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DOJ Mentions SCO in Report on MS Compliance Efforts
Sunday, January 18 2004 @ 11:35 PM EST

This is interesting, and it got me thinking. The Department of Justice has been looking into some aspects of Microsoft's compliance with the final settlement of the antitrust trial, and SCO's name came up.

In connection with the Department of Justice's monitoring of Microsoft's compliance in US v. Microsoft, they provide the court with status reports every six months on how things are going. Their most recent report has just been made available.

At the October 24, 2003 status conference, Judge Kollar-Kotelly directed the DOJ to file a report on January 16, just before the next court hearing on January 23rd, updating her on some issues related to Microsoft's licensing, specifically why so few companies were signing up:

"A judge has asked the US Department of Justice to investigate why only nine companies have signed up to license Microsoft's technology for their own software products, an offering forming part of the federal antitrust settlement with the software company.

"During an antitrust settlement oversight hearing Friday, Judge Colleen Kollar-Kotelly questioned why more companies hadn't taken advantage of the licensing portion of the antitrust settlement, approved by Kollar-Kotelly in late 2002.

"Kollar-Kotelly has asked the DOJ to interview software companies to see if changes are needed in the licensing terms in the antitrust settlement. In a July hearing, Kollar-Kotelly said new licensing terms that Microsoft would later announce should satisfy concerns over royalty rates Microsoft was charging for its communications protocols."

That report is now available. When Microsoft appeared at that conference, it listed three new licensees as examples of the licensing program's success, one of them SCO, and argued the program was a success.

If some didn't want to sign up, that was their right, they argued. After all, MS can't force them to want to interoperate with Microsoft products:

"Microsoft defended its progress, claiming that it was talking to almost 40 suppliers about licensing its technology. The progress from four to nine licensees in three months shows a large effort on Microsoft's part, Desler insisted.

"'We've taken some aggressive steps in terms of promoting this program and in terms of educating the industry about it,' Desler added. 'We've more than doubled the number of licensees we have in three months. This does show some momentum, but this is still a work in progress.'"

However, in the new status report, the DOJ finds after investigation that this SCO license was taken in the context of developing a "broader relationship" with Microsoft, citing MS's earlier paying SCO for a patent and licensing rights.

In other words, according to my reading, they are saying it hardly counts as an example of companies thinking Microsoft's terms for licensing are acceptable, because there was a deal here, whereby each helped the other, not an example of a company just signing up because the licensing terms were on their own merits desirable or at least acceptable to them.

That explains, no doubt, why IBM has an interest in this license's terms and asked to see it in connection with the law suit. It also means to me that it is probably time to focus a bit more on this deal that was struck. What patent did Microsoft sign up to use? What patent did SCO have at the time? And what does Microsoft plan to use the patent for? It also frames Microsoft's licensing program in the appropriate context, for me anyway. How broad is this "broader relationship"?

The status report's final section is written by Microsoft, so we get to see their reply to the concern. First, here is what the DOJ says about the SCO signup:

"Third, two companies — EMC and SCO — took their licenses in the context of developing broader relationships with Microsoft. On May 19, 2003, SCO provided Microsoft with a license covering SCO's UNIX technology, including patent and source code licenses.(6)

"(ftnt 6.) Press Release, SCO, SCO Announces UNIX Licensing Deal with Microsoft (May 19, 2003) at http://ir.sco.com/ReleaseDetail.cfm?ReleaseID=109360. Also, during the October 24, 2003 Status Conference, the Court referred to SCO as being "connected to the open source" Linux community. Transcript of Status Conference at 6 (Oct. 24, 2003). SCO's relationship with that community has become largely hostile. The SCO Group is currently seeking to enforce intellectual property rights against users of Linux client and server technology. Over the past six months, SCO has informed thousands of Linux end users that certain Linux products may violate UNIX intellectual property owned by SCO. Press Release, SCO, SCO Announces New Initiatives to Enforce Intellectual Property Rights (Dec. 22, 2003) at http://ir.sco.com/ReleaseDetail.cfm?ReleaseID=125089."

Microsoft's reply section basically says, So what? Here's 'So what?' in legalese:

"Finally, the Plaintiffs have expressed concern that certain licensees, such as EMC and SCO, have relationships with Microsoft that are broader than their MCPP licenses. Microsoft has relationships with a wide variety of firms in the PC ecosystem. Microsoft believes that it should be willing to explore broader relationships with those prospective MCPP licensees who are interested in such relationships. Such relationships will typically entail additional technology sharing or product development arrangements, which should be seen as beneficial. Microsoft's willingness to explore a broader relationship does not reduce those firms' ability or incentives to use the licensed protocols in furtherance of the remedial goals of the Final Judgments."

You may find it of interest to see that some complaints the Department of Justice and the New York Attorney General Elliiot Spitzer have received were ignored as being "nonsubstantive", meaning that in their view the complaints were not properly framed as being about Microsoft's compliance with the settlement. Others were taken seriously and are being investigated right now or have been acted upon already. For example, there were complaints lodged about not being able to remove Microsoft Messenger from XP, and Microsoft eventually acted on the complaints like this:

"Regarding the complaints concerning the inability for users to uninstall Windows Messenger from Windows XP, Microsoft has provided instructions on how to prevent Windows Messenger from running in Windows XP at the following link: http://support.microsoft.com/?kbid=302089."

The status report also tells us that one current investigation, based on complaints received, has to do with non-assertion of patents:

"With respect to the second issue concerning a non-assertion of patents provision included in the uniform OEM license, Plaintiffs have received an additional complaint and continue to gather information and analyze the issues presented."

Evidently, specific complaints that related directly to the terms of the final settlement were and are being investigated and acted on. The settlement terms were the following:

"Under the settlement, Microsoft:

-May not participate in exclusive deals that could hurt competitors.
-Must offer uniform contract terms for computer manufacturers.
-Must let manufacturers and customers remove icons from desktops for some Microsoft features.
-Must release some technical information to rival software developers."

Presumably, anything related to these four points would be substantive. The Department of Justice's Microsoft page is here. On this page, it says that communications to them about Microsoft's compliance can be addressed to:

Renata B. Hesse
Chief, Networks & Technology Section
Antitrust Division
U.S. Department of Justice
600 E Street, NW
Suite 9500
Washington, DC 20530

Their page for public comments is here.

There is also a web site established for coordinated state enforcement of federal court judgments against the Microsoft Corporation and they say:

"If you believe Microsoft is violating either of the state final judgments, you can file a complaint by submitting an on-line complaint or by mailing a written complaint (along with supporting documentation, if available) to:

"Coordinated State Enforcement of Microsoft Antitrust Judgments
c/o California Office of the Attorney General
455 Golden Gate Avenue, Suite 11000
San Francisco, CA 94102"

The Final Judgment in the case, entered by United States District Judge Colleen Kollar-Kotelly of the District of Columbia in November 2002, mandated the creation of a three-person Technical Committee to assist in both monitoring compliance with and enforcing the terms of the settlement. They say complaints may be submitted via email to Complaints@TheTC.org.

As you recall, Massachusetts is the sole holdout state refusing to approve the settlement, and Massachusetts is still taking complaints as well, although their web site doesn't make it simple to figure out how to file one. Their interest is broader than the four settlement points, however. Their attorney general says the licensing program is not working and he is investigating anticompetitive behavior by Microsoft against rival browsers and Adobe (see also here) and has been actively asking for input:

"'If Microsoft is taking steps to hobble the competitive effectiveness of these rival products and thereby supplant them, such serial killing of competing technologies is a serious and troubling prospect,' wrote Thomas F. Reilly, the attorney general in Massachusetts.

"Microsoft and the Justice Department were expected to describe sometime later the company's efforts to abide by terms of the settlement. The company declined to comment immediately on Massachusetts' claims.

"Reilly described unspecified reports as the source of these latest allegations against Microsoft; the attorney general's office has actively solicited complaints on its Web site about Microsoft's business conduct.

"Massachusetts also criticized a key element of the antitrust settlement as ineffective. One of the most important provisions of the landmark settlement compels Microsoft to permit competitors to license parts of its technology to build products that seamlessly communicate with computers running Windows software.

"Massachusetts said the program was feckless, arguing that the prices Microsoft charges rivals were too high and that the company provides only incomplete information to competitors."

Here is their timeline of events:

"November 1, 2002 Judge Kollar-Kotelly issues three separate orders: (1) Approving DOJ's settlement with Microsoft, formalized in its proposed Consent Judgment, subject to one amendment giving the court continuing jurisdiction; (2) Approving the "settling states" consent judgment with Microsoft, also subject to its continuing jurisdiction; and (3) Ordering a remedy in the case pursued by the "non-settling states." That remedy, imposed after the remedies trial, substantially tracks the DOJ settlement, with some modifications.

"November 29, 2002 Massachusetts announces it is appealing Judge Kollar-Kotelly's order on remedies, seeking to have the D.C. Court of Appeals review the trial court's order and to impose additional remedies addressing Microsoft's past and future conduct."

Back in May, in a press release, they listed what they saw as issues in the settlement:

"The court-ordered remedy issued last year in the Microsoft antitrust case fails to restore competition, help consumers, or hold Microsoft accountable for its unlawful actions, Attorney General Tom Reilly argued today in a brief filed with the federal appeals court. . . . AG Reilly's appeal brief addresses a variety of defects in the court-ordered remedy including:

* Failure to require Microsoft to stop unlawfully commingling its software code (for instance, inextricably interweaving the Internet Explorer browser into the operating system so that it cannot be reasonably removed).

* Failure to stop Microsoft's proven illegal practice of deceiving software developers about its products. The states had proposed a remedy that required Microsoft to follow a 'truth in advertising' practice by prohibiting it from misleading software developers about its support for industry standards. According to the appellate brief filed today, Microsoft founder Bill Gates admitted during remedy proceedings that Microsoft routinely makes knowingly inaccurate claims regarding its compliance with industry standards.

* Failure to address Microsoft's ill-gotten gains and the reality that it controls the now-dominant browser and has successfully weakened its competition, Java.

* Failure to properly protect new technologies, such as web services, from future predatory actions on the part of Microsoft.

* Failure to place any effective disclosure requirements on Microsoft, regarding how other companies' products can interoperate with Windows.

"Assistant Attorney General Glenn Kaplan, Assistant Attorney General Sara Hinchey and Assistant Attorney General Chris Barry-Smith of AG Reilly's Office are overseeing the Microsoft appeal."

It's probably too late to file a complaint with the DOJ or NY State or California and have it be considered at the upcoming hearing on January 23, which is what the current status report was prepared for. But there is another status report, presumably, in six months. The Massachusetts appeal is a different issue. There is also, of course, the EU Commission investigation into Microsoft, and that proceeding is looking into different issues.

One other tidbit worth mentioning. The judge refused to allow an email from a Microsoft exec to Bill Gates and others to be considered when the states asked her to consider it, back before most of them settled, but only because in her view it was too late for it to be considered. It's an interesting email in our context, because in it, the executive complained to Gates et al about Intel encouraging companies to use Linux and outlined steps he planned to take to pay Intel back:

"THE AUGUST 2000 e-mail from then Microsoft Vice President Joachim Kempin to other top level officials, including Chairman Bill Gates, said that chipmaker Intel was lobbying other computer makers 'who are not (Microsoft) friendly in the first place and ... encouraging them to go to Linux.' Linux is a free operating system that competes with Microsoft Windows. (MSNBC is a joint venture between Microsoft and NBC.)

"During the initial six-week remedy hearing Judge Colleen Kollar-Kotelly ruled that lawyers for the nine states pushing the court to impose tougher sanctions on Microsoft couldn’t admit the Kempin e-mail while cross-examining Gates. Kollar-Kotelly ruled the e-mail was outside the scope of the initial antitrust trial for which the company was found to have violated antitrust laws. . . .

"In his e-mail to Gates, Kempin lays out a strategy for a unilateral strike against Intel for having the audacity to suggest to computer makers that Linux might be a choice for consumers. Kempin said he planned to 'stop any go-to-market activities with Intel (and) only work with their competitors.'

"Kempin also notes that he would 'try and restrict source code deliveries where possible and be less gracious when interpreting agreements — again without being obvious about it.'”

It wouldn't be too late to present the email in any new trial, and considering that the DOJ sees SCO and MS as having a relationship... well, you get it. I'm wondering if Massachusetts might be interested in looking into just how broad the "broader relationship" between the two companies is. An investigation might lead to some solid answers. Is Massachusetts focused on Microsoft's anti-Linux conduct and do they view Linux as a Microsoft competitor? Presumably they do, but are they following the SCO story at all? Does it fit into that context? I don't know, but judging from this email, evidently it is not altogether irrational to look for deliberately nonobvious moves by Microsoft against Linux.


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