Failure To Comply With The Final Judgment ...................................20
B. Microsoft's Campaign of Patent FUD against Linux and Open Source
Software.....................................................................................23
C. Microsoft's Ongoing Misconduct Has Sparked Further European Commission
Investigations .........................................23
IV. MICROSOFT'S FALSE PROMISES OF INTEROPERABILITY ..................................24
V. MICROSOFT'S MONOPOLIES HAVE HARMED CONSUMERS ..............................25
A. Microsoft's Operating System Monopoly Has Harmed Consumers .....................25
B. Microsoft's Office Monopoly Has Harmed Consumers........................................26
C. Microsoft's Web Browser Monopoly Has Harmed Consumers ............................28
VI. CONCLUSION...............................................................31
2
I. INTRODUCTION
On January 15, 2009, the European Commission issued a new Statement of Objections to
Microsoft, outlining the Commission's "preliminary view that Microsoft's tying of its web
browser Internet Explorer to its dominant operating system Windows infringes the EC Treaty
rules on abuse of a dominant position (Article 82)" and "distorts competition on the merits
between competing web browsers."1 The European Commission's recent Statement of
Objections validates the ongoing and urgent need to address Microsoft's practices that affect the
openness of the Internet, consumer choice, and competition in general. This paper provides a
brief history of Microsoft's misconduct and demonstrates that, in light of Microsoft's long and
continuing use of anticompetitive tactics, the Commission's concerns are well justified.2
* * *
"This anti-trust thing will blow over. We haven't changed our business practices at all."
-- Bill Gates, Microsoft founder and then-CEO (1995)3
For more than two decades, Microsoft has engaged in a carefully designed and extremely
successful campaign to protect and extend its monopolies. Microsoft has repeatedly made
market allocation proposals to its competitors and has used a broad range of other
anticompetitive and unlawful tactics to eliminate potential rivals, including tying, predatory
product design, and intentional deception.
Microsoft owns several monopoly products, including its Windows operating system and
Office suite of productivity applications.4 These monopolies are extremely lucrative: Microsoft
generates more than $60 billion each year, largely from Windows and Office.5 It has profit
margins of 77% and 65% for these two monopoly products.6 Over the years, Microsoft has
carefully cultivated and expanded the barriers to entry protecting these monopolies. As the D.C.
Circuit explained in discussing the barrier to entry protecting Windows:
That barrier--the "applications barrier to entry"--stems from two
characteristics of the software market: (1) most consumers prefer operating
systems for which a large number of applications have already been written; and
(2) most developers prefer to write for operating systems that already have a
substantial consumer base. This "chicken-and-egg" situation ensures that
applications will continue to be written for the already dominant Windows, which
in turn ensures that consumers will continue to prefer it over other operating
systems.7
Indeed, Microsoft originally gained its Office monopoly for the express purpose of
strengthening the applications barrier that protects Windows. As one of Microsoft's senior
executives wrote in an internal document:
If we own the key "franchises" built on top of the operating system, we
dramatically widen the "moat" that protects the operating system business.... We
hope to make a lot of money off these franchises, but even more important is that
they should protect our Windows royalty per PC.... And success in those
businesses will help increase the opportunity for future pricing discretion.8
Microsoft recognized, however, that owning Office and other applications would not
alone be sufficient. In particular, Microsoft saw a serious potential threat in the form of so-called
"middleware" products. Middleware products are software products that, like Windows, expose
application programming interfaces ("APIs") that software developers can use in writing other
applications. Microsoft recognized that, if any middleware product gained widespread
popularity, "developers might begin to rely upon APIs exposed by the middleware for basic
routines rather than relying upon the API set included in Windows."9 Microsoft has therefore
crushed middleware threats, such as Netscape's web browser.
Although Microsoft has paid many multimillion-dollar settlements for its antitrust
violations over the years, these settlements have proven a small price for such a large ongoing
revenue stream. Microsoft's past conduct demonstrates its ability and willingness to engage in
3
unlawful acts to the detriment of consumers, and awareness of its history is valuable today in
understanding Microsoft's ongoing business practices and strategies.
II. MICROSOFT'S HISTORY OF ANTICOMPETITIVE CONDUCT
This section reviews a number of Microsoft's past actions to extinguish potential
competitive threats. These include Microsoft's: (a) campaign against DR-DOS; (b)
anticompetitive per processor license fees; (c) retaliation against IBM; (d) threats and retaliation
against Intel; (e) elimination of Word Perfect; (f) deceptive WISE software program; (g)
elimination of Netscape; (h) deception of Java developers; (i) elimination of rival media players;
and (j) campaign against rival server operating systems. While not comprehensive, these
examples of Microsoft's past misconduct provide a clear illustration of the types of acts that
Microsoft has taken to protect and extend its monopolies.
A. Microsoft's Campaign To Destroy DR-DOS
"[W]e need to make sure Windows 3.1 only runs on top of MS DOS."
--David Cole, Microsoft Senior Vice-President10
"The approach we will take is to detect dr [DOS] 6 and refuse to load. The error
message should be something like 'Invalid device driver interface.'"
--Phillip Barrett, Microsoft Windows Development Manager11
In the early 1980s, Microsoft purchased an early version of a standard disk operating
system ("DOS") that became known as MS-DOS.12 At the time, a number of rival operating
systems offered features, such as the ability to run multiple programs at the same time, that
Microsoft's operating systems would not offer until years later.13 At the time, operating systems
were just beginning to move from a command-based interface to a graphical user interface.14
Microsoft developed a graphical user interface known as Windows.15 Early versions of
Windows did not actually "run" the computer rather, they were a shell surrounding the
underlying DOS program, which in turn ran the computer.16 Initially, Windows embraced the
DOS standard, which meant that Windows would run on top of any DOS, including DR-DOS,
Microsoft's principal rival in the DOS market.17
3
This initial interoperability came to be known as part of Microsoft's now-classic
"embrace, extend, and extinguish" strategy, which Microsoft has subsequently and successfully
employed in many other product areas.18 This strategy has three phases: First, Microsoft
"embraces" a competing product by developing software or implementing standards that are
compatible with the competing product.19 Microsoft then "extends" its own offering by creating
features or standards that are interoperable only with Microsoft's proprietary technologies.20
Finally, when Microsoft's proprietary software or standards have achieved widespread adoption,
Microsoft "extinguishes" its competitors by dropping any remaining pretense of compatibility.21
In the case of DR-DOS, Microsoft's initial decision to make Windows interoperable
helped promote rapid adoption of the Windows shell. At the same time, however, it meant that
many consumers chose the superior DR-DOS over MS-DOS. In an email to then-Vice President
Steve Ballmer, Microsoft founder and then-CEO Bill Gates wrote:
"Our DOS gold mine is shrinking and our costs are soaring--primarily due to
low prices, IBM share, and DR-DOS.... I believe people underestimate the impact
that DR-DOS has had on us in terms of pricing."22
Microsoft "extended" Windows by making changes so that Windows would no longer
interoperate with DR-DOS smoothly.23 For example, Microsoft designed Windows to display an
ominous error message when used in conjunction with the DR-DOS software.24 Microsoft also
4
disseminated false information about DR-DOS "so people [would] make judgments against it
without knowing details or fa[c]ts."25 By 1994, Microsoft had effectively extinguished DR-DOS
as a threat to Microsoft's own operating system.26
B. Microsoft's Anticompetitive Per Processor License Fees
"Another [DR-DOS] prospect bites the dust with a per-processor DOS
agreement."
--Microsoft sales employee in an internal email27
Most operating systems are purchased by original equipment manufacturers ("OEMs"),
such as Dell and HP. OEMs preinstall operating systems on the computers they manufacture
before selling the computers to consumers. In the late 1980s, Microsoft began requiring OEMs
to pay Microsoft a "per processor license fee" for each computer they shipped, regardless of
whether they installed Windows on the computer.28 This arrangement gave OEMs a powerful
incentive not to pay for and install competing operating systems.
In 1994, the U.S. Department of Justice ("DOJ") filed an antitrust suit against Microsoft
challenging this conduct, resulting in a consent decree under which Microsoft agreed to stop
using per processor license fees.29 But the anticompetitive practice had already been quite
effective in reducing competitors' share, particularly when combined with Microsoft's other
actions directed against DR-DOS.30 The DOJ consent decree also sought to impose some
5
forward-looking relief by prohibiting Microsoft from bundling other products into its now-dominant Windows operating system. The decree included a proviso that permitted Microsoft to
build "integrated" products, however, and Microsoft later took the position that, under the
decree, it could bundle "'a ham sandwich' in the box with a PC preinstalled with Windows
95"and "require OEMs to take the whole package."31
C. Microsoft's Retaliation And Price Discrimination Against IBM
"As long as IBM is working first on their competitive offerings and prefers to
fiercely compete with us in critical areas, we should just be honest with each
other and admit that such priorities will not lead to a most exciting
relationship...."
--Joachim Kempin, Microsoft Senior Vice-President32
Also in the mid-1990s, Microsoft took a series of steps to punish IBM for promoting a
competing operating system and personal productivity application suite. At the time, in addition
to developing software in competition with Microsoft, IBM was also a major OEM, selling
personal computers. As such, IBM was a major customer of Microsoft's. Microsoft retaliated
against IBM for developing competing software products by charging IBM discriminatorily high
license prices for Windows, delaying licensing negotiations with IBM for Windows 95, and
withholding technical support.33 Microsoft informed IBM executives that it would only stop
treating IBM less favorably than other OEMs when IBM ceased competing with Microsoft's
software offerings.34 This resulted in $180 million in lost revenue for IBM,35 and other damages
IBM eventually brought suit against Microsoft and Microsoft settled the claim for $775
million.36
6
D. Microsoft's Organized Collective Boycott Against Intel
"Intel has to accept that when we have a solution we like that is decent that that is
the solution that wins."
--Bill Gates, Microsoft founder and then-CEO37
Microsoft used a similar approach in 1995, when it forced Intel to drop development of
Native Signal Processing ("NSP"), a set of instructions that would have allowed a computer's
processor to directly support audio, video, and 3D graphics. Intel is a manufacturer of
microprocessor chips that are purchased by OEMs to use in the computers they manufacture.
With NSP, Intel hoped to create a platform for multimedia applications that would run on any
operating system, not just Windows. Microsoft thus viewed NSP as a serious threat to its
Windows monopoly. In order to extinguish NSP, Microsoft told Intel that it would make
Windows incompatible with Intel chips if Intel did not abandon the technology, and Microsoft
forced its OEM customers into a collective boycott of Intel's microprocessor chips.38 Bill Gates
reported to other senior Microsoft executives, "Intel feels we have all the OEMs on hold with our
NSP chill."39 Intel ultimately ceded to Microsoft's pressure and abandoned its NSP development
efforts.40
Shortly thereafter, Microsoft again put pressure on Intel. This time around, Microsoft
wanted Intel to stop assisting Sun Microsystems in the promotion of its Java technology. As Bill
Gates wrote in a 1997 email message,
"If Intel has a real problem with us supporting [Intel's microprocessor rival,
AMD] then they will have to stop supporting Java Multimedia the way they
are."41
As a district court subsequently found, Microsoft's campaign to induce "Intel to stop
helping Sun create Java Multimedia APIs, especially ones that run well ... on Windows" was a
successful one.42
E. Microsoft's Elimination Of Word Perfect
"If we own the key 'franchises' built on top of the operating system, we
dramatically widen the 'moat' that protects the operating system business.... We
hope to make a lot of money off these franchises, but even more important is that
7
they should protect our Windows royalty per PC."
--Jeff Raikes, Microsoft President43
"I have decided that we should not publish these [Windows 95 user interface]
extensions. We should wait until we have a way to do a high level of integration
that will be harder for likes of Notes, WordPerfect to achieve, and which will give
Office a real advantage.... We can't compete with Lotus and WordPerfect/Novell
without this."
--Bill Gates, Microsoft founder and then-CEO44
Beginning in 1994, Microsoft launched an anticompetitive campaign to extinguish
WordPerfect, an office productivity application owned by Novell and competing with
Microsoft's Office suite. Office productivity applications (including word processing,
spreadsheet, and presentation applications) are one of the most important groups of applications
and contribute substantially to the applications barrier to entry protecting Microsoft's operating
system monopoly.
When Microsoft began this campaign, WordPerfect enjoyed widespread popularity. In
order to eliminate its competitor, Microsoft withheld crucial technical information about
Windows, going so far as to extend the Windows API, the set of commands a program uses to
communicate with the operating system, to ensure that WordPerfect did not work smoothly with
Microsoft's monopoly operating system.45 Microsoft also used its monopoly power to control
industry standards, thus requiring WordPerfect to implement proprietary technology or risk
incompatibility with Windows.46 And it excluded WordPerfect from the major channels of
distribution for office productivity applications.47 For example, Microsoft forbade OEMs from
pre-installing Novell products and gave discounts for refusing to sell other developers' office
productivity applications.48 As part of Microsoft's strategy to eliminate Novell, "[a] top
Microsoft executive wrote that Microsoft should 'smile' at Novell, falsely signifying Microsoft's
willingness to help the two companies' common customers integrate their various products,
8
while actually 'pulling the trigger' and killing Novell."49 Microsoft's tactics were, again,
extremely successful, as shown in the graphic below.50

Microsoft extinguished WordPerfect and gained a monopoly in office productivity application
suites, accomplishing its goal of "dramatically widen[ing] the moat" protecting its lucrative
Windows monopoly.
F. Microsoft's Deceptive WISE Software Program
"Please give me one good reason why we should even consider [enabling
Microsoft technology to work on competing systems]. (Hint: any good answer
needs to include making more money and helping kill Unix, Sybase or Oracle.)"
--James Allchin, Microsoft Senior Vice-President51
In 1994, Microsoft engaged in similarly deceptive conduct to combat the growing
popularity of the UNIX operating system within corporate networks. Microsoft faced a choice:
whether to "love it to death (invest a lot of money and kill it slowly) or ignore it (invest no
money on the expectation it will die quickly)."52 Microsoft chose initially "to invest in
interoperating" with UNIX,53 by promoting its Windows Interface Source Environment
9
("WISE"), a program that purportedly allowed developers to write software to Windows APIs
and run the resulting programs on Macintosh and UNIX systems.54
Microsoft's plan was successful. By 1996 Microsoft had captured a large share of the
corporate market. Microsoft then took the next step in its standard "embrace, extend,
extinguish" playbook and extended the Windows API without copying its changes to the WISE
program. This meant that developers could no longer smoothly port applications to UNIX and
Macintosh.55 In public, however, Microsoft continued to lead developers into believing that this
software was still fully cross-platform.56 In 1997, Bill Gates noted in an internal email that those
developers who wrote applications for the then-available software without realizing that it would
not port all APIs to UNIX and Macintosh were "just f*****."57 He was right: Microsoft had
successfully extinguished the cross-platform threat to its operating system monopoly. In a
subsequent antitrust suit, a district court called this move "a classic 'bait-and-switch' tactic."58
G. Microsoft's Elimination Of Netscape
"Microsoft first proposed to Netscape that, rather than compete with each other, the two
companies should enter an illegal conspiracy to divide up the market. When Netscape
refused, Microsoft then used its Windows monopoly to, in Microsoft's own words, 'cut off
Netscape's air supply.'"
--Joel Klein, Assistant Attorney General (quoting Paul Maritz, Microsoft's then-Group Vice President of the Platform Applications Group)59
10
In 1996, Microsoft began a series of steps to eliminate a threat to its operating system
monopoly from Netscape's web browser. Web browsers are "middleware" products, meaning
that they expose APIs that developers can use in writing other applications. Microsoft
recognized that if developers began using the APIs in Netscape's browser rather than the APIs in
Windows, consumers might eventually have access to the applications they needed from any
computer with Netscape's browser installed and would not be locked into computers running
Windows.
Microsoft first sought to deal with this threat through a direct market allocation proposal:
Microsoft told Netscape that if Netscape would agree to stop exposing APIs, Microsoft would
provide Netscape with special help in developing "value-added" software applications that relied
on Microsoft's proprietary technologies.60 Netscape rejected Microsoft's proposal.
Microsoft then responded by taking steps to "cut off Netscape's air supply."61 It
developed its own web browser, Internet Explorer, and then technologically and contractually
tied Internet Explorer to its monopoly Windows operating system.62 To ensure that only Internet
Explorer ran well on Windows, Microsoft designed Windows, as its then-Vice President Brad
Chase wrote, to make "running any other browser a jolting experience."63 To ensure that
Internet Explorer had exclusive access to the primary browser distribution channels, Microsoft
also used an extensive set of exclusive-dealing contracts with OEMs, independent software
vendors ("ISVs"), Apple, and others.64
Microsoft was very aggressive in its campaign to shut Netscape out of all major
distribution channels. For example, when Apple resisted distributing Microsoft's Internet
Explorer web browser with its Mac OS operating system, Microsoft threatened to stop supplying
Microsoft Office for Mac OS.65 As the district court found, "ninety percent of Mac OS users
running a suite of office productivity applications [used] Microsoft's Mac Office. In 1997,
Apple's business was in steep decline.... Had Microsoft announced in the midst of this
atmosphere that it was ceasing to develop new versions of Mac Office, a great number of ISVs,
11
customers, developers, and investors would have interpreted the announcement as Apple's death
notice."66
The importance of Office to Apple did not go unnoticed by Microsoft. As Microsoft's
then-program manager for Windows, Ben Waldman, explained in an email to Bill Gates and
then-CFO Greg Maffei: "The threat to cancel Mac Office 97 is certainly the strongest
bargaining point we have, as doing so will do a great deal of harm to Apple immediately."67 Or,
as one Microsoft Vice President put it in an email to Ben Waldman, "MacOffice is the perfect
club to use" to persuade Apple to "materially disadvantage[] Netscape."68 Apple capitulated
and began pre-installing Internet Explorer as the default (and exclusive) browser on Mac
machines. Apple even agreed to push its own employees to use Internet Explorer.69
Once Microsoft had achieved wide distribution for its own browser through these tactics,
it then moved to "extend" (in effect, customize) industry standards for HyperText Markup
Language ("HTML") and Cascading StyleSheets ("CSS") to ensure that users would become
reliant on Microsoft's own web browser.70 Microsoft also introduced its ActiveX technology
extensions, which allowed software written much like traditional computer programs to run in
the Internet Explorer browser, but that only worked on Microsoft's monopoly operating
system.71
As shown in the graphic below, Microsoft's campaign was highly successful.72

12
By 1998, Microsoft executives were confident that "the browser battle is close to over" and that
they had extinguished the threat to the Windows monopoly.73 As Kumar Mehta of Microsoft
explained, "We set out on this mission 2 years ago to not let [N]etscape dictate standards and
control the browser [APIs]. All evidence today says they don't."74 This conduct was at the heart
of the 1998 suit against Microsoft by the DOJ and twenty U.S. States.75 The district court found
that Microsoft violated the antitrust laws in its conduct to maintain its operating system
monopoly against the threat posed by Netscape, and the D.C. Circuit affirmed this conclusion.76
Unfortunately, however, as discussed further below and as noted by several prominent
commentators, the U.S. browser case was settled with a consent decree that has been wholly
ineffective in restoring competition to the state that prevailed prior to Microsoft's unlawful
actions.77
13
H. Microsoft's Attempts To Extinguish Java
"Kill cross-platform Java by grow[ing] the polluted Java market."
--MicrosoftVJ98 SKUs and Pricing Proposal78
"[W]e should just quietly grow j++ share and assume that people will take more
advantage of our classes without ever realizing they are building win32-only java
apps."
--Microsoft's Thomas Reardon79
In 1996, Microsoft turned its attention to Sun Microsystems' Java middleware
technologies as another nascent threat to its operating system monopoly.80 Sun Microsystems
was at the time promoting its Java technologies with the slogan,
"Write-once-run-anywhere" to
illustrate the cross-platform benefits of writing Java applications.81
Microsoft immediately recognized Java as middleware and moved to eliminate this
threat. As usual, Microsoft first embraced Java by licensing the technology from Sun
Microsystems and investing in building its own Java-related developer tools.82 Microsoft then
14
extended its Java developer tools with its own proprietary technology.83 In fact, Microsoft went
so far as actively to deceive Java developers into believing that the Microsoft Java tools were
platform independent.84 In an internal email, Microsoft software engineer Ben Slivka instructed
Microsoft's Visual Studio team: "Don't encourage new cross-platform Java classes; especially
don't help get great Win32 implementations written/deployed. Do encourage fragmentation of
the Java classlib space...."85
Microsoft also used exclusive agreements to promote its "polluted" version of Java and,
as noted above, Microsoft threatened Intel to stop Intel from supporting Sun Microsystems' Java
standards.86 As the D.C. Circuit later explained, "Microsoft's Paul Maritz told a senior Intel
executive that Intel's [development of software that was compatible with] Sun's Java standards
was as inimical to Microsoft as Microsoft's support for non-Intel microprocessors would be to
Intel.... Microsoft threatened Intel that if it did not stop aiding Sun on the multimedia front, then
Microsoft would refuse to distribute Intel technologies bundled with Windows."87 Intel
capitulated, and dropped its support for Java.
Microsoft's overall plan to neutralize Java as a middleware threat was extremely
successful.88 As the Fourth Circuit explained in a subsequent private suit brought by Sun
Microsystems:
First, Microsoft "embraced" the Java technology by licensing from Sun the right
to use its Java Technology to develop and distribute compatible Products.
Second, Microsoft "extended" the Java platform by developing strategic
incompatibilities into its Java runtime and development tools products.... Third,
Microsoft used its distribution channels to flood the market with its version of the
Java Technology in [what Sun characterized as] an attempt to "hijack the Java
Technology and transform it into a Microsoft proprietary programming and
runtime environment."89
15
I. Microsoft's Elimination Of Rival Media Players
RealNetworks "is like Netscape. The only difference is we have a chance to start
this battle earlier in the game."
--Robert Muglia, Microsoft Senior Vice-President90
In 1997, Microsoft recognized that media players also represented a nascent threat to its
profitable operating system monopoly. Like web browsers, media players are middleware
products that expose APIs to software developers.91 Fearing that media players might come to
support multimedia applications on any operating system, Microsoft took action to eliminate the
threat.
Consistent with its previous tactics, Microsoft first embraced the leading media player
software, designed by RealNetworks, announcing an agreement to collaborate in streaming
media.92 The agreement encouraged RealNetworks to make its media player
Windows-dependent in return for compensation from Microsoft.93 As Robert Muglia informed
RealNetworks' Chief Operating Officer, "anyone who competed against [Microsoft] in the
operating system 'lost.'"94 When RealNetworks continued to compete against Microsoft,95
however, Microsoft became increasingly aggressive in its actions. In particular, as it had done
with the browser, Microsoft tied its own media player to Windows.96
RealPlayer was, however, not the only multimedia threat to Microsoft. Microsoft took
separate action to eliminate another competitor in the multimedia space, Burst.com, Inc.
16
("Burst"), a developer of video delivery software.97 And, in 1997, Microsoft targeted Apple's
QuickTime media authoring software, another threat to Microsoft's operating system monopoly.
Like RealNetworks' multimedia player, Apple's multimedia technology ran on several platforms
and exposed APIs to content developers.98 Microsoft saw the Apple product as a particularly
serious threat to the applications barrier to entry in light of Apple's expertise in the operating
system market.99 Microsoft thus reverted to its standard playbook, first attempting to allocate the
market with Apple by offering not to enter the authoring business if Apple stopped developing a
Windows 95 version of QuickTime.100 When Apple refused to participate in Microsoft's illegal
scheme, Microsoft threatened to make its products incompatible with Apple's products if Apple
did not abort its work on its new QuickTime product.101 As one senior Microsoft executive told
Apple, if Apple wanted to survive in the broader multimedia software market, it would have to
"knife the baby" by killing its own multimedia offering.102 Again, Apple refused Microsoft's
proposal.103
When Microsoft first began bundling Windows Media Player with its monopoly
operating system, Microsoft also released a version of its media player for Apple's Mac
operating system. During the period when Windows Media Player was competing with
RealPlayer and Apple QuickTime, Microsoft frequently released new versions of its product for
the Mac. By 2003, however, Microsoft had gained the upper hand, capturing more users than
17
RealNetworks and Apple.104 After 2003, Microsoft never released another Mac version of its
media player.105 Instead, Microsoft continued to promise that it would release a new Mac
version of Media Player until 2006, when it announced that it was terminating the project.106
J. Microsoft's Campaign Against Rival Server Operating Systems
"Sun, Oracle and Netscape are all pushing a new model of [almost] centralized
computing. They all acknowledge that Microsoft holds tremendous sway over the
desktop platform, so they all want to quickly strip as much value and spending as
possible off the desktop and onto the server where they can charge premium
prices and push their own platform offerings."
--Aaron Contorer, Microsoft C++ General Manager107
What we are trying to do is use our server control to do new protocols and lock
out Sun and Oracle specifically"
-- Bill Gates, Microsoft108
In the mid to late 1990s, computer networks were growing in speed and Microsoft sensed
a threat to its core operating system monopoly from more centralized, server-based computing.
Determined to head off any potential competition, Microsoft decided that it needed to add server
operating systems to the "moat" surrounding its Windows operating system monopoly.109 To
gain inroads into this market, Microsoft embraced industry standards for file-and-print sharing,
user management, and identity verification so that its products would be compatible with the
then-prominent Unix server operating systems.110But as Microsoft's server systems started to
gain a foothold in the market, Microsoft quietly started to "extend" support for industry standard
protocols in its Windows operating system so that Windows clients would have a better
experience when connected to Microsoft's servers.111 Eventually, by changing its Windows
personal computer operating system so that Windows computers could not fully connect to any
server that did not use Microsoft's proprietary extensions unless the users installed special
18
software on their machines, Microsoft established and reinforced its dominance in the work
group server operating system market,112 where Microsoft maintains a share of approximately
77%.113
Microsoft's conduct eventually drew scrutiny from the European Commission, which
condemned Microsoft's refusal to release information that would allow other server operating
systems to connect to personal computers running Microsoft's Windows operating system.114 In
a 2004 decision, the European Commission found that if Microsoft succeeded in eliminating
other server operating systems as competitive threats, then innovation would be severely
limited.115 And, in fact, after releasing Windows Server 2003 to lukewarm reviews,116 Microsoft
failed to release a new server version of Windows until 2008.117 Even then, many reviewers
noted that, despite aggressive marketing to small- and midsize-business users and a special
edition of the server operating system just for these users, Microsoft had done very little to
address their needs, and instead had essentially re-packaged a scaled-down version of an existing
enterprise-level product.118
III. MICROSOFT CONTINUES TO ENGAGE IN ANTICOMPETITIVE CONDUCT
Despite international scrutiny of Microsoft's anticompetitive conduct, Microsoft has
continued to take similar unlawful actions to eliminate potential competitive threats. The only
real difference between Microsoft's more recent practices and its earlier ones is that, as Mr.
Gates predicted, Microsoft has now changed its document retention practices.119
19
A. Microsoft's Failure To Comply With The Final Judgment
In 2003, the DOJ discovered that Microsoft had built a feature into Windows that
invoked Microsoft's Internet Explorer browser, rather than the user's chosen default browser,
contrary to the clear obligations of the Final Judgment.120 Similarly, in 2004, Microsoft
attempted to require licensees of its middleware offering, the .NET Framework, to obtain
Microsoft's prior consent before publishing any benchmark testing results for the software.121 In
2005, Microsoft demanded that manufacturers of portable music players sign exclusive deals if
they wanted integration with Microsoft's Windows Media Player.122 And in 2007, Microsoft
made changes to allow consumers limited choice of desktop search products in Windows Vista
only following an extensive government investigation and pressure from a number of U.S.
States. While Microsoft eventually made changes to its conduct in each of these instances, these
incidents all demonstrate Microsoft's willingness to use its monopoly products aggressively first
and make changes later only when confronted about its behavior. This is particularly striking
coming, as it does, within the very limited range of issues covered by the Final Judgment.123 In
fact, the district court overseeing the Final Judgment extended the decree for two more years, to
November 12, 2009, because Microsoft still has not come into compliance with its obligations
regarding communications protocols.124
20
Even today, with its obligations under the consent decree nearing an end, Microsoft has
begun testing the waters and taking more aggressive actions to limit the pre-installation of
competing software by OEMs. For example, in 2008 Microsoft announced that it would
introduce a series of diagnostic tests and requirements for any non-Microsoft software that
OEMs wished to preinstall (Microsoft's own equivalent software was not subject to the tests).125
Microsoft further announced that marketing dollars it typically granted to OEMs would be linked
to compliance with the tests.126 This announcement obviously created serious concerns among
OEMs, ISVs, and consumer advocates. Among other things, Microsoft's announcement meant
that it would gain early access to competing software, and the new program would give
Microsoft an easy tool to keep competing middleware products (for example, browsers and
media players) from being distributed by OEMs. Steven Houck, counsel to the California Group
of plaintiffs, told the U.S. district court at a January 2009 status conference that: "[I]n the six
plus years that we've been enforcing the decree, this particular issue is one in which we've
gotten the most number of complaints and heard the most anxiety about what Microsoft is
doing."127 In light of Microsoft's history of anticompetitive conduct, it is perhaps not surprising
that, with just a few months of U.S. regulatory oversight remaining, Microsoft has once again
begun to ratchet up its anticompetitive tactics.
B. Microsoft's Campaign of Patent FUD against Linux and Open Source
Software
"This is not a case of some accidental, unknowing infringement. There is an
overwhelming number of patents being infringed."
-- Microsoft General Counsel and Intellectual Property and Licensing Vice
President Horacio Gutierrez 128
The open source Linux operating system is the principal rival to Microsoft Windows.
Linux has been taken up by both corporate customers and, increasingly, by private individuals
21
for home use (e.g., with netbooks). In a recent interview with CNET, Steve Ballmer identified
Linux as one of the top two competitive threats to Microsoft in the enterprise segment.129
Consistent with its behavior in response to other competitive threats, Microsoft has used
unfair and anti-competitive tactics to try and slow the uptake of Linux. In particular, Microsoft
has made and continues to make broad, unsubstantiated claims that software developers
distributing Linux or other open source software, as well as their customers, are infringing
Microsoft's patents.130 However, although Microsoft has claimed that as many as 235 patents
may have been infringed131, it has consistently failed to identify which patents are at issue.
Microsoft's tactic is to spread fear, uncertainty and doubt ("FUD") as to whether
developers and users of open source software may be the target of future patent infringement
suits, and thereby chill consumer enthusiasm and demand for Linux and open source solutions.
Indeed, Microsoft's unwarranted threats have brought such pressure to bear on Linux users that
some have felt compelled to enter into royalty-bearing patent licenses with Microsoft.132
Microsoft's campaign of FUD effectively works to impose a "tax" on the use of the most viable
alternative software to Windows: faced with an intimidating and powerful potential litigant
known for its hardball tactics, Linux users are driven to pay the licensing fee despite the
speculative nature of the IP claims. Microsoft's bullying tactics therefore raise the overall cost
and slow down market penetration by innovative technologies intended to compete with
Microsoft's monopoly products.
Moreover, there is a strong likelihood that Microsoft's patent FUD campaign may be
unfounded in law. Recent U.S. jurisprudence clarifies that the scope for patenting business
methods, which lie at the heart of many software patents, is much narrower than was previously
thought to be the case.133 In addition, one of the thresholds for patentability that an invention is
not obvious to a person skilled in the art has recently become harder to meet.134 As such, many
of the patents held by Microsoft are likely to be of questionable validity today. Furthermore,
given the myriad of software patents in existence, consumers may often be unable to determine
with certainty whether their use or distribution of certain software products actually infringes
another company's IP rights. Therefore, contrary to the broad and categorical statements of Mr.
Gutierrez as to the intentional nature of any alleged patent infringements, it is widely recognized
in the industry that, regardless of whether proprietary or open source software is used, there is a
22
high likelihood that patent infringements will have been committed inadvertently. Microsoft has
sought to exploit the current absence of clarity in patent law in order to deter consumers from
taking up offerings competing with Microsoft's own products.
In an apparent escalation of its patent FUD strategy, Microsoft sued the navigational
system vendor, TomTom, for patent infringement at the end of February 2009. Three patent
claims related to Linux are included in the lawsuit.135 At least two of them are related to highly
questionable patents on long file name support in Windows, which have been partially
invalidated by an EC patent court on the grounds that Microsoft's patent claims were "not based
on inventive activity".136 While Microsoft has publicly claimed that its action is not directed
against Linux or open source, and the case was settled in March 2009 pursuant to a mostly-confidential agreement, this represents an aggressive development of Microsoft's use of spurious
or highly questionable patent claims to intimidate and eliminate competition from Linux in order
to maintain or strengthen its dominant position in the OS market.
C. Microsoft's Ongoing Misconduct Has Sparked Further European
Commission Investigations
As noted at the outset, the European Commission ("EC") is also investigating ongoing
misconduct by Microsoft, culminating in its issuance of a Statement of Objections to Microsoft
on January 15, 2009, concerning the tying of the Internet Explorer web browser to the Windows
operating system.137 In addition, the EC continues to investigate a number of other actions
Microsoft has taken to tie products to Windows as well as Microsoft's refusal to enable
interoperability with certain of its monopoly technologies, including Sharepoint, Outlook,
Exchange, and Office.138 The EC is also investigating Microsoft's actions to manipulate the vote
of the International Organization for Standardization / International Electrotechnical
Commission on the recent standardization of Office "Open" XML ("OOXML"). As reported
widely in the press and on the Internet, Microsoft's manipulation of the standards setting process
in favor of OOXML included financial inducements, threats, misleading information, and
committee-stuffing.139 These investigations are compelling examples of Microsoft's continued
misconduct related to its monopolies in operating systems and other products.
23
IV. MICROSOFT'S FALSE PROMISES OF INTEROPERABILITY
Although Microsoft has repeatedly promised to support open standards, both with its
recent "Interoperability Principles"140 and its announcements for Internet Explorer 8,141
Microsoft has routinely made similar promises of standards support in the past without fulfilling
them.142 As a result, many observers have greeted Microsoft's various announcements and
orchestrated fanfare with skepticism. For example, following one recent Microsoft
interoperability announcement, the European Commission released a short statement noting that
Microsoft's promise of interoperability followed "at least four similar statements by Microsoft in
the past on the importance of interoperability."143 As the Commission observed, it took
Microsoft three years even to approach releasing the amount of interoperability information the
European Court of First Instance had ordered it to release.144
Even when Microsoft claims to be implementing a standard, the reality is that Microsoft's
implementations routinely either only partially conform or else somehow extend the standard, so
that software developed to work with Microsoft's version of the standard will not work with
other vendors' implementations of the same standard. As just one example, Microsoft recently
announced that Internet Explorer 8 would support a feature called "local storage," which allows
websites to store a limited amount of data on users' computers so that users can interact with
those sites offline, a feature that could help web applications become effective replacements for
traditional desktop applications.145 This feature is part of HTML 5, the next version of the
24
HTML standard used for writing web pages.146 Unfortunately, Microsoft's implementation is
subtly incompatible with the standard, which could lead web developers who test their sites in
Internet Explorer 8 to write their sites in a way that will not work in other browsers.147 Other,
earlier examples of this conduct include Microsoft's approach to the Windows graphical user
interface (discussed in section II.A) and Microsoft's approach to Java developer tools (discussed
in section II.H). Again, these are just a few examples of Microsoft's hollow interoperability
promises. Microsoft's history clearly demonstrates its longstanding practice of making one set
of statements about interoperability in public and then implementing a wholly different approach
to interoperability in practice.
V. MICROSOFT'S MONOPOLIES HAVE HARMED CONSUMERS
Microsoft's conduct has allowed it to protect its monopolies, which has led to a lack of
choice, higher prices, and less innovation than would otherwise have prevailed in a competitive
marketplace. The barriers to entry surrounding Microsoft's core monopolies remain very high,
and Microsoft's market shares and profit margins in desktop operating systems, office
productivity suites, and browsers have continued to reflect its overwhelming monopoly power in
these markets.148 In short, Microsoft's misconduct has harmed and continues to harm consumers
significantly.
A. Microsoft's Operating System Monopoly Has Harmed Consumers
For fifteen years, Microsoft's share of desktop operating systems has remained above 90%. 149
In 2002, when the Final Judgment in United States v. Microsoft was entered, Windows
XP was the most common desktop operating system.150 Microsoft did not release a successor to
Windows XP until 2007, when it released Windows Vista.151 Even then, the "Vista" that
25
Microsoft released lacked the most significant features that Microsoft had initially promised, and
reviewers labeled it as little more than an incremental improvement.152 CNet News, a leading
computer industry publication, ranked Microsoft's Windows Vista in its "Top Ten Terrible Tech
Products."153 Even Microsoft recognizes that its stronghold on operating systems has harmed
consumers:
The Windows API is ... so deeply embedded in the source code of many Windows
apps that there is a huge switching cost to using a different operating system
instead. ... It is this switching cost that has given customers the patience to stick
with Windows through all our mistakes, our buggy drivers, our high TCO, our
lack of a sexy vision at times, and many other difficulties... Customers constantly
evaluate other desktop platforms, [but] it would be so much work to move over
that they hope we just improve Windows rather than force them to move. In short,
without this exclusive franchise called the Windows API, we would have been
dead a long time ago.154
Microsoft's tactics to prolong its operating system monopoly through means other than
competition on the merits go hand-in-hand with its admitted lack of innovation.
B. Microsoft's Office Monopoly Has Harmed Consumers
Microsoft's Office suite likewise maintains a 95% market share.155 The standard Office
suite includes Word (word processing software), Excel (spreadsheets), PowerPoint
26
(presentations), and Outlook (desktop email client),156 all of which are the de facto standards in
their respective categories.157 Microsoft has more than 500 million Office users.158 The business
division at Microsoft, which includes Office, operated on a profit margin of 65% and brought in
almost $19 billion in revenue in 2008.159
Microsoft's monopoly power in office productivity applications has, likewise, bred
complacency that is harmful to consumers. Even Microsoft's founder and former Chief Software
Architect, Bill Gates, asserts that the only real competitive pressure on Microsoft to improve
Office today is that consumers might not upgrade to the next version.160 Between 1997 and
2007, Microsoft released only three new versions of Microsoft Office, a very slow pace by
software industry standards, and reviewers noted that each release offered only small
improvements over the previous ones.161 It was not until 2007, with the advent of competing
27
online office productivity applications,162 that Microsoft redesigned the Office user interface and,
not coincidentally, introduced new, incompatible file formats.163
C. Microsoft's Web Browser Monopoly Has Harmed Consumers
For the past decade, Microsoft has maintained a dominant share in the web browser
market.164 Since Microsoft's success in exterminating Netscape, however, it has invested little in
developing its Internet Explorer web browser. During Microsoft's push to destroy Netscape, it
released four major new versions of Internet Explorer in two years.165 But after it successfully
excluded Netscape from the market, Microsoft slowed browser development, releasing only two
new versions between 1998 and 2001, neither of which was a major upgrade.166 After 2001,
28
Microsoft "effectively disbanded the Internet Explorer group after killing Netscape."167
Microsoft did not introduce a new version of Internet Explorer for Windows until 2006, and even
then reviewers labeled the new version as an underwhelming catch-up release.168 One of
Microsoft's .NET program managers acknowledged that "[i]t simply doesn't make business
sense for Microsoft to invest in a technology that d[is]intermediates [its] most popular platform,
the Windows operating system."169 As one analyst summarized the issue:
The Web browser is probably the most frequently used category of software in the
world. But in recent years, the browser most people rely on--Microsoft's Internet
Explorer--has been stagnant, offering very few new features.
This is a common pattern with Microsoft. The company is aggressive about
improving its software when it first enters a market. But once it crushes its
competitors and establishes an effective monopoly, as it has in Web browsers,
Microsoft seems to switch off significant innovation.170
Yet despite Microsoft's lack of innovation in the browser market, it has been able to
maintain its enormous market share.171 Even strikingly superior web browsers like Opera and
Mozilla's Firefox have had great difficulty in gaining widespread adoption. After having been
29
starved of innovation by Microsoft for years, technology-savvy jumped at the chance to adopt
Firefox upon its release, and reviewers generally identify Firefox (and other browsers including
Opera) as far superior to Internet Explorer.172 Yet, despite their superiority, no major OEM has
ever distributed any of these alternative, innovative browsers.173 Thus, while IE is guaranteed
ubiquity as a result of Microsoft's tying practice, rival browsers face high barriers to entry even
if they are technically superior. Beyond their popularity with a limited set of sophisticated
consumers, alternative browsers have not been able to make significant inroads.174 This means
that most consumers have gone without features like tabbed browsing and improved security
features for years longer than they would have done in a competitive marketplace.175
Microsoft's persistently high market share despite its noticeably inferior product is proof that
OEMs are not selecting web browsers based on consumer demand.
Microsoft's anticompetitive conduct in the browser market has also firmly entrenched
Internet Explorer as the super-dominant web browser in the workplace. Among other things,
during the years after Microsoft exterminated Netscape and before Firefox came on the scene,
many corporate information technology departments built applications and company intranets on
30
top of proprietary Microsoft technologies in Internet Explorer. These companies would face
significant barriers to switching to a different browser today.176
VI. CONCLUSION
Microsoft's conduct over the last two decades has demonstrated Microsoft's willingness
and ability to engage in unlawful conduct to protect and extend its core monopolies. This
conduct has caused real harm to consumers, who continue to pay high prices and use lower
quality products than would have prevailed in a competitive market. By understanding
Microsoft's history of anticompetitive conduct, developers, consumer groups, and government
authorities will be better equipped to recognize current and future Microsoft misconduct at an
early stage and intervene to prevent Microsoft from using tactics other than competition on the
merits. ECIS remains hopeful that the European Commission's latest Statement of Objections
addressing Microsoft's misconduct will finally mark the beginning of the end of Microsoft's two
decades of anticompetitive behavior and consumer harm.
31
1
Press Release, European Commission, Antitrust: Commission Confirms
Sending a Statement of Objections to Microsoft on the Tying of
Internet Explorer to Windows (Jan. 17, 2009), available at
http://europa.eu/ rapid/ press Releases Action.do ?reference =MEMO/09/15 .
2
For a similar view by Microsoft's only significant rival in the
browser market, see Mitchell Baker, Chairperson, Mozilla
Foundation, The European Commission and Microsoft,
Mitchell's Blog, Feb. 6, 2009,
http://blog.lizardwrangler.com/ 2009/ 02/ 06/ the-european-commission-and-microsoft/
(reflecting on the EC's most recent Statement of Objections and
noting that "Microsoft's business practices have fundamentally
diminished (in fact, came very close to eliminating) competition,
choice and innovation in how people access the Internet").
3
Government Exhibit 940, Handwritten Notes of Intel's Steven
McGeady, United States v. Microsoft, 87 F. Supp. 2d 30
(D.D.C. 2000) (No. 98-1232),available at
http://www.usdoj.gov/ atr/ cases/ exhibits/ 940.pdf ;
see also Transcript of the Direct Examination of Intel's
Steven McGeady, Nov. 10, 1998, at 18:820:6, United States v.
Microsoft, 87 F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232),
available at
http://cyber.law.harvard.edu/ msdoj/ trial.html
("November 10, a.m." link) (testifying that Mr. Gates further
indicated the one thing Microsoft might change was its document
retention policies).
4
See United States v. Microsoft Corp., 253 F.3d 34,
54-58 (D.C. Cir. 2001); see also Competition on the
Internet: Hearing of the House Competition Policy and Antirust Laws
Task Force of the House Judiciary Committee, 110th Cong. 49 (2008)
(remarks of Bradford L. Smith, Senior Vice President, General
Counsel and Corporate Secretary, Microsoft Corporation)
(acknowledging that as of July 2008, "we know that we have a
dominant position, for example, in the market for personal computer
operating systems").
5
See Microsoft Corp., Annual Report (Form 10-K), at 20, 23, 26
(Jul. 31, 2008), available at
http://idea.sec.gov/ Archives/ edgar/ data/ 789019/ 000119312508162768/ d10k.htm .
6
See id. at 23, 26.
7
United States v. Microsoft Corp., 253 F.3d 34, 55 (D.C. Cir.
2001) (internal citations omitted).
8
Novell, Inc. v. Microsoft Corp., No. JFM-05-1087, 2005 U.S.
Dist. LEXIS 11520, at *6 (D. Md. June 10, 2005) (quoting email from
Jeff Raikes at Microsoft to Warren Buffet at Berkshire Hathaway
(Aug. 17, 1997)).
9
United States v. Microsoft Corp., 253 F.3d 34, 53 (D.C. Cir.
2001) ("If middleware were written for multiple operating systems,
its impact could be even greater.... Ultimately, if developers could
write applications relying exclusively on APIs exposed by
middleware, their applications would run on any operating system on
which the middleware was also present.").
10
Consolidated Statement of Facts in Support of Its Responses to
Motions for Summary Judgment by Microsoft Corporation 246,
Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d 1295 (D.
Utah 1999) (No. 2:96-CV-645 B).
11
Id. 251.
12
See Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d
1295, 1298 (D. Utah 1999). The disk operating system was one of
the earliest operating systems developed for computers,
controlling the computer's interaction with other software through
a command-based standard. See id. at 1297.
13
See Jon Pepper, Like MS-DOS, Only Better, SOFTWARE
MAG., Oct. 1990,
http://findarticles.com/ p/ articles/ mi_m0SMG/ is_n12_v10/ ai_9560823 .
14
See Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d
1295, 1298 (D. Utah 1999).
15
See id.
16
See id.
17
See id. at 1303.
18
See Direct Examination of Steven McGeady, Vice President of
Intel, at 5354, United States v. Microsoft Corp., 87 F.
Supp. 2d 30 (D.D.C. 2000) (No. 98-1232), available at
http://cyber.law.harvard.edu/ msdoj/ transcripts/ 1109b.doc (testifying that a Microsoft executive used the phrase "embrace,
extend and extinguish" in a 1995 meeting to describe Microsoft's
strategies towards its competitors).
19
See, e.g., United States v. Microsoft Corp., 253 F.3d
34, 7475 (D.C. Cir. 2001) ("Microsoft, too, agreed to promote the
Java technologies--or so it seemed.... Microsoft made a large
investment of engineering resources to develop a high-performance
[Java implementation]." (internal quotations omitted)).
20
See Findings of Fact 38790, United States v. Microsoft
Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (98-1232) [hereinafter
"Findings of Fact"], available at
http://www.usdoj.gov/ atr/ cases/ f3800/ msjudge.pdf . Microsoft's Thomas Reardon urged, "[W]e should just quietly grow
j++ [Microsoft's [Java] developer tool] share and assume that
people will take more advantage of our classes without ever
realizing they are building win32-only java app[lication]s."
Id. 394.
21
See id. 390 ("Far from being the unintended consequence of
an attempt to help Java developers more easily develop
high-performing applications, incompatibility was the intended
result of Microsoft's efforts.").
22
Graham Lea, Unsealed Caldera Documents Expose MS' DR-DOS
Moves, THE REGISTER UK, May 24, 1999,
http://www.theregister.co.uk/ 1999/ 05/ 24/ unsealed_caldera_documents_expose_ms/ .
23
See Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d
1295, 1303 (D. Utah 1999). Internal discussions at Microsoft
revealed a strategy to make Windows 3.1 incompatible with DR-DOS.
Id. at 1313 (citing an email in which two Microsoft top
executives instructed employees to "make sure [DR-DOS] has problems
in the future").
24
See id. at 1311. Microsoft included a "Readme" text file in
Windows 3.1 that stated that "running Microsoft Windows 3.1 with an
operating system other than MS-DOS could cause unexpected results
or poor performance." Kenneth C. Baseman, Frederick R.
Warren-Boulton, and Glenn A. Woroch, Microsoft Plays Hardball:
The Use of Exclusionary Pricing and Technical Incompatibility to
Maintain Monopoly Power in Markets for Operating System
Software, ANTITRUST BULL., Summer 1995, at 13, available
at
http://elsa.berkeley.edu/ ~woroch/ hardball.pdf ; see
also Andrew Schulman, The Caldera v. Microsoft Dossier,
O'REILLY NETWORK, Feb. 7, 2000,
http://www.oreillynet.com/ pub/ a/ network/ 2000/ 02/ 07/ schulman.html
(Microsoft "allegedly leveraged its Windows monopoly to crush"
DR-DOS by "including intentionally misleading product
pre-announcements, vaporware and FUD ('fear, uncertainty, and
doubt') announcements, exclusionary licensing, beta-test
blacklists, building deliberate incompatibilities into Windows to
hinder it from running with DR-DOS, and trying to create the
misperception that DR-DOS couldn't work properly with Windows.").
25
Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d 1295, 1303
(D. Utah 1999). For example, Microsoft executives began conducting
interviews with trade press to highlight the issue. Microsoft Vice
President Brad Silverberg asked rhetorically in one interview: "Why
take the risk with all the compatibility problems that DR- DOS has
had?" See Consolidated Statement of Facts in Support of Its
Responses to Motions for Summary Judgment by Microsoft Corporation 383, Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d 1295
(D. Utah 1999) (No. 2:96-CV-645 B).
26
See Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d
1295, 1304 (D. Utah 1999). Caldera, the owner of DR-DOS, filed suit
against Microsoft in 1996 and, after the district court denied
Microsoft's motions for summary judgment, Microsoft settled the
case for an undisclosed amount. See Andrew Schulman, The
Caldera v. Microsoft Dossier, O'REILLY NETWORK, Feb. 7, 2000,
http://www.oreillynet.com/ pub/ a/ network/ 2000/ 02/ 07/ schulman.html .
27
Dan Goodin, Microsoft Defends DOS Licensing, CNET NEWS, May
27, 1999,
http://www.news.com/ 2100-1001-226467.html .
28
See United States v. Microsoft Corp., 56 F.3d 1448,
1451 (D.C. Cir. 1995); Complaint 26, United States v. Microsoft
Corp., No. 94-1564 (D.D.C. July 15, 1994), available at
http://www.usdoj.gov/ atr/ cases/ f0000/ 0046.htm .
29
See Final Judgment, United States v. Microsoft Corp.,
No. 94-1564, 1995 U.S. Dist. LEXIS 20533, at *8 (D.D.C. Aug. 21,
1995), available at
http://www.usdoj.gov/ atr/ cases/ f0000/ 0047.htm .
Section IV(C) of the court's order prohibits Microsoft from
entering into per processor licenses. Id.
30
See United States v. Microsoft Corp., 56 F.3d 1448,
145152 (D.C. Cir. 1995); Complaint 36(b)-(c), United States v.
Microsoft Corp., No. 94-1564 (D.D.C. July 15, 1994), available
at
http://www.usdoj.gov/ atr/ cases/ f0000/ 0046.htm
(describing how these licensing practices deprived competitors
of sales).
31
Reply Brief of Petitioner United States of America at 5, United
States v. Microsoft Corp., 147 F.3d 935 (D.C. Cir. 1998) (No.
94-1564), available at
http://www.usdoj.gov/ atr/ cases/ f1200/ 1277.htm .
32
Findings of Fact, supra note 20, 126.
33
See id. 116. Microsoft refused to license Windows 95 to IBM
under the guise of an audit of IBM's past royalty payments.
Id. 122. Joachim Kempin, Microsoft's executive in charge of
sales to OEMs, offered to close the audit if IBM agreed not to
bundle its office productivity suite with its PCs. Id. 124.
IBM refused and it was not granted a license to pre-install Windows
95 until fifteen minutes before the start of Microsoft's official
product launch. Id. 125.
34
Id. 126.
35
Id. 128.
36
See Press Release, Microsoft, Microsoft and IBM Resolve
Antitrust Issues (July 1, 2005), available at
http://www.microsoft.com/ presspass/ press/ 2005/ jul05/ 07-01msibmsettlepr.mspx .
37
Government Exhibit 276, Email from Bill Gates, United States v.
Microsoft, 87 F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232),
available at
http://www.usdoj.gov/ atr/ cases/ exhibits/ 276.pdf .
38
See Findings of Fact, supra note 20, 10102.
39
Id. 103.
40
See id. 101. Microsoft's leverage over the OEMs forced
Intel to abandon its software development ambitions. In relating
the success of the OEM boycott to Microsoft executives, Gates
added, "we should let OEMs know that some of the new software work
Intel is doing is OK. If Intel is not sticking totally to its part
of the deal let me know." Id. 103.
41
Id. 406.
42
See id. 406.
43
Novell, Inc. v. Microsoft Corp., No. JFM-05-1087, 2005 U.S.
Dist. LEXIS 11520, at *6 (D. Md. June 10, 2005) (quoting
email from Jeff Raikes at Microsoft to Warren Buffet at Berkshire
Hathaway (Aug. 17, 1997)).
44
Transcript of the Deposition of Microsoft Chairman Bill Gates,
Sept. 2, 1998 at 662:7-13, United States v. Microsoft Corp.,
87 F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232), available at
http://www.washingtonpost.com/ wp-srv/ business/ longterm/ microsoft/ documents/ gates0902p4.htm
; see also
Dave Methvin, Novell Hasn't Forgotten Microsoft's Jab At
WordPerfect, INFO. WK., Mar. 19, 2008,
http://www.informationweek.com/ blog/ main/ archives/ 2008/ 03/ novell_hasnt_fo.html .
45
See Complaint 56, 6972, Novell, Inc. v. Microsoft
Corp., No. JFM-05-1087, 2005 U.S. Dist. LEXIS 11520 (D. Md.
June 10, 2005).
46
See id. 8494.
47
See id. 112.
48
See id. 117.
49
See id. 55.
50
Fred Vogelstein, Search and Destroy, FORTUNE, May 2, 2005,
at 74, available at
http://money.cnn.com/ magazines/ fortune/ fortune_archive/ 2005/ 05/ 02/ 8258478/ index.htm
(showing "Microsoft's Battles" market share graphics). In 1993,
WordPerfect accounted for more than 40% of word processing software
sales, with annual sales of $700 million. See Complaint 150, Novell, Inc. v. Microsoft Corp., No. JFM-05-1087, 2005
U.S. Dist. LEXIS 11520 (D. Md. June 10, 2005). By 1996,
WordPerfect's share of sales had dropped to less than 10%, with
annual sales of only $200 million. See id.
51
Steve Lohr, In an Antitrust Suit, a Tiny Ex-Partner Is Taking
Aim at Microsoft, N.Y. TIMES, May 31, 1999,
http://query.nytimes.com/ gst/ fullpage.html ?res= 940DE7D81530F932A05756C0A96F958260 .
52
Case COMP/C-3/37.792 Microsoft, Commission Decision Mar. 24, 2004, 575, available at
http://ec.europa.eu/ comm/ competition/ antitrust/ cases/ decisions/ 37792/ en.pdf
(citing Microsoft internal e-mail from Mark Ryland to Jim
Allchin, dated April 18, 1996) [hereinafter "EC Decision"].
53
Id.
54
See Bristol Tech., Inc. v. Microsoft Corp., 114 F.
Supp. 2d 59, 6465 (D. Conn. 2000); John Lettice, How Microsoft
Used the WISE Trojan Horse Against Unix, THE REGISTER, July 18,
1999,
http://www.theregister.co.uk/ 1999/ 07/ 18/ analysis_how_ms_used/
("Microsoft had originally identified WISE as a mechanism which
would help it get [Windows] NT established in corporate networks.
In the early days of the OS Microsoft needed to accept that there
would be co-existence (NT's market share was then vanishingly
small), so WISE was useful. It also acted as a mechanism for
controlling that coexistence. Microsoft then saw Sun-backed efforts
such as WABI and PWI as real threats that could wrest control of
Windows APIs from it, so it favoured WISE as an 'official,'
controllable version.").
55
See Bristol Tech., Inc. v. Microsoft Corp., 114 F.
Supp. 2d 59, 7374 (D. Conn. 2000). Internal Microsoft
communications explained that "[t]he risk of going cross-platform
with our server technology" i.e., permitting developers to
port application seamlessly between Windows NT and UNIX or
Macintosh "is that we might undermine the market for NT."
Id. at 71.
56
See id. at 7274. Although Microsoft had internally decided
to limit the software source code, in 1996 Bill Gates delivered a
keynote address at the UNIX Expo meant to ensure confidence in the
WISE program and stressing that the WISE developers had the "very
latest Windows API technology." Id. at 73.
57
Id. at 74.
58
Id. at 83. This judgment was later vacated after the parties
settled and Microsoft paid an undisclosed sum. Microsoft Corp.
v. Bristol Tech., Inc., 250 F.3d 152, 15354 (2d Cir. 2001)
(noting that the settlement agreement was reached in part with
Bristol's promise that it would not oppose Microsoft's motion to
vacate the district court's order).
59
Press Release, Department of Justice, Statement by Assistant
Attorney General Joel I. Klein: Filing of Antitrust Suit Against
Microsoft at 2 (May 18, 1998), available at
http://www.usdoj.gov/ atr/ public/ press_releases/ 1998/ 1770.htm ;
see also Plaintiffs' Joint Proposed Findings of Fact 91.3.1, United States v. Microsoft Corp., 87 F. Supp. 2d 30
(D.D.C. 2000) (No. 98-1232), available at
http://www.usdoj.gov/ atr/ cases/ f2600/ 2613-1.htm
[hereinafter "Plaintiffs' Joint Proposed Findings of Fact"].
60
See Findings of Fact, supra note 20, 8183. At a
meeting between Microsoft and Netscape executives, Microsoft made
it clear that if Netscape attempted to expose its own APIs rather
than build off of Microsoft's platform, "Microsoft would view
Netscape as a competitor, not a partner." Id. 83.
61
Plaintiffs' Joint Proposed Findings of Fact, supra note 49, 91.3.1, United States v. Microsoft Corp., 87 F. Supp. 2d 30
(D.D.C. 2000) (No. 98-1232), available at
http://www.usdoj.gov/ atr/ cases/ f2600/2613-1.htm .
62
See United States v. Microsoft Corp., 253 F.3d 34, 58 (D.C.
Cir. 2001).
63
Findings of Fact, supra note 20, 160. Microsoft did this by
placing code specific to web browsing in the same files as code
that provided operating system functionality. Id. 161. The
district court found that "Microsoft's primary motivation for this
action was to ensure that the deletion of any file containing
browser-specific routines would also delete vital operating system
routines and thus cripple Windows 95." Id. 164.
64
The district court found that "no other distribution channel for
browsing software even approaches the efficiency of OEM
pre-installation and IAP bundling." Id. 145. Microsoft,
with the exception of a few months in 1997, never allowed OEMs to
ship Windows 95 or Windows 98 without Internet Explorer. Id. 202. By 1998, Netscape was only being shipped on four of the sixty
OEM sub-channels. Id. 239.
65
See id. 34151.
66
Id. 344.
67
Id. 346.
68
Government Exhibit 268, Email from Don Bradford, United States
v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000) (No.
98-1232), available at
http://www.usdoj.gov/ atr/ cases/ exhibits/ 268.pdf .
69
Findings of Fact, supra note 20, 352.
70
See Paul Festa, IE 5.5 Angers Web Standards
Advocates, CNET NEWS, July 13, 2000,
http://www.news.com/ 2100-1023-243144.html .
71
See Java Gets a Run for Its Money, CNET NEWS, Mar.
12, 1996,
http://www.news.com/ 2100-1023-207269.html .
72
Fred Vogelstein, Search and Destroy, FORTUNE, May 2, 2005,
at 74, available at
http://money.cnn.com/ magazines/ fortune/ fortune_archive/ 2005/ 05/ 02/ 8258478/ index.htm
(showing "Microsoft's Battles" market share graphics).
73
Findings of Fact, supra note 20, 377.
74
Id. 377.
75
See United States v. Microsoft Corp., 253 F.3d 34
(D.C. Cir. 2001). It also served as the basis for a private lawsuit
brought by AOL Time Warner, Netscape's parent company, which
Microsoft settled for $750 million. See Press Release,
Microsoft Corp., AOL Time Warner and Microsoft Agree to Collaborate
on Digital Media Initiatives and Settle Pending Litigation (May 29,
2003), available at
http://www.microsoft.com/ presspass/ press/ 2003/ may03/ 05-29msaol settlementpr.mspx .
76
See United States v. Microsoft Corp., 87 F. Supp. 2d
30, 3751 (D.D.C. 2000); see also United States v. Microsoft
Corp., 253 F.3d 34, 6162, 6466, 7072, and 7374 (D.C. Cir. 2001)
(finding that Microsoft's OEM license restrictions, its tying of
Internet Explorer to Windows, and its exclusive dealing contracts
with Internet Access Providers ("IAPs"), Independent Software
Vendors ("ISVs"), and Apple Computer were all anticompetitive
actions that violated the Sherman Act).
77
See, e.g., California Group's Report on Remedial
Effectiveness at 15 (Aug. 30, 2007), New York v. Microsoft
Corp., 224 F. Supp. 2d 76 (D.D.C. 2002) (No. 98-1232),
available at
http://www.naag.org/ assets/ files/ pdf/ antitrust. 2007-08-30 _Filed _CA _Group _Effectiveness _Report.pdf .
("There can be little doubt that Microsoft's market power remains
undiminished and that key provisions of the Final Judgment those
relating to middleware have had little or no competitively
significant impact. One can fairly ask what impact the Final
Judgment has had on Microsoft apart from the cost of developing
the still delayed Technical Documentation that would cause it to
refrain from engaging in similar conduct with respect to whatever
competitive threat might arise in the future. Consequently, the
California Group respectfully submits, Microsoft's commingling
violation has not been effectively addressed, Microsoft remains in
possession of the fruits of its violation, and the competitive
conditions antedating Microsoft's anticompetitive conduct have not
been restored."); Tunney Act Comments of Professor Einer Elhauge on
the Proposed Settlement Between the United States and Microsoft at
7 (Jan. 27, 2002), United States v. Microsoft, 87 F. Supp.
2d 30 (D.D.C. 2000) (No. 98-1232), available at
http://www.usdoj.gov/ atr/ cases/ ms_tuncom/ major/ mtc-00027209.pdf
(criticizing the decree and noting that it would do "nothing
effective about technological foreclosure"); U.S. v. Microsoft:
The Experts, The View From Outside: Assessing the Wisdom of a
Breakup, NEW YORK TIMES, Apr. 30, 2000, available at
http://query.nytimes.com/ gst/ fullpage.html ?res= 9502EFDA1439F933A05757C0A9669C8B63
(quoting Steven Salop, Professor at Georgetown University Law
Center and consultant to the DOJ in the first action against
Microsoft, in discussing the Microsoft decree: "Conduct remedies
are particularly difficult to enforce against a company bent on
exploiting any loopholes"); Carl Shapiro, Microsoft: Remedial
Failure, ANTITRUST LAW JOURNAL, at 18 (forthcoming),
available at
http://faculty.haas.berkeley.edu/ shapiro/ microsoft2008.pdf
("Unfortunately, the Final Judgment [in United States v. Microsoft]
has done little, if anything, to lower the entry barriers facing
these threats [to Windows].").
78
Government Exhibit 259, United States v. Microsoft Corp., 87
F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232), available at
http://www.usdoj.gov/ atr/ cases/ exhibits/259.pdf .
79
Government Exhibit 1332, United States v. Microsoft Corp.,
87 F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232), available at
http://www.usdoj.gov/ atr/ cases/ exhibits/ 1332.pdf .
80
See United States v. Microsoft Corp., 253 F.3d 34,
7578 (D.C. Cir. 2001) (finding that Microsoft's exclusionary
agreements with ISVs, its deceptive conduct as it related to Java
developer tools, and its threats to Intel to stop supporting Java
were all anticompetitive measures taken to protect Microsoft's
operating system monopoly). Sun brought a private antitrust action
against Microsoft, which Microsoft settled for $700 million.
Press Release, Microsoft, Microsoft and Sun Microsystems Enter
Broad Cooperation Agreement; Settle Outstanding Litigation (Apr. 2,
2004), available at
http://www.microsoft.com/ presspass/ press/ 2004/ apr04/ 04-02Sun AgreementPR.mspx .
81
See, e.g., JavaSoft Ships Java 1.0, AllBusiness.com,
Jan. 23, 1996, available at
http://www.allbusiness.com/ technology/ software-services-applications/ 7190655-1.html .
82
See, e.g., United States v. Microsoft Corp., 253 F.3d
34, 7475 (D.C. Cir. 2001) ("Microsoft, too, agreed to promote the
Java technologies--or so it seemed.... Microsoft made a large
investment of engineering resources to develop a high-performance
[Java implementation]." (internal quotations omitted)) .
83
See id. at 76 ("Microsoft's Java implementation included ...
certain keywords and compiler directives that could only be executed
properly by Microsoft's version of the Java runtime environment for
Windows ... [and produced] Java applications that [ran] only on
Windows."(internal quotations omitted)); id. at 7677
("Microsoft's ultimate objective was to thwart Java's threat to
Microsoft's monopoly in the market for operating systems. One
Microsoft document, for example, states as a strategic goal: `Kill
cross-platform Java by grow[ing] the polluted Java market.'").
84
See id. at 76 (observing that "developers who relied upon
Microsoft's public commitment to cooperate with Sun and who used
Microsoft's tools to develop what Microsoft led them to believe
were cross-platform applications ended up producing applications
that would run only on the Windows operating system").
85
Government Exhibit 518, Email from Ben Slivka, United States v.
Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232),
available at
http://www.usdoj.gov/ atr/ cases/ exhibits/518.pdf .
86
See Findings of Fact, supra note 20, 396, 401.
87
United States v. Microsoft Corp., 253 F.3d 34, 77 (D.C. Cir.
2001) (quoting Findings of Fact, supra note 20,
40405).
88
See Alex Iskold, Java: A Retrospective, READWRITEWEB,
Oct. 19, 2007,
http://www.readwriteweb.com/ archives/ java_a_retrospective.php .
89
In re Microsoft Corp. Antitrust Litig., 333 F.3d 517, 523
(4th Cir. 2003).
90
Government Exhibit 1576, Email from Jim Durkin, United States v.
Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232),
available at
http://www.usdoj.gov/ atr/ cases/ exhibits/ 1576.pdf .
91
See Findings of Fact, supra note 20, 78.
"RealNetworks' streaming software presents a set of APIs that
competes for developer attention with APIs exposed by the streaming
technologies in Microsoft's DirectX." Id. 111.
92
See EC Decision, supra note 52, 305; see also
Findings of Fact, supra note 20, 111 (finding that
Microsoft viewed RealNetworks' streaming software "as competitive
technology that could develop into part of a middleware layer that
could, in turn, become broad and widespread enough to weaken the
applications barrier to entry"); id. 114 ("Still,
Microsoft's intentions toward RealNetworks in 1997 ... show that
decision-makers at Microsoft were willing to invest a large amount
of cash and other resources into securing the agreement of other
companies to halt software development that exhibited discernible
potential to weaken the applications barrier").
93
Id. 113.
94
Plaintiffs' Joint Proposed Findings of Fact, supra note 49, 84.2 ii.
95
See Findings of Fact, supra note 20, 114 (noting
that RealNetworks planned to continue developing competing
streaming technologies).
96
See EC Decision, supra note 52, 844. The EC Decision
noted that "[t]hrough tying [Windows media player ("WMP")] with
Windows, Microsoft ensure[d] that WMP is as ubiquitous on PCs
worldwide as Windows is. No other distribution mechanism or
combination of distribution mechanisms attain[ed] this universal
distribution." Id. The EC further found that "[t]hrough
tying WMP, Microsoft thus create[d] a [network effect] reminiscent
of the one that propelled Windows to its quasi-monopoly position in
the client PC operating system market." Id. 882.
RealNetworks later filed an antitrust suit against Microsoft, which
Microsoft settled for $761 million. Press Release, Microsoft,
Microsoft and RealNetworks Resolve Antitrust Case and Announce
Digital Music and Games Partnership (Oct. 11, 2005), available
at
http://www.microsoft.com/ presspass/ press/ 2005/ oct05/ 10-11MSRealPR.mspx .
97
See Complaint, Burst.com, Inc. v. Microsoft Corp.,
No. JFM-02-cv-2952, MDL Docket No. 1332 (D. Md. dismissed Mar. 11,
2005). Microsoft changed published Windows APIs that Burst's
products were using and told third parties that Burst's products
did not work well on Windows. Id. 29. It then provided
Burst with a series of purported solutions to the problem
Microsoft had intentionally created, knowing that those solutions
were ineffective. Id. Burst brought suit, but its suit was
frustrated by Microsoft's destruction of key documents. See
Eriq Gardner, First Bill, Now Steve, IP LAW & BUS.,
Apr. 2006,
http://www.burst.com/ new/ newsevents/ articles/ IP%20Law&Business.htm .
Burst introduced evidence of Microsoft's spoliation of evidence,
including a 1995 "do-not-save-e-mail directive" and a "30-Day
E-Mail Destruction Rule" promulgated by Jim Allchin, Microsoft
Group Vice President of platforms. Id. Allchin's directive
told employees, "Do not archive your mail. Do not be foolish. 30
days." Id. The suit was settled for a reported $60
million just before a hearing on Burst's spoliation claim.
Id.; see also Robert Cringely, Bursted Not
Busted: Burst Really Did Win Its Case With Microsoft and Here's
Why, I, CRINGELY, Mar. 17, 2005,
http://www.pbs.org/ cringely/ pulpit/ 2005/ pulpit _20050317 _000846.html
(positing that "Microsoft's immediate motivation to settle was the
spoliation hearing that could have exposed the company to older
cases being re-opened based on the possibility that Microsoft had
deliberately destroyed evidence").
98
See Findings of Fact, supra note 20, 78.
99
See id. 104. The district court found that "QuickTime
competes with Microsoft's own multimedia technologies, including
Microsoft's multimedia APIs (called 'DirectX') and its media
player. Because QuickTime is cross-platform middleware, Microsoft
perceives it as a potential threat to the applications barrier to
entry." Id. 104.
100
See id. 105. The specific market allocation proposals
discussed herein are only the ones that have come to light through
subsequent litigation, and it is highly probable that Microsoft has
made market allocation proposals to other nascent competitors that
simply have not come to light, or at least have not come to public
attention.
101
See id. 106.
102
Plaintiffs' Joint Proposed Findings of Fact, supra note 49, 79.2 ii.
103
See Findings of Fact, supra note 20, 109. As the
district court noted, "Microsoft's motivation was its desire to
limit as much as possible the development of multimedia content
that would run cross-platform." Id. 110.
104
Kevin J. O'Brien, As EU Debated, Microsoft Took Market
Share, INT'L HERALD TRIB., Sept. 16, 2007,
http://www.iht.com/ articles/ 2007/ 09/ 16/ news/ msft17.php .
105
See Ina Fried, Music Stops for Mac Windows Media
Player, CNET NEWS, Jan. 12, 2006,
http://www.news.com/ Music-stops-for- Mac-Windows-Media-Player/ 2100-1047_3-6026715.html ?part=rss&tag= 6026715&subj= news ;
Kevin J. O'Brien, As EU Debated, Microsoft Took Market
Share, INT'L HERALD TRIB., Sept. 16, 2007,
http://www.iht.com/ articles/ 2007/ 09/ 16/ news/ msft17.php .
106
See Ina Fried, Music Stops for Mac Windows Media
Player, CNET NEWS, Jan. 12, 2006,
http://www.news.com/ Music-stops-for- Mac-Windows-Media-Player/ 2100-1047_3-6026715.html ?part=rss &tag=6026715 &subj=news .
107
EC Decision, supra note 52, 771.
108
EC CFI Judgment, 771
109
A server operating system is an operating system for a server, a
device that performs services for connected personal computers as
part of a client-server architecture. In contrast, a client (or
desktop) operating system serves only a personal computer.
110
See Microsoft Corp., Windows NT and UNIX Interoperability,
Oct. 1, 1997,
http://www.microsoft.com/ technet/ archive/ winntas/ deploy/ ntunxint.mspx ?mfr=true .
111
See EC Decision, supra note 52, 176301.
112
See id. 236301.
113
See IDC Workload Tracker 2007 (Worldwide Server Operating
System Market Shares -- Based on the IDC Server Workload Models
in 2000 and 2007).
114
See EC Decision, supra note 52, 78182.
115
See id. 725 ("Microsoft's research and development efforts
are indeed spurred by the innovative steps its competitors take
in the work group server operating system market. Were such
competitors to disappear, this would diminish Microsoft's
incentives to innovate.").
116
See Gregg Keizer, Microsoft Windows Server 2003:
Experts Advise Caution, CHANNELWEB NETWORK, Apr. 19, 2003,
http://www.crn.com/ it-channel/ 18822436
(weighing the pros and cons of migrating to Windows Server 2003
and noting that many companies may want to "hold tight" rather
than migrate).
117
See Steven Warren, Should You Upgrade to Windows Server
2008?, TECHREPUBLIC, Oct. 15, 2007,
http://blogs.techrepublic.com.com/ datacenter/ ?p=209 .
1
See Jason Brooks, A Head Full of Windows Server
2008, EWEEK, Nov. 9, 2007,
http://blogs.eweek.com/ brooks/ content/ windows/ a_head_full_of _windows_server_2008.html
("Microsoft's newly minted Windows Essential Business Server
offers a very compelling answer to the question, 'How can a
midsize business consume all the same sorts of Microsoft core
server products that a large enterprise might consume?' ... [A]n
excellent answer to the wrong question.").
119
See Burst.com, Inc.'s Motion for Spoliation Instruction,
Witness Preclusion, and Related Relief, In re Microsoft
Antitrust Litigation, No. JFM-02-cv-2952, MDL Docket No. 1332
(D. Md. dismissed Mar. 11, 2005), available at
http://www.groklaw.net/ pdf/ BurstSpoliation.pdf .
Burst's motion provides extensive documentation of Microsoft's
revised "short fuse" document retention policy. For example, in a
January 2000 email to the Windows Division, Mr. Allchin directed
employees: "Do not archive your email. Do not be foolish. 30
days." Id. at 13. As noted above, Microsoft settled with
Burst on the courthouse steps just before oral argument on
Burst's spoliation motion.
120
See Interim Joint Status Report on Microsoft's Compliance
with the Final Judgments at 6 (Oct. 17, 2003), United States
v. Microsoft, 87 F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232),
available at
http://www.usdoj.gov/ atr/ cases/ f201300/ 201386.pdf .
121
See Interim Joint Status Report on Microsoft's Compliance
with the Final Judgments at 78 (Oct. 8, 2004), United States
v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000) (No.
98-1232), available at
http://www.usdoj.gov/ atr/ cases/ f205700/ 205751.pdf .
After plaintiffs, which included the United States and several
state attorneys general, brought this complaint to Microsoft's
attention, Microsoft responded that it was willing to require
prior notice, rather than prior consent. See id. However,
plaintiffs still believed this response was inadequate to comply
with the Final Judgment and continued to demand modification of
this requirement until Microsoft eventually gave in, agreeing to
make "additional changes" resolving plaintiffs' concerns. See
Interim Joint Status Report on Microsoft's Compliance with the
Final Judgments at 6 (June 1, 2005), United States v. Microsoft
Corp., 87 F. Supp. 2d 30 (D.D.C. 2000) (No. 98-1232),
available at
http://www.usdoj.gov/ atr/ cases/ f209300/ 209307.pdf .
122
See Interim Joint Status Report on Microsoft's Compliance
with the Final Judgments at 1213, (Oct. 19, 2005), United
States v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000)
(No. 98-1232). The DOJ's October 2005 Joint Status Report noted
that it was "unfortunate that the draft specification contained
the exclusivity provision." Id. at 13.
123
The European Commission recently fined Microsoft $1.35 billion
for failure to comply with the Commission's 2004 antitrust ruling.
See Peppi Kiviniemi, EU Fines Microsoft $1.35
bn, LiveMint, Feb. 28, 2008,
http://www.livemint.com/ 2008/ 02/ 27210155/ EU-fines-Microsoft-135-bn.html ?atype=tp .
A lawyer for ECIS expressed a similar regret in regards to
Microsoft's conduct in the EC, observing that it is "more
profitable [for Microsoft] to reap the anticompetitive benefits of
non-compliance with the law and to pay the fines than to comply."
Id.
124
See Memorandum Opinion at 38 (Jan. 29, 2008), New York
v. Microsoft Corp., 224 F. Supp. 2d 76 (D.D.C. 2002) (No.
98-1232), available at
http://www.microsoft-antitrust.gov/ pdf/ Jan292008MemOp.pdf ("[I]t is abundantly clear that more than five years after the
Communications Protocols and related technical documentation were
required to be available to licensees under III.E, the
documentation envisioned by that Section is still not available to
licensees in a complete, useable, and certifiably accurate
form."). The district court extended the decree "based upon the
extreme and unforeseen delay in the availability of complete,
accurate, and useable technical documentation relating to the
Communications Protocols that Microsoft is required to make
available to licensees...." Id. at 3. The district court
further noted that allowing the provisions of the Communications
Protocols to expire jeopardized the "full procompetitive impact"
of the Final Judgment. Id. at 4.
125
See Stephanie Condon, Vista Marketing Draws Antitrust
Complaints, CNET NEWS, Jan. 28, 2009, at
http://news.cnet.com/ 8301-13578 _3-10151757-38.html ;
Interim Joint Status Report on Microsoft's Compliance with the
Final Judgments at 4 (Jan. 29, 2009), United States v.
Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000) (No.
98-1232), available at
http://www.usdoj.gov/ atr/ cases/ f241600/ 241677.pdf ; see also Microsoft Presentation, "Advancing the Platform,"
presented at Windows Hardware and Engineering Conference, Nov. 4-7
2008, available at
http://download.microsoft.com/ download/ 5/ E/ 6/ 5E66B27B -988B -4F50 -AF3A -C2FF1E62180F/ COR-T780_WH08.pptx
(describing Project Velocity tests).
126
See Stephanie Condon, Vista Marketing Draws Antitrust
Complaints, CNET NEWS, Jan. 28, 2009, at
http://news.cnet.com/ 8301-13578 _3-10151757-38.html .
Microsoft denies that marketing dollars will be tied to the test
results, but that remains an open issue as the program is
undergoing changes. See id.
127
Transcript of Status Conference at 16, Jan. 28, 2009, United
States v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000)
(No. 98-1232); see also Stephanie Condon, Vista
Marketing Draws Antitrust Complaints, CNET NEWS, Jan. 28,
2009, at
http://news.cnet.com/ 8301-13578 _3-10151757-38 (quoting Steven Houck).
128
See Roger Parloff, Microsoft takes on the free
world, CNN MONEY, May 14, 2007, available at
http://money.cnn.com/ magazines/ fortune/ fortune_archive/ 2007/ 05/ 28/ 100033867/ .
129
See Marguerite Reardon, Microsoft and EMC renew their
vows, CNET.COM, Feb. 4, 2009, available at
http://news.cnet.com/ 8301-10805 _3-10156015-75.html
130
See Gavin Clarke, Royalties are the admission price,
Microsoft tells freetards, THE REGISTER, Mar. 27, 2008,
available at
http://www.theregister.co.uk/ 2008/ 03/ 27/ microsoft _brad _smith _patents _royalties/ .
131
See Parloff, Microsoft takes on the free world,
supra, note 128.
132
See, e.g., Matt Asay, Microsoft continues to prey on the
overly cautious with patent deals, CNET.COM, Mar. 21, 2008,
available at
http://www.cnet.com/ 8301-13505 _1-9900817-16.html .
133
See KSR International Co., Petitioner e. Teleflex Inc.
et al., (2007) US 27, available at
http://www.supremecourtus.gov/ opinions/ 06pdf/ 04-1350.pdf
and In Re Bernard L. Bilski and Rand A. Warsaw, United
States Court of Appeals for the Federal Circuit, 2007-1130 (Serial
No. 08/833,892), available at
http://www.cafc.uscourts.gov/ opinions/ 07-1130.pdf .
134
See, e.g., KSR International Co., Petitioner e. Teleflex
Inc. et al., supra, note 133; Angiotech Pharmaceuticals
Inc. v. Conor Medsystems Inc. [2008] UKHL 49; Apotex Inc.
v. Sanofi-Synthelabo Canada Inc. [2008] SCC 61.
135
See Bruce Perens, Analyzing Microsoft's TomTom
Lawsuit, DATAMATION.COM, Mar. 1, 2009, available at
http://itmanagement.earthweb.com/ osrc/ article.php/ 3807801/ Bruce-Perens-Analyzing -Microsofts-Linux-Lawsuit.htm and Richard Hillesley, TomTom The drums of a patent war with
Microsoft? ITPRO.COM, Mar. 5, 2009, available at
http://www.itpro.co.uk/ 610093/ tomtom -the-drums-of -a-patent-war -with-microsoft .
136
See, e.g., Federal Patent Court declares FAT patent of
Microsoft null and void, HEISE ONLINE, Mar. 2, 2007,
available at
http://www.heise.de/ english/ newsticker/ news/ 86141 .
137
See Press Release, European Commission, Antitrust:
Commission Confirms Sending a Statement of Objections to Microsoft
on the Tying of Internet Explorer to Windows (Jan. 17, 2009),
available at
http://europa.eu/ rapid/ press Releases Action.do ?reference =MEMO/09/15 .
138
See Press Release, European Commission, Commission
Initiates Formal Investigation Against Microsoft in Two Cases of
Suspected Abuse of Dominant Market Position (Jan. 14, 2008),
available at
http://europa.eu/ rapid/ press Releases Action.do ?reference =MEMO/08/19 .
139
See Charles Forelle, Microsoft's Office Push Scrutinized
by EU, WALL ST. J., Feb. 8, 2008,
http://online.wsj.com/ article/ SB12024286 7034452081.html
(stating that the EC is examining whether Microsoft's pressure on
countries to vote for the Office Open XML standard "amounted to an
undue stifling of competition"). "In the months and weeks leading
up to the vote, Microsoft resellers and other allies joined standards bodies en masse helping swell the Italian group, for
instance, from a half-dozen members to 85." Id.; see
also Daniel Goldberg, Microsoft Pressed Swedish Partners to
Vote for Open XML, PC WORLD, Aug. 30, 2007,
http://www.pcworld.com/ article/ id,136599-pg,1/ article.html (noting that Microsoft offered "extra marketing contributions" and
"extra support in the form of Microsoft resources" to persuade its
Swedish business partners to vote for the adoption of Office Open
XML).
140
Press Release, Microsoft, Microsoft Makes Strategic Changes in
Technology and Business Practices to Expand Interoperability (Feb.
21, 2008), available at
http://www.microsoft.com/ presspass/ press/ 2008/ feb08/ 02-21Expand InteroperabilityPR.mspx ;
Mary-Jo Foley, All About Microsoft: Reading the Fine Print on
Microsoft's Open-Source Promises, ZDNET, Feb. 21, 2008,
http://blogs.zdnet.com/ microsoft/ ?p=1208 .
141
See Dean Hachamovitch, Microsoft's Interoperability
Principles and IE8, IEBLOG, Mar. 3, 2008,
http://blogs.msdn.com/ ie/ archive/ 2008/ 03/ 03/ microsoft-s -interoperability -principles -and-ie8.aspx .
142
See, e.g., Chris Wilson, Standards and CSS in IE,
IEBLOG, July 29, 2005,
http://blogs.msdn.com/ ie/ archive/ 2005/ 07/ 29/ 445242.aspx ;
Ted Schadler, Commentary: IBM, Microsoft's Web Services
Sing-Along, CNET NEWS, Sept. 22, 2003,
http://www.news.com/ 2030-1069 _3-5079712.html ; Nick Wingfield, Microsoft Standards: Windows to W3C, CNET
NEWS, July 1, 1997,
http://www.news.com/ Microsoft-standards -Windows-to-W3C/ 2100-1023 _3-201106.html .
143
Press Release, European Commission, Commission Takes Note of
Microsoft's Announcement of Interoperability Principles (Feb. 21,
2008), available at
http://europa.eu/ rapid/ press Releases Action.do ?reference =MEMO/08/106
(emphasis added).
144
Press Release, European Commission, Commission Decision to Impose
Penalty Payments on Microsoft-- Frequently Asked Questions (Feb.
27, 2008), available at
http://europa.eu/ rapid/ press Releases Action.do ?reference =MEMO/08/125 .
145
Microsoft Corp., Introduction to DOM Storage, Microsoft
Developer Network,
http://msdn2.microsoft.com/ en-us/ library/ cc197062.aspx .
146
See World-Wide Web Consortium, HTML 5: A Vocabulary and
Associated APIs for HTML and XHTML 4.10 (Working Draft, June 10,
2008), available at
http://www.w3.org/ TR/ html5/ #storage .
147
Compare id. (documenting a standard set of storage related
events and synchronous operations) with Microsoft Corp.,
Introduction to DOM Storage, Microsoft Developer Network,
http://msdn.microsoft.com/ en-us/ library/ cc197062.aspx
(documenting different storage-related event names and
asynchronous operations).
148
See California Group's Report on Remedial Effectiveness at
24 (Aug. 30, 2007), New York v. Microsoft Corp., 224 F. Supp. 2d
76 (D.D.C. 2002) (No. 98-1232), available at
http://www.naag.org/ assets/ files/ pdf/ antitrust .2007-08-30 _Filed _CA_Group _Effectiveness _Report.pdf ;
see also Microsoft Corp., Annual Report (Form 10-K) at 67
(July 31, 2008), available at
http://idea.sec.gov/ Archives/ edgar/ data/ 789019/ 000119312 508162768/ d10k.htm .
The profit margin for Microsoft's client segment, which includes
its Windows operating system, was 77% in fiscal year 2008. See
id. at 23. The profit margin for Microsoft's business
division, which includes Office, was 65%. See id. at 26.
149
See Operating System Market Share Survey, Net Applications,
Dec. 2008, available at
http://marketshare.hitslink.com/ operating-system -market-share.aspx ?qprid=8 ; California Group's Report on Remedial Effectiveness at 10 (Aug.
30, 2007), New York v. Microsoft Corp., 224 F. Supp. 2d 76
(D.D.C. 2002) (No. 98-1232), available at
http://www.naag.org/ assets/ files/ pdf/ antitrust .2007-08-30 _Filed_CA_Group _Effectiveness _Report.pdf .
150
See California Group's Report on Remedial Effectiveness at
10 (Aug. 30, 2007), New York v. Microsoft Corp., 224 F.
Supp. 2d 76 (D.D.C. 2002) (No. 98-1232), available at
http://www.naag.org/ assets/ files/ pdf/ antitrust .2007-08-30 _Filed_CA_Group _Effectiveness _Report.pdf .
151
See id.; see also Hadley Stern, Mac Updates vs.
Windows Updates, O'REILLY NETWORK, May 20, 2004,
http://www.oreillynet.com/ mac/ blog/ 2004/ 05/ mac_updates _vs_windows _updates.html
(contrasting Apple's regular update schedule for its operating
system with Microsoft's and noting that "Microsoft's ... approach
leaves innovation on a very slow timeframe").
152
See Robert Vamosi, Editors' Reviews: Windows Vista,
CNET REVIEWS, Jan. 24, 2007,
http://reviews.cnet.com/ windows/ windows-vista -home-premium/ 4505-3672 _7-32013237.html ?tag =prod.2
(labeling Vista a "warmed-over Windows XP Home edition" and noting
that after five years of development "there's a definite 'Is that
all?' feeling"); Ina Fried & Margaret Kane, Microsoft
Revamps Its Plans for Longhorn, CNET NEWS, Aug. 27, 2004,
http://www.news.com/ Microsoft -revamps -its -plans -for -Longhorn/ 2100-1016 _3-5327150.html
(noting that Microsoft "has not had a full release of its desktop
operating system since Windows XP debuted in October 2001").
153
Top Ten Terrible Tech Products, CNET CRAVE, Nov. 20, 2007,
http://crave.cnet.co.uk/ gadgets/ 0, 39029552, 49293700 -10,00.htm .
154
EC Decision, supra note 52, 463 (citing an internal
Microsoft memo drafted for Bill Gates by C++ General Manger Aaron
Contorer and dated Feb. 21, 1997).
155
See To Pay or Not to Pay: The World of Office Suites
Opens Up, KNOWLEDGE@W.P. CAREY, Arizona State Univ. School of
Business, Oct. 10, 2007,
http://knowledge.wpcarey.asu.edu/ article.cfm ?articleid =1483 ;
see also Daniel Eran Dilger, Microsoft's Outrageous
Office Profits, ROUGHLY DRAFTED MAG, Sept. 9, 2007,
http://www.roughlydrafted.com/ 2007/ 09/ 09/ microsoft%e2%80%99s -outrageous -office -profits/
("Microsoft's Office suite represents the third pillar of the
company's core trio of monopolies, next to its Windows desktop
software and its Windows Server products.").
156
See Microsoft Office - Compare the Office 2007 Suites,
http://office.microsoft.com/ en-us/ suites/ FX101635841033.aspx .
157
See Kurt Cagle, Microsoft Office Open XML Fails to Win
ISO Vote, O'REILLY XML BLOG, Sept. 4, 2007,
http://www.oreillynet.com/ xml/ blog/ 2007/ 09/ microsoft_office _open_xml _fail.html .
158
See Jefferson Graham, Google Apps Can Be a Small Firm's
Best Friend, USA TODAY, Feb. 12, 2008,
http://www.usatoday.com/ tech/ products/ software/ 2008-02-12 -google-apps_N.htm
(calling Microsoft Office "a software behemoth in Corporate
America").
159
See Microsoft Corp., Annual Report (10-K), at 26 (July 31,
2008), available at
http://idea.sec.gov/ Archives/ edgar/ data/ 789019/ 000119312 508162768/ d10k.htm ;
see also Daniel Eran Dilger, Office Wars 3--How
Microsoft Got Its Office Monopoly, ROUGHLY DRAFTED MAG., Sept.
10, 2007,
http://www.roughlydrafted.com/ 2007/ 09/ 10/ office-wars -3-how -microsoft-got -its-office -monopoly/
("Microsoft's Office monopoly gives the company more revenues and
delivers nearly as much profit as its Windows software.").
160
See David Kirkpatrick, Gates and Ozzie: How to Escape
E-Mail Hell, FORTUNE, June 27, 2005, 169-72, available
at
http://money.cnn.com/ magazines/ fortune/ fortune _archive/ 2005/ 06/ 27/ 8263426/ index.htm
("Our biggest competitor is always the status quo--people may just
do things the way they've been doing them and feel, hey, that's
good enough.").
161
See Gregg Keizer, Microsoft Office System, CNET
REVIEWS, Oct. 21, 2003,
http://reviews.cnet.com/ 4520-3513 _7-5092597 -1.html ?tag=txt
(explaining that Microsoft Office "isn't a must-have upgrade for
the average home user"); Gregg Keizer, Microsoft Office XP
Suite Reviews, CNET REVIEWS, Mar. 15, 2001,
http://reviews.cnet.com/ office-suites/ microsoft -office-xp/ 4505-3524 _7-5152705.html ?tag =prod.txt.5
(noting that Microsoft Office XP is "not worth the cost, time, and
effort for single or home users" and offers only "incremental
improvements"); Gregg Keizer, All About Office 2000: Should You
Upgrade?, CNET REVIEWS, Apr. 12, 1999,
http://web.archive.org/ web/ 20001218073500/ home.cnet.com/ category/ topic/ 0,10000, 0-3670-7 -278204 ,00.html
(follow the "Should You Upgrade?" link on the right) (stating that
Office 2000 is not "cost smart" for "small businesses,
work-at-homers, or those operating without the infrastructure of
an intranet").
162
See Elinor Mills, Google Combines Word Processing,
Spreadsheets, CNET NEWS, Oct. 10, 2006,
http://www.news.com/ Google -combines -word -processing, -spreadsheets/ 2100-1032 _3-612 4593.html ?tag= nefd.top
(explaining that Google Docs & Spreadsheets is a free program
that allows users to manage and create documents on the Web and
noting that Microsoft has responded by "revamping its business");
see also Elsa Wenzel, Microsoft Office 2007 Office Suite
Reviews, CNET REVIEWS, Jan. 29, 2007,
http://reviews.cnet.com/ office -suites/ microsoft -office -2007/ 4505-3524 _7-32143052.html ?tag =prod.txt.1 ("The advent of Office 2007 comes as a growing number of competing
tools are simpler, cost less (if they aren't free), and handle the
same core features.").
163
See Elsa Wenzel, Microsoft Office 2007 Office Suite
Reviews, CNET REVIEWS, Jan. 29, 2007,
http://reviews.cnet.com/ office -suites/ microsoft -office -2007/ 4505-3524 _7-3214 3052.html ?tag= prod.txt.1
(noting that the average user rating for Microsoft Office 2007 was
"mediocre"). With Office 2007, Microsoft switched from its
proprietary binary file format for electronic documents to XML
file format. Id. ("The new era of Office affects even those
who don't upgrade, and a conversion tool is needed to let older
Office versions open Office 2007's default, Open XML files."). For
developers who had spent years reverse engineering the proprietary
binary file format in order to allow some level of
interoperability with non-Microsoft systems, the switch to XML
caused new incompatibility problems with these non-Microsoft
users. See Ephraim Schwartz, ODF vs. OpenXML,
INFOWORLD, May 15, 2007,
http://weblog.infoworld.com/ realitycheck/ archives/ 2007/ 05/ odf_vs _openxml.html .
164
See Browser Market Share for YTD 2009, Net Applications,
http://marketshare.hitslink.com/ browser -market -share.aspx ?qprid=0
(showing Microsoft Internet Explorer market share at almost 70%);
California Group's Report on Remedial Effectiveness at 3 (Aug. 30,
2007), New York v. Microsoft Corp., 224 F. Supp. 2d 76
(D.D.C. 2002) (No. 98-1232), available at http://www.naag.org/ assets/ files/ pdf/ antitrust .2007-08-30 _Filed_CA_Group _Effectiveness _Report.pdf (noting shares above 85% through 2006). It is worth noting that
what little ground Internet Explorer has recently lost to its
rival browsers is not due to any success on the part of the
consent decree that ended the United States' antitrust suit
against Microsoft. As the California Group (the Plaintiff States
of California, Connecticut, Iowa, Kansas, Minnesota, and
Massachusetts and the District of Columbia) emphasized, even
counsel for the United States was not willing to attribute any
reduction in Microsoft's web browser market share to the Final
Judgment. See id. at 9 (quoting counsel for the
United States as saying, "It's hard to know what [that reduction
is] attributable to, and I wouldn't want to credit the final
judgment.").
165
See Brian Wilson, Browser History Timeline: Overview,
http://www.blooberry.com/ indexdot/ history/ browsers2.htm .
166
See id.; Rex Baldazo, Review: Microsoft Internet
Explorer 6.0, CNET REVIEWS, Mar. 31 2003,
http://reviews.cnet.com/ software/ microsoft -internet -explorer-6/ 4505-3513 _7-2083 2430.html ?tag= prod.txt.2 ;
Jim Rapoza, IE 5.0's Best Surprise Is No Surprise, EWEEK,
Mar. 29, 1999,
http://web.archive.org/ web/ 2001020 9175240/ zdnet.com/ products/ stories/ reviews/ 0,4161 ,2227 704,00.html .
(stating that as an upgrade, IE 5.0 is "bloated" and "doesn't
radically change the product").
167
Charles H. Ferguson, What's Next for Google, TECH. REV.,
Jan. 2005,
http://www.technologyreview.com/ Infotech/ 14065/
(pointing out that only recently has Microsoft again begun
innovation in the browser market once it "realized that Firefox
was starting to gain share"). Around the same time, Microsoft also
ended development of Internet Explorer for Mac users, redeploying
the entire team to work on an unrelated project. See Jorg
Brown, I was on the MacIE 6 Team When It Got Canned,
SLASHDOT, Dec. 18, 2005,
http://apple.slashdot.org/ comments.pl ?sid= 171546 &cid= 14288661
("[A]lmost immediately after 5.0 was released, the MacIE team was
redeployed to work on a set-top DVR box."); see also Colin
Baker, Microsoft Drops Mac IE, CNET NEWS, Dec. 19, 2005,
http://www.news.com/ Microsoft-drops -Mac-IE/ 2100-1016 _3-600 0919.html
(stating that Microsoft officially ended support for the Mac IE in
2003 and that it had not updated the software in over three years,
meaning that Mac users only had access to IE 5 while Windows users
had IE 6).
168
See Robert Vamosi, Internet Explorer 7 Browser
Review, CNET REVIEWS, Oct. 18, 2006,
http://reviews.cnet.com/ browsers/ internet -explorer-7/ 4505-3514 _7-3211 1537.html
("IE 7 was Microsoft's one chance to leapfrog ahead of the
competition, but the company has only barely caught sight of the
current front-runners. For more features and greater security,
switch to Mozilla Firefox."). Some changes within IE7 are "merely
cosmetic" and the browser is missing the "innovative, cutting-edge
features" found on Firefox2. Id.; see also Fred
Vogelstein, Search and Destroy, FORTUNE, May 2, 2005, at 75,
available at
http://money.cnn.com/ magazines/ fortune/ fortune _archive/ 2005/ 05/ 02/ 8258478/ index.htm
("[T]he recently released Firefox browser, which can be downloaded
free, has forced Gates to reconstitute an Internet Explorer
development team.").
169
Dare Obasanjo, Mac IE's Death: A Case for Microsoft Disbanding
or Transferring the Windows IE Team, Dare Obasanjo aka
Carnage4Life, Dec. 19, 2005,
http://www.25hoursaday.com/ weblog/ PermaLink.aspx ?guid= ba90f4aa -4a07 -4f3e -a318- bc1095c 61980 .
170
Walter S. Mossberg, For Tabbed Browsing and Other New Tricks,
Try Explorer's Rivals, WALL ST. J., Jan. 8, 2004, available at
http://web.archive.org/ web/ 2007021 4035829/ http:// ptech.wsj.com/ archive/ ptech-200 40108.html .
171
See California Group's Report on Remedial Effectiveness at
3 (Aug. 30, 2007), New York v. Microsoft Corp., 224 F.
Supp. 2d 76 (D.D.C. 2002) (No. 98-1232), available at
http://www.naag.org/ assets/ files/ pdf/ antitrust .2007-08-30 _Filed_CA_Group _Effectiveness _Report.pdf
(reporting an 85% market share for Internet Explorer in 2006).
172
See Robert Vamosi, Internet Explorer vs. Firefox 2,
CNET REVIEWS, Oct. 30, 2006,
http://reviews.cnet.com/ 4520-10442 _7-665 6808-7.html ?tag=btn
(stating that "Firefox 2 still rules the browser roost for now,
despite a much improved version of Internet Explorer" and noting
that Firefox has "earned its spot at the top of the browsers")
(link is to inner page of review); Erik Larkin, Radically New
IE 7 or Updated Mozilla Firefox 2--Which Browser is Better?,
PC WORLD, Oct. 24, 2006,
http://www.pcworld.com/ article/ id,127309 -page, 6-c, browsers/ article.html
("Of the two rivals, Firefox remains the better application.").
173
See California Group's Report on Remedial Effectiveness at
12 (Aug. 30, 2007), New York v. Microsoft Corp., 224 F. Supp. 2d
76 (D.D.C. 2002) (No. 98-1232), available at
http://www.naag.org/ assets/ files/ pdf/ antitrust .2007-08-30 _Filed_CA_Group _Effectiveness _Report.pdf
("The OEM flexibility provisions of the Final Judgment have not
produced competitively significant results because they do not
adequately address the persistent disincentives (including
Microsoft's advantage of free universal distribution, additional
support costs, potential consumer confusion and PC resource
constraints) that discourage OEMs from preloading rival middleware
products on a Windows PC...."); see also Edward F.
Moltzen, Firefox Gets No Respect from PC Makers, Despite
Popularity, CHANNELWEB NETWORK, Oct. 15, 2007,
http://www.crn.com/ software/ 202402974 .
174
See Net Applications, Browser Market Share,
http://marketshare.hitslink.com/ report.aspx ?qprid=0 .
As the Chairperson of the Mozilla Foundation put it: "Equally
important, the success of Mozilla and Firefox does not indicate a
healthy marketplace for competitive products. Mozilla is a
non-profit organization; a worldwide movement of people who strive
to build the Internet we want to live in. ... I certainly hope
that neither the EU nor any other government expects to maintain a
healthy Internet ecosystem based on non-profits stepping in to
correct market deficiencies." Mitchell Baker, Chairperson, Mozilla
Foundation, The European Commission and Microsoft,
Mitchell's Blog, Feb. 6, 2009,
http://blog.lizardwrangler.com/ 2009/ 02/ 06/ the- european- commission -and- microsoft/ .
175
Paul Festa, Microsoft Offers Tabbed Browsing--In IE 6,
CNET NEWS, June 8, 2005, available at
http://news.cnet.com/ Microsoft -offers -tabbed -browsing --in-IE-6/ 2100-1032 _3-573 8037.html
(explaining that tabbed browsing is a feature, "long offered by IE
competitors like Opera, Safari and Firefox," that enables users to
open several web pages in a single window and select among them by
clicking on a tab at the top of the page, and noting that tabbed
browsing would not be standard on Internet Explorer until Version
7).
176
See Sara Grant, Lessons from the Browser Wars: Q&A
with Pai-Ling Yin, HARV. BUS. SCHOOL WORKING KNOWLEDGE, Apr.
10, 2006,
http://hbswk.hbs.edu/ item/ 5288.html
(detailing corporate managers' unwillingness to switch their
companies to Firefox).
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