decoration decoration
Stories

GROKLAW
When you want to know more...
decoration
For layout only
Home
Archives
Site Map
Search
About Groklaw
Awards
Legal Research
Timelines
ApplevSamsung
ApplevSamsung p.2
ArchiveExplorer
Autozone
Bilski
Cases
Cast: Lawyers
Comes v. MS
Contracts/Documents
Courts
DRM
Gordon v MS
GPL
Grokdoc
HTML How To
IPI v RH
IV v. Google
Legal Docs
Lodsys
MS Litigations
MSvB&N
News Picks
Novell v. MS
Novell-MS Deal
ODF/OOXML
OOXML Appeals
OraclevGoogle
Patents
ProjectMonterey
Psystar
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v IBM
SCO v Novell
SCO:Soup2Nuts
SCOsource
Sean Daly
Software Patents
Switch to Linux
Transcripts
Unix Books
Your contributions keep Groklaw going.
To donate to Groklaw 2.0:

Groklaw Gear

Click here to send an email to the editor of this weblog.


To read comments to this article, go here
Antitrust Class Action Complaint Against Microsoft in Minnesota
Monday, March 22 2004 @ 05:42 AM EST

With the antitrust trial in Minnesota resuming today, I thought it would be useful to have the complaint as text. It's here as PDF and thanks to Frank Jaffe and especially to LvilleDebugger, we have it as searchable text.

One compelling reason to follow this trial is that they will be presenting evidence regarding Microsoft's actions with respect to DR-DOS.

IBM in discovery asked SCO for documents regarding the Caldera v. Microsoft case. SCO said they didn't have them and suggested they should ask Microsoft. Canopy arranged for the documents from the Caldera v. Microsoft lawsuit to be destroyed. But it seems at least some of the evidence is being presented fresh, as you will see when you read the complaint. Why IBM wanted the documents on this case, I don't know, but I expect with time it will become clear. Meanwhile, the facts in documents about the DR-DOS case that were turned into toilet paper may now reappear in testimony in this class action.

According to paragraph 20, this case will try to establish the following:

20. There are questions of law and fact common to the Class which predominate over any questions affecting only individual Class members. Such common questions include, but are not limited to:

a. Whether Microsoft is a monopolist in the markets for Intel-compatible personal computer operating system and applications software;
b. Whether Microsoft and its co-conspirators engaged in anti-competitive conduct in unreasonable restraint of trade;
c. Whether Microsoft engaged in conduct by which Microsoft unlawfully acquired, used and/or maintained its monopoly;
d. Whether the alleged conduct violates the Minnesota Antitrust law, Minn. Stat Sections 325D.49, et seq.:
e. Whether Microsoft's unlawful conduct has caused legally cognizable injury to each Class by increasing, maintaining, or stabilizing the prices that Plaintiffs and the Class members have paid for Microsoft software above competitive levels and/or by denying them a free choice in a competitive market, as well as the benefits of software innovation;
f. Whether Microsoft unlawfully tied its browser, Microsoft Internet Explorer, with the Windows software; and
g. Whether Plaintiffs and the Class members are entitled to damages and the appropriate measure of such damages.

So those are the issues. If those in the proofreaders' group especially could look this over against the original to make sure we didn't miss anything in our haste, I'd appreciate it.

By the way, according to an internetnews.com article, the firm representing the plaintiffs in Minnesota, Zelle, Hofmann, Voelbel, Mason & Gette, "helped negotiate a $1.1 billion settlement with Microsoft on behalf of California residents in January 2003". The article quotes some of the exhibit emails showing the deliberate incompatibilities Microsoft put in to make DR-DOS not work quite right. Laura DiDio immediately springs to Microsoft's defense:

"'Going back to 1988, the industry was in its infancy,' said Yankee Group analyst Laura Didio. 'A lot of engineers simply did not have enough experience or know-how to fix these problems.' In that era, according to Didio, 'Integration between disparate software platforms ranged from barely adequate to extremely poor and unworkable. What you're reading in these memos was widely practiced by vendors at the time, including Microsoft competitors.'"

Compare that "explanation" with the memos:

"Pages of e-mails and memos filed by the state and published by the Fourth Judicial District Court are filled with tidbits that could show Microsoft chose to break Windows unless it ran on MS-DOS. For example, one September 1988 e-mail from 'billg' asks, 'You never sent me a response on the question of what things an app would do that would make it run with MSDOS and not run with DR-DOS. Is there any version check or API that they fail to have? Is their feature (sic) they have that might get in our way? I am not looking for something they can't get around. I am looking for something that their current binary fails on.'

"The e-mails filed as evidence also show there was much back-and-forth about whether an application could identify the flavor of DOS on the PC. According to another e-mail, 'Bill Gates ordered ... if it is non MS-DOS (such as DR-DOS), application will display messages saying "Since you use different environment, this application may not work correctly."' In a July 1991 e-mail, davidcol (David Cole, now vice president of the MSN and personal services group) writes, 'We should not consider things that stop Windows from working on Netware. (Netware here = netware + DR-DOS.) If it was just DR-DOS alone, then we should prevent Windows from working there.'

"In a September 1991 e-mail, philb (former Microsoft engineer Phil Barrett) responds to a developer's question sbout how to make Windows 3.1 run on DR-DOS 6 by writing, 'The approach we will take is to detect dr6 and refuse to load.'"

Does that sound like a bunch of engineers who couldn't figure out how to fix a problem to you? Or a bunch of executives trying to figure out how to make some? Then there is this pearl of wisdom from an attorney:

"The state will have to prove that if Microsoft hadn't taken exclusionary actions, there would be more competition today in the operating system market, said Allan Van Fleet, co-head of the antitrust practice group at the Houston law firm Vinson & Elkins. 'If you get a monopoly because you honestly have the best product or service, it's not a crime to charge whatever you can for it,' he said."

I don't want to make fun of anybody based on one quotation, because I've learned that reporters almost never get things exactly right, but he surely can't have said that.

**************************************************

STATE OF MINNESOTA DISTRICT COURT
COUNTY OF HENNEPIN FOURTH JUDICIAL DISTRICT   

_____________________________________

SECOND AMENDED CLASS
ACTION COMPLAINT AND
JURY TRIAL DEMAND

____________________________________

DANIEL GORDON, MICHAEL STOLLE,
VOCAL SIGNS, INC., BRANDON WELTER,
DAVID ELLINGSON, KARI A. WALLACE,
RECLAIM CENTER, INC., Individually and
On Behalf of All Others Similarly Situated,

Plaintiffs,

  v.

MICROSOFT CORPORATION,

Defendant.

____________________________________

Civil No. 00-5994

Honorable Bruce A. Peterson

___________________________________


Plaintiffs, for their Second Amended Class Action Complaint, by and through counsel, on behalf of themselves and all others similarly situated, against defendant Microsoft Corporation ("Microsoft"), on information and belief, formed after an inquiry reasonable under the circumstances, allege as follows:

NATURE AND BASIS OF THE ACTION


1. Plaintiffs bring this class action under the laws of Minnesota for damages for injuries sustained as a result of defendant Microsoft's anti-competitive and monopolistic practices in the conduct of trade or commerce, specifically those acts or practices that it intended to use, did use, and continues to use to prevent and destroy competition and unlawfully acquire and/or maintain monopoly power, to deny fundamental product choice in the operating systems and applications software markets for word processing, spreadsheets and office suites, and to raise prices to supra-competitive levels in Minnesota in the following product markets:

a) The licensing of Intel-compatible personal computer ("PC") operating system software; and

b) The licensing of Intel-compatible PC applications system software, including word processing, spreadsheet, and office suite software.

2. The purpose and effect of this illegal conduct has been to deny purchasers of Microsoft operating system and applications software a competitive price and free choice among competing software products, as well as the benefit of software innovation. Microsoft has restricted trade in the relevant software markets, resulting in substantial harm both to competition and to the ultimate consumers in those markets.

3. These claims are prosecuted by two classes. The first class, the "Windows Operating Software Class," is comprised of Minnesota indirect purchasers of Microsoft Windows or MS-DOS operating software. For purposes of this class, "Microsoft Windows or MS-DOS operating software" means Microsoft Windows operating software for use in personal computers which includes, without limitation, MS-DOS, Windows 3.11, Windows for Workgroups, Windows NT Workstation, Windows 95 and/or Windows 98 operating system software compatible with Intel x86/Pentium architecture. For purposes of this class, "Windows Operating Software Class" means a person or entity, who at the time of purchase, resided in or was incorporated in Minnesota who, on or after May 18, 1994, was an indirect purchaser of Microsoft Windows or MS-DOS operating software, and who did not purchase its Microsoft Windows or MS-DOS operating software for the purpose of resale.

4. The second class, the "Windows Applications Software Class," is comprised of Minnesota indirect purchasers of Microsoft Windows "Word" word processing software, and/or "Excel" spreadsheet software, and/or "Office" office suite software compatible with Microsoft Windows operating software. For purposes of this class, "Windows Applications Software Class," means a person or entity, who at the time of purchase, resided in or was incorporated in Minnesota who, on or after May 18, 1994, was an indirect purchaser of Microsoft Windows "Word" word processing software, and/or "Excel" spreadsheet software, and/or "Office" office suite software and who did not purchase its Microsoft Windows "Word", "Excel" or "Office" for the purpose of resale.


JURISDICTION AND VENUE

   5. This Court has jurisdiction pursuant to the Minnesota Antitrust Law, Minn. Stat. § 325D. 49 et seq. This Court also has jurisdiction pursuant to Minn. Stat. § 543.19 over defendant because it is authorized to conduct, and in fact does conduct, substantial business in the State of Minnesota. Defendant has sufficient minimum contacts with Minnesota or otherwise intentionally avails itself of the consumer markets within Minnesota through the promotion, sale, marketing and/or distribution of its products in Minnesota to render the exercise of jurisdiction by the Minnesota courts permissible under traditional notions of fair play and substantial justice.

   6. This complaint is not based upon federal law or any federal question. No claim for relief is made under federal law. The amount in controversy for each named Class representative and each absent Class member does not exceed, inclusive of interest, fees and costs, the sum or value of $75,000.00.

   7. Venue is proper in this County, pursuant to Minn. Stat. § 542.09, as the acts upon which this action is based occurred in part in this County. Plaintiffs and numerous Class members reside in this County, and purchased Microsoft licensed Intel-compatible personal computer operating system and applications software and were thereby injured in this venue. Defendant received substantial compensation and profits from sales of such products in this County. Thus, Defendant's liability arose in part in this County.


PARTIES

   8. Plaintiff Daniel Gordon ("Gordon") is a resident of Hennepin County, Minnesota and at the time of purchase, a Minnesota indirect purchaser of Microsoft operating system and applications software. Gordon is a member and proposed Class Representative of both proposed classes.

      9. Plaintiff Michael Stolee ("Stolee") is a resident of Hennepin County, Minnesota, and at the time of purchase a Minnesota indirect purchaser of Microsoft operating system and applications software. Stolee is a member and proposed Class Representative of both proposed classes.

10. Plaintiff Vocal Signs, Inc. ("VSI") is a Minnesota corporation with its principal place of business in Minnesota, and at the time of purchase a Minnesota indirect purchaser of Microsoft operating system and applications software. VSI is a member and proposed Class Representative of both proposed classes.

11. Plaintiff Brandon Welter ("Welter") is a resident of Hennepin County, Minnesota and at the time of purchase a Minnesota indirect purchaser of Microsoft operating system software.

12. Plaintiff David Ellingson ("Ellingson") is a resident of Hennepin County, Minnesota and at the time of purchase a Minnesota indirect purchaser of Microsoft operating system and applications software. Ellingson is a member and proposed Class Representative of both proposed classes.

13. Plaintiff Kari A. Wallace ("Wallace") is a resident of Virginia and at the time of purchase a Minnesota indirect purchaser of Microsoft operating system and applications software. Wallace is a member and proposed Class Representative of both proposed classes.

14. Plaintiff Reclaim Center, Inc. ("RCI") is a Minnesota corporation with its principal place of business in Minnesota and at the time of purchase a Minnesota indirect purchaser of Microsoft operating system and applications software. RCI is a member and proposed Class Representative of both proposed classes.

15. Defendant Microsoft is a corporation organized and existing under the laws of the State of Washington, with its principal place of business located at One Microsoft Way, Redmond, Washington. At all relevant times Microsoft has sold and licenses and continues to sell and license Intel-compatible PC operating system and applications software. Microsoft is the world's largest supplier of computer software for personal computers, which it supplies largely through sellers of personal computers and independent distributors. In its fiscal year 1998, Microsoft had revenues of approximately $14.5 billion and net income of approximately $5 billion. Throughout the Class Period, Microsoft has marketed its personal computer operating system and applications software in Minnesota and elsewhere and has licensed this operating and applications software to sellers of personal computers, distributors, and resellers in Minnesota and elsewhere.

16. Various other individuals, partnerships, corporations and associations not named as defendants in this Complaint, have participated or acted in concert or in furtherance of the violations alleged herein and have performed acts and made statements in furtherance thereof. When and if Plaintiffs learn the identity of such persons, Plaintiffs may seek leave to amend this Complaint to add said co-conspirators as defendants.

CLASS ACTION ALLEGATIONS

17. Plaintiffs bring this action pursuant to Minn. R. Civ. P., Rule 23 on behalf of themselves and on behalf of the two classes defined below. The relevant time period for each class is May 18, 1994 to the present ("the Class Period"). The two classes are:

a. All persons or entities who acquired for their own use, and not for further selling, leasing or licensing, a license in Minnesota from Microsoft, an agent of Microsoft, or an entity under Microsoft's control, for an Intel-compatible PC version of MS-DOS, Windows 95, upgrades to higher MS-DOS versions, upgrades to or of Windows 95, Windows 98, upgrades to or of Windows 98, or other software products in which MS-DOS or Windows has been incorporated in full or part ("Microsoft Operating System Software") at any time during the Class Period ("Windows Operating Software Class"); and

b. All persons or entities who acquired for their own use, and not for further selling, leasing or licensing, a license in Minnesota from Microsoft, an agent of Microsoft, or an entity under Microsoft's control, for an Intel-compatible PC version of Microsoft Word or any upgrade of Microsoft Word, Microsoft Excel or any upgrade of Microsoft Excel, or Microsoft Office or any upgrade of Microsoft Office ("Microsoft Applications Software"), at any time during the Class Period ("Windows Applications Software Class").

Both classes exclude defendant and its co-conspirators; their parents, subsidiaries, affiliates, officers, directors, and employees. Also excluded are any federal, state or local governmental entity, and any judge or judicial officer presiding over this matter, judicial staff, and the members of their immediate families.

18. The Class is so numerous that joinder of all members is impracticable. There are thousands of members of the Class who are geographically dispersed.

19. Plaintiffs' claims are typical of the claims of the members of the Class because Plaintiffs and all Class members were injured by the same wrongful conduct of the Defendant as alleged herein.

20. There are questions of law and fact common to the Class which predominate over any questions affecting only individual Class members. Such common questions include, but are not limited to:

a. Whether Microsoft is a monopolist in the markets for Intel-compatible personal computer operating system and applications software;

b. Whether Microsoft and its co-conspirators engaged in anti-competitive conduct in unreasonable restraint of trade;

c. Whether Microsoft engaged in conduct by which Microsoft unlawfully acquired, used and/or maintained its monopoly;

d. Whether the alleged conduct violates the Minnesota Antitrust Law, Minn. Stat. §§325D.49, et seq.;

e. Whether Microsoft's unlawful conduct has caused legally cognizable injury to each Class by increasing, maintaining, or stabilizing the prices that Plaintiffs and the Class members have paid for Microsoft software above competitive levels and/or by denying them a free choice in a competitive market, as well as the benefits of software innovation;

f. Whether Microsoft unlawfully tied its browser, Microsoft Internet Explorer, with the Windows software; and

g. Whether Plaintiffs and the Class members are entitled to damages and the appropriate measure of such damages.

21. As the claims of the Plaintiffs are typical of the claims of the Class, and the Plaintiffs have no interests adverse to or which irreconcilably conflict with the interests of other members of the Class, Plaintiffs are adequate class representatives.

22. Plaintiffs will fairly and adequately protect the interests of the Class and have retained counsel experienced and competent in the prosecution of complex class action litigation.

23. A class action is superior to other available methods for the fair and efficient adjudication of the controversy and substantial benefits will derive from proceeding as a class action. Such treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum simultaneously, efficiently, and without the duplication of effort and expense that numerous individual actions engender. Class treatment also will permit the adjudication of relatively small claims by many Class members who could not afford to individually litigate such claims against large corporate defendants. There are no difficulties likely to be encountered in the management of this class action that would preclude its maintenance as a class action, and no superior alternative exists for the fair and efficient group-wide adjudication of this controversy.

DEFINITIONS
 
 The following definitions are provided to explain terms used herein:

24. "Applications" are software programs that perform specific user-oriented tasks. For example, Microsoft Word word processing software, Microsoft Excel spreadsheet software, and Microsoft Office office suite software are applications. Applications programs are typically written to run on a particular operating system and cannot run on other operating systems unless the developer develops additional code to "port" the program to the other operating system.

25. "Application Programming Interfaces" or "APIs" are synapses at which the developer of an application can connect to code in an operating system or other software program to allow the application program to use the services of that operating system or program.

26. A "Browser" is a software application that allows a user to navigate via the Internet and select, retrieve and view information located on the World Wide Web.

27. "Findings of Fact" dated November 5, 1999 by Judge Thomas Penfield Jackson in United States v Microsoft, filed May 18, 1998. See United States v. Microsoft Corp., 65 F. Supp. 1 (D.D.C. 1999). These Findings of Fact are incorporated herein as if here fully set forth.

28. "Graphical User Interface" or "GUI" is a type of environment that represents programs, files, and options by means of icons, menus, and dialog boxes on the screen. The user can select and activate these options by pointing and clicking with a mouse or, often, with the keyboard. GUI 's have characteristics of both application and operating system software.

29. "Independent Software Vendors" or "ISVs" are firms, including Microsoft that produce applications and other software. They are "independent" in as much as they are not part of a vertically integrated hardware and software company (e.g., IBM for System/390 operating system software).

30. An "Intel-compatible PC" is one designed to function with Intel's x86/Pentium families of microprocessors or with compatible microprocessors manufactured by Intel or other firms. Microsoft's Windows operating system is an example of an operating system that runs on x86-compatible PCs. Operating systems designed to run on x86-compatible PCs will not function on incompatible PCs, such as the Macintosh, nor will an operating system designed for a non-x86-compatible PC function on an x86-compatible one.

31. The "Internet" is a global electronic network that links many millions of computing devices together, allowing the computers to exchange information over telephone wires, dedicated data cables, and wireless links. The Internet links PCs by means of servers, which run operating systems and applications designed for servicing a network environment.

32. "Internet Access Providers" or "IAPs" are commercial firms that connect users, companies and other organizations to the Internet. PCs typically connect to the Internet through the services of IAPs, which generally charge subscription fees to their customers in the United States.

33. "Internet Content Providers" or "ICPs" are persons or companies that provide content on the Web. The content consists principally of web pages that may incorporate any combination of text, graphics, audio and video content, software programs, and other data.

34. "Internet Service Providers" or "ISPs" are a type of Internet Access Provider, such as MindSpring, or Netcom that offer Internet access.

35. "Middleware" is software that "sits" between two or more types of software and translates information between them. Middleware generally sits between an application and an operating system. Middleware software provides APIs for applications and uses the APIs of the underlying operating system.

36. An "On-line Service" or "OLS" generally offers access to an online community of users along various services and an array of proprietary content and, optionally, Internet access. America Online, Prodigy, and the Microsoft Network are three examples of an OLS.

37. An "operating system" is a software program that controls the allocation and use of computer resources (such as central processing unit time, main memory space, disk space, and input/output channels). In a personal computer, the operating system allows the various components of the PC to communicate and function with each other. It also acts as a "platform" to support the functions of software application programs.

38. "Original Equipment Manufacturers" or "OEMs" are companies whose business may include the manufacture, assembly, development and sale of personal computers (e.g., Dell, Gateway, Hewlett Packard and Compaq). OEMs typically purchase or license from different third-party vendors and preinstall various hardware and software components for their systems, including the operating system and applications software.

39. "Personal computer" ("PC") is a digital information processing device designed for use by one person at a time. A typical PC consists of central processor components (e.g. a microprocessor and main memory) and mass data storage (such as a hard disk). A typical PC system consists of a PC, certain peripheral input/output devices (including a video monitor, a keyboard, a mouse, and a printer) and an operating system.

40. "Platform" is used in the software industry to describe software that provides features or services that can be used by software applications. Applications typically "run on top" of the operating system and draw upon the services that the operating system's "platform" provides.

41. The "World Wide Web" or "Web" is a massive collection of digital information resources stored on servers throughout the Internet.

42. A "Web client" is software that, when running on a computer connected to the Internet, sends information to and receives information from Web servers throughout the Internet. Web clients and servers transfer data using a standard known as the Hypertext Transfer Protocol ("HTTP").

43. A "Web browser" is a type of Web client that enables a user to select, retrieve, and perceive resources on the Web. In particular, Web browsers provide a way for a user to view hypertext documents and follow the hyperlinks that connect them, typically by moving the cursor over a link and depressing the mouse button. Although certain Web browsers provided graphical user interfaces as far back as 1993, the first widely popular graphical browser distributed for profit, called Navigator, was brought to market by the Netscape Communications Corporation in December 1994. Microsoft introduced its browser, called Internet Explorer, in July 1995.

GOVERNMENT ACTION

44. The United States Department of Justice ("DOJ") complained of and investigated, among other things, Microsoft's illegal and anti-competitive practices in the operating system market in United States v. Microsoft, Civil No. 94-1564 (D.D.C. Petition filed July 15, 1994) ("Microsoft I"). The anti-competitive practices complained of included, among others, inducing OEMs to enter into per processor license agreements with Microsoft, which required the OEM to pay a royalty to Microsoft on every machine the OEM shipped regardless of whether the machine contained MS-DOS, another operating system, or no operating system. Thus, an OEM could only use a competing operating system if it was willing to pay twice - once to Microsoft and once to Microsoft's competitor.

45. The United States District Court for the District of Columbia entered a final judgment in Microsoft I on August 21, 1995, which barred several anti-competitive terms in Microsoft's agreements with OEMs. Prohibited contract provisions included per processor license provisions, license terms exceeding one year in length, provisions prohibiting or restricting OEMs from licensing or distributing non-Microsoft Operating Systems, provisions conditioning an OEM's license of one Microsoft operating system product upon the license of another Microsoft product or upon the OEM not licensing a non-Microsoft product, minimum commitment provisions, and provisions requiring royalty payments to Microsoft other than on a per-copy or per-system basis.

46. In 1997, the United States sought to have Microsoft held in contempt for violating the 1995 Final Judgment, in large part due to Microsoft's requirement that OEMs license and distribute Microsoft's Internet browser as a condition of obtaining a license for Windows 95. Despite the court's entry of a preliminary injunction on December 11. 1997, Microsoft on December 15, 1997 publicly announced that any OEM that did not agree to license and distribute Internet Explorer could not obtain a license to the current version of Microsoft' s Windows operating system.

47. Subsequent proceedings led to a renewed complaint by the United States. On May 18, 1998, the DOJ, joined by twenty states and the District of Columbia, filed suit against Microsoft alleging various antitrust violations ("Microsoft II"). The DOJ and Microsoft vigorously litigated the merits of DOJ's allegations for eighteen months. On November 5, 1999, Judge Thomas Penfield Jackson released his Findings of Fact ("Findings of Fact") based on the extensive evidence presented during the bench trial.

48. Judge Jackson's Findings of Fact concluded, inter alia, that Microsoft had held and continues to hold a monopoly in the market for "Intel-Compatible PC Operating Systems"; that Microsoft has sustained and perpetuated this monopoly by using anti-competitive and unreasonably exclusionary conduct to gain advantage; and that Microsoft has leveraged its advantageous position to restrict competition in other software markets.

49. On April 3, 2000, Judge Jackson issued his Conclusions of Law ("Conclusions of Law" which are incorporated herein as if here fully set forth) in Microsoft II, 87 F. Supp.2d 30 (D.D.C. 2000), in which he stated, inter alia, that "Microsoft maintained its monopoly power by anti-competitive means and attempted to monopolize the Web browser market, both in violation of' the antitrust laws. Microsoft also unreasonably restrained trade "by unlawfully tying its Web browser to its operating system." Conclusions of Law, 87 F. Supp. at 35.

50. In the remedy stage, proposals submitted to the court in Microsoft II by DOJ asked the court to split Microsoft into two different companies - with one company retaining the Windows operating system business and the other taking the rest of Microsoft's business, including software applications and Internet software.

51. The DOJ reorganization plan was recommended, in large part, to restrict Microsoft's wrongful exercise of its combined monopoly power over operating system and applications software, and to prevent it from continuing to leverage its monopoly power in the operating system market to exert control over and raise barriers to entry in the software applications markets, and thereby to stifle competition and charge higher prices in the applications markets.

52. On June 6, 2000, the Microsoft II court approved the DOJ proposal and directed that Microsoft be split into two separate companies. However, the court stayed implementation of such relief pending an appeal by Microsoft.

BACKGROUND

53. In 1981, Microsoft released the first version of its Microsoft Disk Operating System, commonly known as "MS-DOS." The system had a character-based user interface that required the user to type specific instructions at a command prompt in order to perform tasks such as launching applications and copying files. When International Business Machines Corporation ("IBM") selected MS-DOS for pre-installation on its first generation of PCs, Microsoft's product became the predominant operating system sold for Intel-compatible PCs.

54. In 1985, Microsoft began shipping a software package called Windows. The product included a graphical user interface, which enabled users to perform tasks by selecting icons and words on the screen using a mouse. Although originally just a user-interface, or "shell," sitting on top of MS-DOS, Windows took on more operating-system functionality over time.

55. In 1995, Microsoft introduced a software package called Windows 95, which announced itself as the first operating system for Intel-compatible PCs that exhibited the same sort of integrated features as the Mac OS running PCs manufactured by Apple Computer, Inc. ("Apple"). In June 1998, Microsoft released its successor, Windows 98.

56. Microsoft is the leading supplier of operating systems for PCs. The company transacts business in all fifty of the United States and in most countries around the world.

57. Microsoft licenses copies of its software programs directly to consumers. The largest part of its MS-DOS and Windows sales, however, consists of licensing the products to OEMs such as IBM and Compaq Computer Corporation ("Compaq"). An OEM typically installs a copy of Windows onto one of its PCs before selling the package to a consumer under a single price.


MICROSOFT'S MONOPOLY POWER IN THE RELEVANT MARKETS

The Relevant Product Markets

  58. At all material times, Microsoft has had monopoly power in the following product markets:

a. The licensing of Intel-compatible personal computer ("PC") 'operating system software; and

b. The licensing of Intel-compatible PC applications systems software, including word processing, spreadsheet, and office suite software.

The Relevant Geographic Market

59. At all material times, the relevant geographic market for the class action claims asserted for the relevant product markets is the state of Minnesota.


Microsoft's Monopoly Power In The Relevant Market For Operating Systems

60. Since the mid-1980s, Microsoft has dominated the operating system software market. For example, in the United States, its market share at times has exceeded 95 percent. Beginning in the late-1980s and continuing through the present, Microsoft engaged in a series of predatory acts designed to, and which did, eliminate competition and prevent entry in the operating system market. Software companies offering superior operating systems and/or lower prices, namely, Digital Research, Inc. ("DRI") and International Business Machines ("IBM"), were not able to compete with Microsoft because of Microsoft's unlawful conduct. Microsoft has had no significant competitor in the operating system market since DRI and IBM were eliminated as meaningful competitors in 1994. In addition, Microsoft has possessed a dominant and persistent share of the Minnesota market for Intel-compatible PC operating system software. During most of the Class Period, Microsoft's share of this market has been at least 95% (extrapolating from Microsoft's share of the United States market for Intel-compatible PC operating system software).

61. The inability of server operating systems, non-Intel compatible PC operating systems, information appliances, network computers, server-based computing and middleware generally to provide a reasonable substitute for Microsoft's operating systems or to discipline its monopoly power is set forth in the Findings of Fact at ¶¶ 19-32. It would be prohibitively expensive for a new Intel-compatible operating system to attract enough developers and consumers to become a viable alternative to a dominant incumbent in less than a few years. Findings of Fact at ¶ 31.

62. Throughout the Class Period, Microsoft has had monopoly power in the relevant market for operating systems. Findings of Fact of ¶ 33. Microsoft can and has exercised this power by charging a price for its Intel-compatible PC operating system software that is substantially above that which could be charged in a competitive market, and it can and has done so for a significant period of time without losing business to competitors.


Microsoft's Monopoly Power In The Relevant Market For Word Processing Applications


63. Microsoft has possessed a dominant, persistent and increasing share of the Minnesota market for Intel-compatible PC word processing applications software through its Microsoft Word product. Currently, Microsoft's share of this market in the United States is approximately 86%. Microsoft's market share in Minnesota is similar, on information and belief.

64. It would be prohibitively expensive for new Intel-compatible word processing applications software to attract enough consumers to become a viable alternative to a dominant incumbent in less than a few years.

65. Throughout the Class Period, Microsoft has had monopoly power in the relevant market for word processing applications software. Microsoft can and has exercised this power by charging a price for its Intel-compatible PC word processing applications software that is substantially above that which could be charged in a competitive market, and it can and has done so for a significant period of time without losing business to competitors.


Microsoft's Monopoly Power In The Relevant Market For Spreadsheet Applications

66. Microsoft has possessed a dominant, persistent and increasing share of the Minnesota market for Intel-compatible PC spreadsheet applications software through its Microsoft Excel product. Currently, Microsoft's share of this market in the United States is approximately 87%. Microsoft's market share in Minnesota is similar, on information and belief.

67. It would be prohibitively expensive for new Intel-compatible spreadsheet applications software to attract enough consumers to become a viable alternative to a dominant incumbent in less than a few years.

68. Throughout the Class Period, Microsoft has had monopoly power in the relevant market for spreadsheet applications software. Microsoft can and has exercised this power by charging a price for its Intel-compatible PC spreadsheet applications software that is substantially above that which could be charged in a competitive market, and it can and has done so for a significant period of time without losing business to competitors.


Microsoft's Monopoly Power In The Relevant Market For Office Suite Applications

   69. Microsoft has possessed a dominant, persistent and increasing share of the Minnesota market for Intel-compatible PC office suite applications software through its Microsoft Office and Office Suite products. Currently, Microsoft's share of this market in the United States is approximately 89%. Microsoft's market share in Minnesota is similar, on information and belief.

   70. It would be prohibitively expensive for new Intel-compatible office suite applications software to attract enough consumers to become a viable alternative to a dominant incumbent in less than a few years.

   71. Throughout the Class Period, Microsoft has had monopoly power in the relevant market for office suite applications software. Microsoft can and has exercised this power by charging a price for its Intel-compatible PC office suite applications software that is substantially above that which could be charged in a competitive market, and it can and has done so for a significant period of time without losing business to competitors.


SOFTWARE DISTRIBUTION SYSTEM

72. Microsoft considers its software to be its exclusive intellectual property. Consequently, as stated by Microsoft, it "does not technically `sell' the software to anyone." Rather, it " licenses the software for specified purposes only." Affidavit of Robert Vellone, dated March 24, 2000, filed in Precision Billing Services, Inc. v. Microsoft Corp., No. 99-896-GPM (S.D. Ill.), ¶ 6. With regard to operating system software, Microsoft grants licenses to OEMs that permit them to pre-install it on PCs sold to end-users, while Microsoft grants different licenses to end-users that permit them to use the software on the PCs they purchase. The terms of Microsoft's written licenses are dictated and drafted solely by Microsoft.

73. Microsoft distributes its software licenses in the United States and worldwide through multiple channels. Early on, Microsoft recognized the OEMs, such as Dell and Compaq, as the single, most important channel for distribution of operating system and applications software licenses. Microsoft intentionally used its monopoly power in the operating system market to capture, dominate, and exclusively control the OEM distribution channel. As a result, Microsoft's captive OEM channel functions as Microsoft's distributor for the large majority of all Microsoft operating system licenses with end-users of PCs. The remainder of Microsoft 's software licenses are offered to end-users through retailers, such as CompUSA and Staples, other distributors and resellers, and Microsoft itself.

74. Microsoft has used its monopoly in the operating system market to dictate the terms and conditions under which OEMs are engaged, on Microsoft's behalf and as Microsoft's agent, to communicate Microsoft's offers of end-user licenses to purchasers of PCs. OEMs have no choice but to accede to Microsoft's demands. Because of Microsoft's monopoly, both the OEMs and Microsoft believe that there does not exist a single, commercially viable alternative to the pre-installation of Microsoft operating systems on PCs manufactured and sold by OEMs. Conclusions of Law, 87 F. Supp. at 37. Because OEMs have no other viable choice, Microsoft effectively forced OEMs to pre-install Microsoft operating systems on their PCs and to act as Microsoft 's agents in offering end-user licenses for acceptance or rejection by customers under terms strictly and exclusively dictated by Microsoft. As an example of Microsoft's domination and control of the OEM distribution channel, Microsoft strictly limits the freedom of OEMs to add to, delete from, or modify the operating system, its start-up sequence, or the content and appearance of the Windows desktop.

75. End-users can acquire Microsoft software licenses from the company by calling a 1-800 telephone number or accessing Microsoft's Internet Web site at "shop.microsoft.com."

76. End-users were the targets and foreseeable victims of Microsoft's anti-competitive conduct alleged herein and have paid artificially-inflated prices for Microsoft's software licenses. Microsoft requires end-users who obtain Microsoft software pre-installed on a personal computer to enter into an end-user license agreement with Microsoft. Microsoft dictates the terms of agreements under which distributors and retailers are engaged, on Microsoft's behalf and as Microsoft's agent, to communicate Microsoft's offers of end-user licenses. These agreements provide, among other things, for a refund to be paid to the end-user of the cost of the operating system or applications software, as the case may be, if the end-user declines to enter into Microsoft's required license. The license also provides significant restrictions on the use of the software by the licensee and grants Microsoft certain rights and remedies against the licensee for breach of the license agreement.

77. Contrary to software industry practice and what had been Microsoft's practices prior to the Class Period, end-users who purchased new PCs through the OEM distribution channel during the Class Period were anti-competitively (a) prevented by Microsoft from effectively returning the Microsoft operating system for a refund (notwithstanding the terms of Microsoft's end-user license), (b) prohibited by Microsoft from installing on their new PCs the Windows 95 or Windows 98 operating system on their existing PC, and (c) prohibited by Microsoft from re-selling on a stand-alone basis the Windows 95 or Windows 98 operating system products which they purchased with their new PCs.


THE APPLICATIONS BARRIER TO ENTRY

78. There is a barrier to entry into the operating system market known as the "applications barrier to entry," which Microsoft has predatorily used as a key mechanism for maintaining its operating system monopoly. Microsoft went to great lengths, as alleged below, to destroy the competitive position of any software product that threatened to weaken or eliminate that barrier.

79. The applications barrier to entry results from the nature of the demand for PC operating systems. Consumer interest in an operating system derives primarily from the ability of that system to run software applications. The fact that a vastly larger number of applications have been written to run on Microsoft operating systems than on other PC operating systems has attracted consumers to Microsoft's operating system; they can be confident that their interests in applications will be met as long as they use Microsoft's product.

80. Software development is characterized by substantial economies of scale. The fixed costs of producing software, including applications, is very high. By contrast, marginal costs are very low. Moreover, much of the cost of developing software is "sunk" - once expended, such resources cannot be used for another purpose. The result of economies of scale and sunk costs is that developers write their applications only to those operating systems that have a large enough installed base to generate sufficient sales to justify the developers' development costs.

81. An application that is written for one PC operating system will operate on another PC operating system only if it is converted to run on that system. Converting applications is both time-consuming and expensive, especially since it involves using the same programmers who developed the program originally and who otherwise would be working on the next version of the application. Therefore, applications developers tend to write first to the operating system software with the most users. Developers might then convert their applications to other operating systems software, but only to the extent that the added sales justify the cost of conversion, including opportunity costs. In order to recover that cost, ISVs that do go to the effort of converting frequently set the price of converted applications considerably higher than that of the original version.

82. The applications barrier to entry also results from the positive network effect associated with computer software. That is, software's attractiveness increases with the number of people using it. Thus, the multitude of people using MS-DOS or Windows makes the products more attractive to consumers. In turn, the size of the Windows and MS-DOS installed base impels ISVs to write applications first and foremost to run on those operating systems, thereby ensuring a large body of applications. The large body of applications thus has reinforced demand for MS-DOS and Windows, augmenting Microsoft's dominant position and perpetuating ISVs incentives to write applications principally for MS-DOS and Windows. This self-reinforcing cycle is often referred to as a "positive feedback loop."

83. The small or non-existent market share of an aspiring competitor makes it prohibitively expensive for the aspirant to develop its PC operating system into an acceptable substitute for MS-DOS or Windows. To provide a viable substitute for MS-DOS or Windows, another PC operating system would need a large and varied base of compatible applications that was comparable to Microsoft's installed base in size and variety. Even if the contender attracted several thousand compatible applications, it would still look like a gamble from the consumer's perspective next to MS-DOS and Windows, which support over 70,000 applications. The amount it would cost an operating system software vendor to make that many applications available is prohibitively large.

84. In deciding whether to develop an application for new operating system software, an ISV's first consideration is the number of users it expects the operating system software to attract. Out of this focus arises a collective-action problem: each ISV realizes that the new operating system software could attract a significant number of users if enough ISVs developed applications for it; but few ISVs are willing to sink resources into development for the system until it becomes established. Since everyone is waiting for everyone else to bear the risk of early adoption, the new operating system has difficulty attracting enough applications to generate a positive feedback loop. The vendor of a new operating system cannot effectively solve this problem by paying the necessary number of ISVs to write for its operating system, because the cost of doing so would dwarf the expected return.

85. While the applications barrier to entry has been formidable, it is not necessarily insurmountable or permanent. Middleware products appeared in the market in the late 1980s and in the 1990s that threatened to eliminate the barrier. Microsoft, however, was vigilant and successfully undertook anti-competitive acts and practices to forestall and eliminate middleware threats and retain the full force of the applications barrier.


MICROSOFT'S ANTI-COMPETITIVE ACTIVITIES IN THE OPERATING SYSTEM MARKET

Overview


86. Through predatory conduct, Microsoft successfully fended off two types of challenges to its operating system monopoly. One type came from two competing operating systems, Digital Research's DR-DOS and IBM's OS/2. Both were positioned to compete vigorously against MS-DOS. Through a series of predatory acts from 1988 through 1994, however, Microsoft essentially eliminated both DR-DOS and OS/2 from the market.

87. The next type of challenge to Microsoft's monopoly was by several middleware products, which from 1988 to 1998, threatened to weaken or circumvent the applications barrier to entry that insulated Microsoft from competition. Microsoft responded to this threat with additional exclusionary conduct designed to keep the applications barrier and Microsoft's monopoly intact.

88. In 1981, Microsoft became a significant supplier of PC operating system software when it contracted with IBM to design and develop operating system software for the IBM personal computer. By the mid-1980s, Microsoft's operating system, called MS-DOS, had become entrenched as the standard for Intel-compatible personal computers.

89. By 1987, several OEMs, whose computers were sold with operating systems pre-installed, approached DRI, a Microsoft competitor, about developing a better operating system than MS-DOS. In 1988, DRI released its operating system software under the name DR-DOS. Given the relative lack of complexity of MS-DOS at that time, DRI was readily able to clone that software, i.e., DR-DOS could support the same applications software as MS-DOS supported. In addition, DR-DOS included features that MS-DOS lacked. DR-DOS received numerous industry awards and was sold at a lower price than MS-DOS.

90. Unable or unwilling to legitimately compete with DR-DOS by attempting to offer a better or lower-priced product, Microsoft instead embarked on a series of unlawful predatory acts designed to drive DRI from the market. These predatory acts focused largely on the OEM channel, which distributed the vast majority of operating system software by pre-installing it on computers. By controlling this critical distribution channel to the exclusion of DR-DOS, Microsoft made DRI's competitive position untenable, and by 1994 DRI was forced to exit the market.

91. Indeed, Microsoft realized by the mid-1980s that MS-DOS was becoming obsolete and began working with IBM to develop the next generation operating system. The first version of Microsoft and IBM's joint efforts was released in 1987 under the name OS/2. By 1990, Microsoft's Windows software, which contained some of the graphical user interface ("GUI") elements that Microsoft had developed for OS/2, was gaining popularity, and Microsoft decided to focus its efforts on Windows to the exclusion of OS/2. IBM took over exclusive development of OS/2. The GUI model that IBM developed for OS/2 is still the model for all GUI's today. In fact, the second generation of OS/2 won over many Window 3.x users because of its superior performance.

92. Again, unable or unwilling to compete on the merits, Microsoft resorted to a course of anti-competitive conduct directed at OS/2. By the end of 1994 Microsoft's predatory conduct had the desired effect of eliminating OS/2 as a significant competitor. Many of Microsoft's anti-competitive acts were the same as or similar to those targeted at DR-DOS.

93. By the end of 1994, with Microsoft's two competitors essentially out of the market, any challenge to Microsoft's monopoly could only come from a new entrant. But any potential competitor faced the applications barrier to entry. By 1994, moreover, a new competitor could not circumvent the barrier by cloning Windows, as that software had become much too complex to be cloned.

94. Since at least the late 1980s, part of Microsoft's strategy has been to protect its operating system monopoly by unlawfully maintaining the applications barrier. The threat to the applications barrier has come from middleware, which exposes APIs (or their equivalent) that can substitute for or enhance some of the functionality of the operating system; applications written to middleware APIs, therefore, can run on any of several operating systems. Thus, middleware has the capacity to weaken or eliminate the applications barrier to entry by, as Bill Gates stated, "commoditizing" the operating system. When middleware has threatened to undermine or eliminate the barrier, Microsoft's response has been swift and predatory.

95. An early threat came from Mirrors, Micrographx 5 software developer tool that allowed applications designed to run on MS-DOS to also run on OS/2. Microsoft's exclusionary conduct, however, drove Mirrors from the market.

96. Borland International, Inc.'s developer tools, which were the market leader in the early 1990s, like Mirrors, allowed software developers to easily convert applications from one operating system to another. As with Mirrors, Microsoft engaged in anti-competitive conduct that essentially eliminated Borland's product from the market.

97. The Micrographx and Borland threats were followed in the mid-1990s by a string of middleware products that threatened to diminish the applications barrier to entry: (1) a software product called Notes, distributed first by Lotus and then by IBM, (2) Netscape's Navigator, an Internet browser, (3) Java technologies, a programming language and related software developed by Sun Microsystems, (4) Intel's Native Signal Processing software, and (5) Apple's and RealNetwork's multimedia playback technologies.

98. Microsoft understood that each of these products facilitated the development of applications programs that would be indifferent to the identity of the underlying operating system. Microsoft responded predatorily to each such product.


Exclusion of DR-DOS

99. In 1981, Microsoft contracted with IBM to design and develop the operating system software for the IBM PC. Microsoft acquired rights from another company for a product called "QDOS," which borrowed heavily from an operating system developed by DRI called CP/M. Microsoft changed the name to MS-DOS and licensed it to IBM and others.

100. By the mid-1980s, MS-DOS had become entrenched as the standard in the Intel-compatible PC operating systems market. The price of MS-DOS in the OEM channel escalated from $2-$5 per copy in the 1981-1982 period to $25-$28 per copy by 1988.

101. Because of Microsoft's apparent decision not to innovate or extend the capabilities of MS-DOS, a number of OEMs approached DRI to develop an improved version of DOS. In addition, a number of OEMs who simply could not get Microsoft to deal with them expressed an interest in DRI as an alternative DOS software supplier. Accordingly, in 1987, DRI began planning a new version of DOS, to be called DR-DOS.

102. The results of DRI's efforts was a product designated as DR-DOS 3.31, introduced in 1988, followed by an enhanced DR-DOS 5.0 in 1990 and DR-DOS 6.0 in 1991. These DOS versions were significantly superior to then-existing versions of MS-DOS in many areas, receiving numerous industry awards and enthusiastic reviews. DR-DOS was offered at prices below the inflated price levels of MS-DOS products.

103. Microsoft responded to the DR-DOS threat with a number of anti-competitive practices, including:

a. constructing a wall of per processor licenses beginning in 1988 when DR-DOS was released. Microsoft OEM status reports had repeated references to these practices, such as: "Opus agreement has finally been signed by Redmond. Another DRI prospect bites the dust with a per processor DOS agreement," or "DRI visited Hyundai executives and pricing issue was raised again. The new license is a per processor deal, which allowed us to completely kick out DRI." One OEM, U.S. Micro Express, stated with respect to a per processor license that "We were not given the option of licensing MS-DOS on any other basis"

b. entering into long term "take or pay" minimum commitment licenses. Even though the life cycle of a DOS release was somewhat less than two years, Microsoft pushed for agreements of two or three years in duration. This was a key part of the "Strategy Against DRI" presented in June 1991 to the Microsoft OEM sales force;

c. requiring prepaid balances from OEMs, tying them to Microsoft through the threat that they would forfeit any prepaid amount not used during a contract period unless a new license was signed;

d. implementing a "DOS clone check" in 1989 on foreign versions of Windows, as evidenced by this message from the Microsoft Korean subsidiary:

Bill Gates ordered to all application business units to include checking routines of operating environments and if it is Microsoft DOS, nothing will happen. But if it is non MS-DOS (such as DR-DOS), application will display messages saying that "This application has been developed and tested for MICROSOFT MS-DOS. Since you use different environment, this application may not work correctly...."


A similar DR-DOS detection and warning was implemented in Microsoft's QuickPascal, with a message that warned that use of the product with another operating system "may void valuable warranty protection by Microsoft ...."

e. making false, misleading and premature announcements such as the one in June 1990, within a week of DRI's announcement of DR-DOS 5.0, that Microsoft intended to release by September 1990 MS-DOS 5.0, that would have all the technical advantages of DR-DOS 5.0. MS-DOS 5.0 in fact was not released until June 1991, over one year after Microsoft' announcement, without the promised features. Microsoft made similar preemptive vaporware announcements of MS-DOS 6.0, MS-DOS 7.0 (which never came to market as a stand-alone product) and Windows 95, in direct response to DR-DOS 6.0 and Novell DOS 7.0. (Novell acquired DRI in 1991.) Microsoft knew these announcements were false and misleading when made;

f. engaging in merger discussions with Novell immediately after Novell's acquisition of DRI, and insisting as a part of the proposed merger that Novell divest DRI, with the ulterior purpose of causing Novell to slow down its integration of DR- DOS. When Microsoft's merger discussions broke down in 1992, DR-DOS was wounded as a competitor;

g. announcing in the Fall of 1991 that DR-DOS would not be compatible with the next release of Windows, scheduled for release in April 1992. To reinforce the impression of incompatibility, Microsoft released test or so-called "beta" versions of Windows containing code that generated misleading error messages when Windows ran on top of DR-DOS;

h. creating deliberate incompatibilities between Windows and DR-DOS, so that Windows would not run properly on DR-DOS;

i. unleashing a "FUD" campaign to create "fear, uncertainty and doubt" in the OEM and retail channel regarding the use of DR-DOS. In May 1991, Sergio Pineda of Microsoft circulated to all OEM account managers the following regarding the theme of the campaign:


Any degree of incompatibility is enough to create fear, uncertainty & doubt among end users when it comes time to buy new systems - this suggests that PC OEMs will take on a big risk if they ship DR-DOS with their systems.

We recommend that we "informally" plant the bug of FUD in their ears.br>
j. reporting supposed flaws in DR-DOS to the media as crippling "bugs," while not mentioning to the media that MS-DOS releases had such severe bugs that Microsoft was required immediately to release "patches" to cure them. A July 1991 memo from a Microsoft executive states: "We are engaged in a FUD campaign to let the press know about some of the bugs. We'll provide info a few bugs at a time to stretch it out";

k. putting Novell on a "beta blacklist," i.e., refusing to provide a Windows 3.1 beta to Novell' s DR-DOS development team, thereby hampering Novell's ability to offer a Windows 3.1-compatible release of DR-DOS;

l. inserting secret, encrypted code into the final Windows 3.1 (beta) version that triggered a false error message whenever a computer was running DR-DOS with Windows. This AARD Code had the intended effect of creating concern among OEMs about DR-DOS. The code was removed from the final (nonbeta) version of Windows 3.1;

m. informing certain OEMs that they could not obtain Windows or be given access to essential information, including product support and service, if they did not purchase and ship MS-DOS to the exclusion of DR-DOS;

n. retaliating against industry participants who supported DR-DOS. For example, when Z-Nix Inc. bundled DR-DOS 6.0 and Microsoft Windows 3.1, proclaiming no incompatibilities, Microsoft's Brad Silverberg wrote: "look what znix is doing! cut those f*****s off." Within three weeks, Microsoft demanded an audit of Z-Nix's entire business and then commenced a copyright and trademark infringement action. Z-Nix was forced to file for bankruptcy in or around 1995;

o. establishing a pricing structure for Windows that made it prohibitively expensive to buy that product without also buying MS-DOS. Microsoft often instructed its OEM account managers to inform their OEMs that the price for Windows alone would be higher than the price of Windows and MS-DOS combined.

104. In September 1994, as a result of Microsoft's anti-competitive conduct, Novell announced that it would cease the marketing and development of DR-DOS. After this announcement, the price of Windows increased. Microsoft had succeeded in eliminating the one competitor that, because its DOS program had the same original source as Microsoft, was not affected by the applications barrier to entry.


Virtual Elimination of OS/2

105. In the mid-1980s, Microsoft and IBM decided to collaborate on a new operating system that would replace MS-DOS. The product, which was later sold under the name OS/2, was intended to be a state-of-the-art, GUI-based operating system. However, as Microsoft's Windows software became more successful and as Microsoft's monopoly position became more entrenched by Microsoft obtaining per-processor licenses and engaging in other exclusionary tactics, the company lost interest in collaborating with IBM. In 1991, IBM and Microsoft terminated their joint development agreement, leaving IBM to continue developing OS/2 alone.

106. After Microsoft's relationship with IBM ended, Microsoft launched a predatory campaign to drive OS/2 from the market. It pursued a course of conduct very similar to the one it used to exclude DR-DOS from the market. Thus, Microsoft relied on restrictive OEM licenses that effectively cut off IBM from the critical OEM channel; it made false and misleading vaporware announcements and pre-announcements; it refused to write its applications to run on OS/2; it engaged in FUD campaigns and product disparagement in an effort to devalue OS/2 in the minds of applications developers, OEMs and consumers; and it created deliberate incompatibilities between Windows and OS/2.

 107. In addition, as alleged below, Microsoft engaged in exclusionary conduct to drive from the market, developer tools that enabled applications originally written to run on Microsoft's operating system to be ported to OS/2.


Microsoft's Anti-competitive Maintenance of The Applications Barriers to Entry

108. By 1994, Microsoft had destroyed its two competitors in the operating system market. By 1994, moreover, Microsoft was secure that it would not encounter new competition from another clone operating system like DR-DOS. By then, Windows was simply too complex to be cloned. Only a non-clone, therefore, could potentially enter the operating system market. However, the applications barrier to entry made entry by a non-clone prohibitively expensive.

109. Microsoft's unlawful conduct alleged herein, in addition to the exclusionary conduct intended to drive DR-DOS and OS/2 from the market, also consisted of predatory responses to the introduction or growing popularity of software products that threatened to weaken or eliminate the applications barrier to entry. A succession of such products appeared in the market between 1988 and 1998 and were met with a rapid, strong and predatory response by Microsoft. Microsoft engaged in continuing violations of the Minnesota Antitrust Law by means of such exclusionary, predatory conduct and other conduct which it specifically intended to create market conditions in which end-users were forced to purchase Microsoft products and were deprived of competitive substitutes therefor.

Microsoft's Predatory Response To Micrographx's Mirrors


110. In the late 1980s, Micrographx offered a developer tool called Mirrors that allowed Windows applications readily to be ported to OS/2 and vice versa. Mirrors, therefore, had the capacity to substantially weaken the applications barrier to entry. Microsoft engaged in anti-competitive acts to eliminate the Mirrors threat.

111. Microsoft induced Micrographx to share its confidential intellectual property on the representation that Microsoft was interested in licensing Mirrors for its applications programmers, and Microsoft signed a non-disclosure agreement. However, Microsoft then stopped pursuing such a license and eventually developed developer tools similar to Mirrors that it incorporated into its operating system, essentially eliminating demand for Mirrors as a stand-alone product.


112. Promptly after Microsoft declined to license Mirrors, Micrographx sought to license the product to IBM. To avoid the prospect that IBM would obtain the Mirrors technology and be able to port Windows applications to run on OS/2, Microsoft took predatory actions designed to, and which did, prevent that result.


Microsoft's Predatory Response To Borland's C++

113. In the early 1990s Borland's C++ was the most popular programming language among PC applications developers. Borland's C++ had an Object Windows Library ("OWL") that enabled programmers to write applications that were platform independent, i.e., the applications could be written to OWL's, not the operating system's, APIs. Eventually, Borland innovated OWL to the point where it could be used to write applications that could be ported to Windows, OS/2, Macintosh, and Unix with virtually no conversion effort.

114. Seeing the threat that OWL posed to the applications barrier to entry, Microsoft embarked on a campaign to cripple Borland's C++. Microsoft prematurely announced the release of new versions of its competing developer tools and made false "vaporware" claims, to deprive Borland of the advantages of being the first mover and having the superior product.

115. Furthermore, Microsoft refused to renew the license for its software developer kit ("SDK") to Borland unless Borland 's C++ also carried and supported MFC, which was Microsoft's counterpart to OWL. Borland literally could not sell C++ without SDK; on the other hand, if it shipped MFC in addition to OWL, developers would choose MFC as it would be the only library available as part of both the Borland and Microsoft developer tools. Borland had no choice but to choose the latter option. Microsoft 's developer tools soon became dominant and its MFC, which carried the Windows APIs, perpetuated the applications barrier to entry.


Microsoft's Predatory Response To Intel's Native Signal Processing

116. Microsoft's quashing of Intel's Native Signal Processing ("NSP") is yet another example of Microsoft's relentless campaign to eliminate all threats to its operating system monopoly.

117. In 1995, Intel had developed NSP software, which promised to "endow Intel microprocessors with substantially enhanced video and graphics performance." Findings of Fact at ¶ 95. But because NSP had the potential to serve as a platform on which applications could be developed, Microsoft forced Intel into ceasing NSP development, flatly precluding that innovation from reaching consumers. Findings of Fact at ¶¶ 94-103. The Court found that "as late as the end of 1998... Microsoft still had not implemented key capabilities that Intel had been poised to offer consumers in 1995." Findings of Fact at ¶ 101. Even after quashing the threat of Intel's NSP software, Bill Gates told Intel at a meeting in August 1995 that Intel could not count on Microsoft to support Intel's next generation of microprocessors if Intel was developing platform-level software that competed with Windows.


Microsoft's Predatory Response To Netscape's Navigator


118. Microsoft II focused on actions taken by Microsoft to maintain its monopoly power after it had eliminated threats from DR-DOS and OS/2. In particular, the case focused on Microsoft's misconduct directed at Netscape's Web browser, Netscape Navigator.

119. Netscape Navigator possessed middleware attributes that gave it the potential to diminish Microsoft's applications barrier to entry. First, it was a complement to, not a substitute for, Windows, and therefore could gain widespread use. Second, it could serve as a platform for other software, particularly network-centric applications that work in association with Web pages. Third, Navigator had been ported to more than fifteen different operating systems. If a developer wrote an application that relied on the APIs exposed by Navigator, that application would, without any porting of its own, run on many different operating systems.

 120. Navigator began to enjoy tremendous public acceptance shortly after its release in December, 1994. Microsoft soon thereafter recognized the damage Navigator could cause its operating system monopoly. In a May 1995 memo, Bill Gates, the chairman and CEO of Microsoft, described Netscape as a "new competitor 'born' on the Internet." He warned that Netscape was "pursuing a multi-platform strategy where they move the key API into the client to commoditize the underlying operating system." That is, browsers threatened to reduce or eliminate the key barrier to entry that protected Microsoft's monopoly share of the operating software market.

121. Microsoft launched a campaign to eliminate the Netscape threat. This campaign involved many anti-competitive acts, including:

a. attempting to convince Netscape, before Microsoft launched its own browser in July 1995, to enter into an agreement dividing the market. Microsoft requested that Netscape not compete in operating system software or the production of browsers for Windows 95 in return for Microsoft's agreement not to compete in browser applications or the production of browsers for platforms other than Windows 95. Because of their pernicious effect on competition, such market division agreements are per se illegal under the Minnesota Antitrust Law. Netscape rejected the Microsoft proposal;

b. withholding crucial technical information. At a meeting in June 1995, Netscape representatives requested technical information from Microsoft. A Microsoft representative indicated that Netscape's response to Microsoft's offer of a "special relationship" would determine whether Netscape received this information immediately or in three months. Subsequently, despite Netscape's repeated requests for this information, Microsoft withheld it until late October, more than three months later. The delay forced Netscape to postpone the release of its Windows 95 browser, causing it to miss most of the holiday selling season;

c. withholding a scripting tool that Netscape needed to make its browser compatible with certain ISPs. In mid-August 1995, a Microsoft representative informed Netscape that Microsoft was linking the grant of a license for the scripting tool to the resolution of all open issues. Netscape never received the license and, as a result, was unable for a time to do business with certain ISPs;

d. conditioning the placement of an Internet Service Provider on the "Internet Connection Wizard" screens or in the Online Services folder in Windows 95 on the ISP's agreement to deny most or all of its subscribers a choice of Internet browser. Approximately one-third of Internet browser users obtain their browsers from their service provider, so Microsoft's exclusionary agreements with these firms had a substantial foreclosure effect on Netscape Navigator and other browsers;

e. entering into exclusionary agreements with Internet Content Providers such as Disney, Hollywood Online, and CBS Sportsline, which provide news, entertainment, and other information from sites on the Web. In order to achieve priority placement on the Windows desktop screen after installation of Internet Explorer, Microsoft required ICPs to agree: (i) not to compensate manufacturers of "other browsers" (defined as either of the two top non-Microsoft browsers) by distributing its browser or by payments to the other browser for distributing, marketing, or promoting the ICP content; (ii) not to promote any other browser; (iii) not to allow any other browser to promote the ICP channel content; and (iv) to design the ICP Web sites using Microsoft-specific programming extensions so that the sites looked better with Internet Explorer than with a competing browser;

f. imposing license restrictions that prevented OEMs from altering the Windows 95 boot-up sequence. These restrictions increased Microsoft's ability to require preferential treatment for Internet Explorer from ISPs and ICPs in return for access to the Windows desktop. These restrictions also limited an OEM's ability to substitute or feature a non-Microsoft browser or other application;

g. Microsoft bundled Internet Explorer with Windows 95 in licensing agreements with OEMs, in order to foreclose choice by OEMs;

h. Microsoft tied, both contractually and technically, Internet Explorer to Windows 98 (in violation of the Minnesota Antitrust Law). There is a demand for browsers that is separate and apart from the demand from operating system software. Findings of Fact at ¶ 154. Microsoft itself recognized this by offering Internet Explorer separate and apart from Windows. Even users of Windows 95 could "de-install" Internet Explorer. However, Microsoft also recognized that it could not compete on the merits with Netscape. As Microsoft's Christian Wilfeuer wrote in February, 1997, Microsoft had concluded that it would "be very hard to increase browser share on the merits of [Internet Explorer] alone. It will be more important to leverage the [operating system] asset to make people use [Internet Explorer] instead of Navigator." To leverage its operating system, Microsoft tied the implementation of Windows 98 with Internet Explorer, so that it could not be simply "de-installed." Moreover, even if Netscape Navigator is chosen as a default browser, Windows 98 is written to override the user's choice in certain circumstances. As Brad Chase of Microsoft wrote to his superiors near the end of 1995, "We will bind the shell to the Internet Explorer, so that running any other browser is a jolting experience."

 122. The result of Microsoft's campaign against Netscape Navigator was a dramatic reversal in market share. Netscape Navigator's share fell from above 80 percent in January 1996 to 55 percent in November 1997, and Internet Explorer's share rose from five percent to 36 percent over the same period. Internet Explorer's share by the latter part of 1998 was approximately 50 percent and has been steadily rising as Windows 95 users have converted to Windows 98.

Microsoft's Predatory Response To Sun Microsystem's Java Technologies

123. Sun Microsystems, Inc. announced in May 1995 that it had developed the Java programming language. The inventors of Java intended the technology to enable applications written in the Java language to run on a variety of platforms with minimal porting. This was a significant development because the easier it is for developers to port their applications to different operating systems, the more applications will be written for operating systems other than Windows.

124. Microsoft executives almost immediately became deeply worried about the potential of Sun's Java technologies to diminish the applications barrier to entry protecting their operating system monopoly. In May 1995 Netscape agreed to include a copy of Sun' s Java runtime environment with every copy of Navigator, and Navigator quickly became the principal vehicle by which Sun placed copies of Java on the PC systems of Windows users.

125. In 1996, senior executives at Microsoft became aware that the number of developers writing network-centric applications in the Java programming language had become significant and that Java was likely to increase in popularity among developers. Microsoft therefore became interested in maximizing the difficulty with which applications written in Java could be ported from Windows to other platforms and vice versa. Microsoft engaged in various anti-competitive acts to accomplish this purpose, including:

a. Microsoft discouraged developers from using Java. In 1997, Sun added a class library called Remote Method Invocation ("RMI"), which allowed Java applications written upon it to communicate with each other in certain useful ways. Microsoft's license agreement with Sun required Microsoft to offer RMI. However, because this would allow Java developers to make applications more portable, Microsoft took action to prevent access to RMI. Microsoft buried the RMI link in an obscure location and neglected to include an entry for it in the site's index. Referring to Java developers who might access Microsoft's site looking for RMI, a Microsoft employee wrote to his approving manager "They'll have to stumble across it to know it's there. . . . I'd say it's pretty buried.";

b. Microsoft licensed and then corrupted Java, by creating Microsoft-specific Java development tools and a Windows-compatible Java runtime environment that made porting more difficult than with the Sun version of Java. Microsoft continued to refuse to implement Sun's RMI method until November 1998, when a court ordered it to do so;

c. Microsoft. discouraged business allies, such as Intel, from cooperating with Sun, threatening that cooperation would jeopardize the business relationship between Microsoft and the ally; and

d. In agreements signed with ISVs in 1997 and 1998, Microsoft conditioned early Windows 98 and Windows NT betas, other technical information, and the right to use certain Microsoft seals of approval, on the agreement of those ISVs to use Microsoft's version of the Windows Java as the "default." Microsoft entered into an agreement with at least one ISV that explicitly required it to redistribute Microsoft's Java to the exclusion of any other.

126. Microsoft's anti-competitive attacks upon Java, coupled with its limitation of a primary distribution vehicle, Netscape Navigator, effectively eliminated the threat to the applications barrier.

MICROSOFT'S ANTI-COMPETITIVE ACTIVITIES IN THE APPLICATIONS SOFTWARE MARKETS

Overview

127. As alleged above, Microsoft engaged in a prolonged series of exclusionary acts to preserve its operating system monopoly. At the same time, Microsoft abused and leveraged that monopoly power to gain unfair advantages in various applications software markets, including the markets for word processing, spreadsheets and office suites. Microsoft refused to give competing applications software developers fair access to its operating system - an essential facility without which a computer will not operate.

128. In addition, Microsoft displaced the dominant spreadsheet program (Lotus 1-2-3) by engaging in a calculated effort beginning in 1989 to convince Lotus Development Corporation to write its next spreadsheet version to run on OS/2 without disclosing that Microsoft had already decided to abandon OS/2 in favor of MS-DOS and Windows.

129. Furthermore, Microsoft's anti-competitive efforts beginning in 1995 to take market share from Navigator were designed to protect Microsoft's monopoly in the office suites and word processing markets (in addition to protecting Microsoft's operating system monopoly). Microsoft understood that the growth in e-mail's popularity as a means of communication within and between businesses and other organizations greatly diminished such organizations' interest in word processing programs such as Word and (by extension) office suites such as Office. Microsoft's unlawful attack on Navigator's market share thus not only unlawfully maintained Microsoft's monopoly in the operating system market, but in the word processing and office suites markets as well.


Microsoft's Operating System As An Essential Facility

130. By virtue of its unlawful acts, Microsoft developed and maintained control of facilities essential to competition in the market for Intel-compatible PC applications software, including word processing, spreadsheet, and office suite software.

131. Such essential facilities include, among other things, the specifications for MS-DOS and Windows.

132. By unreasonably refusing, limiting and manipulating its actual and potential competitors' access to the specifications while preferentially or freely granting itself such access, and through its other unlawful acts alleged herein, Microsoft unreasonably and unfairly advantaged itself in the relevant applications software market alleged herein, acquired and/or maintained monopolies in the market, and unlawfully inflated the prices it charged for the relevant applications software.

133. Implicitly recognizing both that its operating system code was an essential facility and that it had the ability to abuse its control over that code, Microsoft claimed (falsely) until 1991 that it had created a "Chinese wall" that prevented its own applications software developers from having access to its operating system source codes or the employees working on those codes.

134. Microsoft's essential facilities are the accepted, worldwide standards for operating systems for Intel-compatible personal computers, and without them, the Classes herein would be deprived of the benefits of meaningful competition in the applications software market where timely access to Microsoft's operating system code is imperative.

135. ISVs could not practically or economically have duplicated these essential facilities in light of the lengthy development time, required sunk costs, the applications barriers to entry, and other impediments.

136. Microsoft could have easily provided timely access to its operating system specifications to competing software vendors and others in the normal course of business, but chose instead to preclude, limit or delay such access in order to acquire and/or maintain monopoly power in the relevant applications software market.

137. Microsoft has exploited unlawfully its control over these essential facilities to maintain and/or perpetuate its monopolies in the relevant applications software market.

138. Microsoft, through its control over these essential facilities and through monopolies in the relevant market, has denied Plaintiffs and Class members the fundamental right to product choice, and has forced Plaintiffs and the Class members to pay supra-competitive prices for the relevant applications software products.


Abusing and Leveraging Monopoly Power From The Operating Systems Market

139. Microsoft has pursued a strategy of using its power in the market for Intel-compatible PC operating systems as leverage, through anti-competitive acts and marketing and technical links, to acquire and/or maintain monopoly power in the applications software market. The anti-competitive acts used by Microsoft to acquire and/or maintain its monopoly power in the operating system market also have allowed Microsoft to target and monopolize the applications software market for Intel-compatible PC word processing, spreadsheet and office suite software.

140. Microsoft has obtained power in the applications market by, among other things, giving its own applications software developers early and complete access to the revised code developed in successive versions of its operating system. To compete with Microsoft's applications software, non-Microsoft developers must have timely access to Microsoft's operating system APIs, as well as to other operating system information.

141. To maintain its dominance over, and supra-competitive prices in, the applications software market, Microsoft, among other things:

a. failed to timely disclose the APIs for MS-DOS and Windows to software developers who needed such information to create applications software compatible with Microsoft's operating system;

b. opposed alternative standards called "OpenDoc" that were open standards for developing new applications. Such open standards would have freed developers from Microsoft's attempts to dictate the way applications software was developed. Microsoft punished competitors who supported the open standards. Among other things, such persons would receive "special" versions of the beta software that lacked key information necessary for development of software products running on Windows;

c. created a new standard OLE (object linking and embedding) for data transfer, which Microsoft subsequently revised pursuant to requests from its Excel developers without timely releasing those revisions to competing developers. As a result, Excel had the opportunity for input and early knowledge of the resulting modifications that were unavailable to Microsoft's competitors. These competitors, particularly Lotus 1-2-3, suffered delays of many months as they were forced to rewrite their own applications to make them perform under the OLE revisions.

d. forced software developers to sign non-disclosure agreements that barred them from receiving information on Windows 95 if they did not support Microsoft's OLE;

e. impeded competing ISV's development efforts by providing them with incomplete operating system code, forcing them to accept restrictive licenses, and barring them from attending supposedly open software development conferences at Microsoft;

f. impeded competing ISV's development efforts by denying promised promotional and marketing support, forcing distributors and dealers to exclude ISV's from their promotions, and denying ISV's promised access to Windows' user mailing lists;

g. intentionally made its operating system incompatible with or difficult to operate with competitors' applications software;

h. threatened OEMs that they would receive a license for Windows only if they agreed not to offer competitors non-Microsoft applications software;

i. threatened OEMs that Microsoft would increase the price for its operating systems if the OEMs distributed non-Microsoft applications software;

j. threatened to withhold from OEMs market development funds if the OEMs distributed non-Microsoft applications software;

k. threatened OEMs that Microsoft would withhold technical support to the OEMs for Microsoft's operating systems, including Windows, if the OEMs offered competitors non-Microsoft applications software; and

l.   raised the price of Windows to non-tier one OEMs in consideration for tier one OEMs agreement to offer only Microsoft applications software.

142. In his Findings of Fact, Judge Jackson gave specific examples of Microsoft's anti-competitive behavior in regard to its applications software, including its attempts to preclude IBM's installation of its own Lotus SmartSuite bundle of office productivity software on the PCs manufactured by IBM. Findings of Fact at ¶¶ 115-132. Specifically, Judge Jackson found that "[w]hen IBM refused to abate the promotion of those of its own products that competed with Windows and Office, Microsoft punished the IBM PC Company with higher prices, a late license for Windows 95, and the withholding of technical and marketing support." Findings of Fact at ¶ 116, 118-131.


Microsoft's Predatory Acts Specifically Targeted At The Spreadsheets Market

143. In the early 1990s, Lotus 1-2-3 had the dominant share of the Intel-compatible PC spreadsheet software market. In 1994, Microsoft engaged in a calculated effort to persuade Lotus to write its next version of Lotus 1-2-3 to run on OS/2 rather than MS-DOS. At the very time that Microsoft was engaged in those efforts, it had decided for itself to abandon any further development efforts for OS/2 and to focus instead on further developing Windows. Microsoft withheld this critical decision from Lotus.

144. Microsoft's deception was successful: Lotus wrote its next spreadsheet version for OS/2, thereby misdirecting huge sums of money in virtually worthless development efforts. Microsoft timely released its next spreadsheet version to run on Windows and took substantial market share from Lotus.


Microsoft's Predatory Acts Specifically Targeted At The Word Processing And Office Suites Markets


 145. Netscape's browser, as alleged, threatened to weaken the applications barrier to entry that protected Microsoft's monopoly in the operating system market. Microsoft also recognized that Navigator posed a dangerous threat to its applications software monopoly, particularly in the office suites and word processing markets. As one Microsoft executive wrote:

Netscape is using their position with the browser as a foothold onto the desktop to push e-mail and collaboration as the new killer applications. Any Office Suite in the near future will have mail as its core component. As e-mail use becomes pervasive in organizations, it will replace Word (and by extension Office) as the most critical end user app in organizations .... Netscape is working hard to offer a compelling application development platform, which if successful, will greatly diminish corporation's interests in our Office products . . . . The threat of continued low mail client share in organizations and with consumers is that our competitors gain control of the desktop, where they can switch existing Office users to their solutions, sell upgrades, and drive server share with a cohesive client-server solution . . . . In summary, we must keep our focus on browser share. This is central to the success of Windows and central to the success of Office. By focusing on IE today, we not only secure the desktop and secure future Windows sales, but also gain a user base that we can upgrade to Outlook then Office.

 146. Microsoft's predatory acts directed at Navigator, therefore, were designed not just to protect Microsoft's operating system monopoly, but also its monopolies in the word processing and offices suites markets.


ANTITRUST INJURY


147. Microsoft's exclusionary and restrictive practices described herein have caused significant harm to Plaintiffs and the Class members. Plaintiffs and the Class members have suffered tangible economic loss that is reasonably capable of ascertainment.

148. Microsoft denied Plaintiffs and Class members fundamental product choice in the operating system and applications software markets for word processing, spreadsheet, and office suite, which formed the predicate for Microsoft's unlawful monopoly profiteering. Microsoft increased, maintained or stabilized the price Plaintiffs and the Class members paid for licenses for Microsoft's operating system and applications software above competitive levels, virtually without regard to the price of licenses for competing software.

 149. The Court in Microsoft II found in one example that Microsoft priced Windows updates 80% above a competitive price - $89 rather than $49. Findings of Fact at ¶ 63. In addition, Microsoft then raised the price of its superseded operating system, Windows 95, to match the price of its current operating system, Windows 98, despite the fact that Window 95's outmoded technology was virtually worthless. This was a clear effectuation of Microsoft's ability to extract monopoly profits.

 150. Microsoft's supra-competitive prices are not the result of superior products or competition on the merits. Instead, Microsoft has been able, at Plaintiffs' and the Class members' financial expense, artificially to inflate its profits by engaging in a series of exclusionary acts and restrictive practices with the purpose and effect of restraining and preventing competition and unlawfully acquiring and/or maintaining its monopoly in the relevant markets described above.

151. Plaintiffs and the Class members, as consumers in the markets for operating system and applications software, were within that area of the economy endangered by the breakdown of competitive conditions caused by Microsoft's unlawful conduct. Plaintiffs and the Class members were foreseeable and necessary victims of Microsoft's monopolization, and their injury was inextricably intertwined with Microsoft's exclusionary and illegal conduct.

152. The heart of Microsoft's scheme was to offer a Hobson's choice to licensees or potential licensees of operating system and applications software. Plaintiffs and the Class members were compelled to choose between acquiring a Microsoft operating system or applications software license at supra-competitive cost and degradated value; or acquiring no product or one of those few products that had been effectively marginalized by Microsoft so as not to afford the basic performance sought in these markets by consumers. The injury suffered by Plaintiffs and the Class members was inextricably intertwined with the injury Microsoft sought to inflict on the operating system and applications software markets. Therefore, the injury to Plaintiffs and the Class members flows from that which makes Microsoft's acts unlawful.

153. Plaintiffs and the Class members who purchased a license to use certain versions of Windows have in addition been harmed by the unlawful contractual and technological tie of the Internet Explorer. Those who use no browser, or use a competing browser, are harmed by the performance degradation caused by the technological tie: the loss of speed and memory caused by the unwanted browser operating code. Findings of Fact at ¶ 173. Even those who use Internet Explorer are harmed by the technological tie, which results in increased operating system instability (increasing the likelihood that a browser crash will cause a crash of the entire operating system), and increased susceptibility to damage from malicious viruses. Findings at Fact at ¶ 174.

154. The antitrust violations of Microsoft do not arise from a single isolated transaction, nor even a series of transactions. Microsoft's antitrust violations, as described herein, constitute a repeated, continuous course of numerous transactions that fundamentally shaped the markets for operating system and applications software such that, for all reasonable purposes, it may fairly be said that Microsoft's unlawful conduct became embedded in these markets.

155. Over the many years of its continuous unlawful conduct, Microsoft has maintained a captive OEM channel that functions as Microsoft's distributor for the large majority of all Microsoft operating system and applications licenses to end-users of PCs, with the remainder of Microsoft's licenses reaching end-users through large established retailers, distributors and resellers, and Microsoft itself. These OEMs and other distributors of Microsoft's operating system and applications software products do not, when acting in that capacity, suffer the supra-competitive cost and degradation of product that is absorbed by Plaintiffs and the Class members.

156. Given the ongoing nature of the unlawful conduct of Microsoft and the embedded nature of that conduct in the distribution system for Intel-compatible personal computer operating system and applications software, the absence of a class action remedy for Plaintiff and the Class members would likely lead to the absence of any monetary sanction against Microsoft under the laws of the state of Minnesota. In light of the relationship between OEMs and Microsoft as alleged and the admission that OEMs have elected not to sue Microsoft, there is absent any risk of duplicative recovery. In any event, to the narrow extent such duplication may exist, apportionment can reasonably be accomplished.


TOLLING OF APPLICABLE STATUTES OF LIMITATION

157. Any applicable statutes of limitation have been equitably tolled by Microsoft's affirmative acts of fraudulent concealment, suppression, and denial of the true facts regarding the existence of the monopolistic and anti-competitive practices at issue herein. Such acts of fraudulent concealment included intentionally covering up and refusing to publicly disclose critical internal memoranda, product development plans and other reports of anti-competitive practices. Through such acts of fraudulent concealment, Microsoft was able to actively conceal from the public for years the truth about Microsoft's anti-competitive practices, thereby tolling the running of any applicable statutes of limitation. Moreover, Microsoft still refuses to this day to take full responsibility for its actions, vigorously denying all liability or even the existence of monopolistic conduct.

FIRST CAUSE OF ACTION

(Violation of Minnesota Antitrust Law - Illegal Combination In Restraint Of Trade)

158. Plaintiffs reallege and incorporate herein by reference the preceding paragraphs of this Complaint.

159. At some point in time before the commencement of the Class Period (the exact date being presently unknown to Plaintiffs) and continuing to date, Microsoft and its co-conspirators entered into an illegal contract, combination or conspiracy in unreasonable restraint of trade in the relevant markets at issue herein, in violation of the Minnesota Antitrust Law, Minn. Stat. § 325D.49, et seq.

160. As a result of this violation, Plaintiffs and members of the Windows Operating Software Class and the Windows Applications Software Class have been injured in their business and property, in an amount which will be established at the trial of this action.


SECOND CAUSE OF ACTION
(Violation of Minnesota Antitrust Law - Illegal Monopolization)

161. Plaintiffs reallege and incorporate herein by reference the preceding paragraphs of this Complaint.

162. At some point in time before the commencement of the Class Period (the exact date being presently unknown to Plaintiffs), Microsoft possessed and continuing to this date possesses monopoly power in the market for Intel-compatible PC operating system and applications software. Through the anticompetitive conduct described herein, Microsoft has willfully acquired and/or maintained its monopoly power in the relevant markets. Microsoft has acted with an intent to illegally acquire and/or maintain its monopoly power, and the anticompetitive conduct described herein either conducted unilaterally or with its co-conspirators, has enabled it to so monopolize the relevant markets or attempt or conspire to do so in violation of the Minnesota Antitrust Law, Minn. Stat. § 325D.49 et seq.

163. As a result of this violation, Plaintiffs and members of the Windows Operating Software Class and the Windows Applications Software Class have been injured in their business and property, in an amount which will be established at the trial of this action.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs, individually and on behalf of each Class, pray for judgment and relief against Microsoft as follows:

(1) An order of this court certifying this action to proceed as a class action and Plaintiffs as the proper class representatives;

(2) Actual and treble damages;

(3) Reasonable costs of suit and attorneys' fees;

(4) Pre- and post judgment interest; and

(5) Such other and further relief as this Court may deem necessary, proper and/or appropriate.


JURY DEMAND


Plaintiffs demand a trial by jury on all causes of action so triable.

Dated: October 22, 2002  
ZELLE, HOFMANN, VOELBEL, MASON & GETTE LLP
Richard M. Hagstrom (Atty. No. 39445)
Michael E. Jacobs (Atty. No. 0309552)
Meghan L. Knowles (Atty. No. 0303926)
[address, phone]

Samuel D. Heins (Atty. No. 43576)
Daniel E. Gustafson (Atty. No. 202241)
Vincent J. Esades (Atty. No. 249361)
HEINS MILLS & OLSON, P.L.C.
[address, phone]

David E. Krause
James B. Hovland
KRAUSE & ROLLINS Attorneys at Law
[address, phone]

OF COUNSEL:

Craig C. Corbitt
ZELLE, HOFMANN, VOELBEL, MASON & GETTE LLP
[address, phone]

Alice McInerney
Daniel Hume
KIRBY MCINERNEY & SQUIRE, LLP
[address, phone]

Leonard B. Simon
Robert Gralewski
MILBERG WEISS BERSHAD HYNES & LERACH LLP
[address, phone]

____________________________________

ACKNOWLEDGMENT

The allegations in this complaint are well grounded in fact and are warranted by existing law or a good faith argument for its extension, modification, or reversal. Plaintiffs brings this complaint in good faith and not for any improper purposes. Plaintiffs acknowledge that costs, disbursements, and reasonable attorney and witness fees may be awarded to defendant pursuant to Minn. Stat. § 549.21, subd. 2 and Minn. Stat. § 549.211.

___________signature____________

______________________________________

AFFIDAVIT OF SERVICE

 

STATE OF MINNESOTA
COUNTY OF HENNEPIN

) ss.
)


Sheila Stender, being first duly sworn, deposes and says that she is a secretary in the law office of Zelle, Hofmann, Voelbel, Mason & Gette LLP, [address]; that on the 22nd day of October, 2002 she caused to be served by U.S. mail the Second Amended Class Action Complaint and Jury Trial Demand on:

Robert L. DeMay
Leonard, Street and Deinard
[address]

David Tulchin
Sullivan & Cromwell
[address]

___________signature of Sheila Stender________

Subscribed and sworn to before me this 22nd day of October, 2002.

___________signature_________
Notary Public

[notary stamp]


  View Printable Version


Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )