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Novell v. Microsoft - Day 2 - Opening Statements ~ pj - Updated 2Xs
Tuesday, October 18 2011 @ 07:03 PM EDT

Chris Brown attended the second day of the Novell v. Microsoft antitrust trial in Salt Lake City, Utah today. Today was one of the most important days of the trial, the opening statements by the two sides' attorneys, where each side presents the overview of what they hope to prove at trial. And in Microsoft's opening, Chris says that Bill Gates will be "in the courtroom" in a few weeks in person to testify for Microsoft.

Chris's full report will come later tonight, after he gets some necessary work things taken care of. So this is a brief taste of what will come later, and to let you know that we did have someone in the courtroom today.

More volunteers are welcome, of course. This trial will be going on for weeks, unless there is a settlement, so if you are anywhere nearby or can get that way, please do.

Here's the quick note from Chris, but check back later tonight or in the morning for more:

Both sides made their opening statements with both making compelling presentations.

Novell: Microsoft used anti-competitive acts to strengthen their Microsoft Office suite at the expense of their competitors, particularly WordPerfect and Quattro Pro.

Microsoft: It was Novell's bad decisions, habitually late delivery, and buggy inferior product that led to WordPerfect and Quattro Pro's demise.

It appears I was mistaken yesterday, or perhaps the situation has changed... Microsoft told the jury today that they Mr. Gates will be in the courtroom and will testify regarding why he made the decisions he did. He said this would be in "a few weeks."

If you'd like to attend and would like directions, please feel free to contact me and I'll help you out.

While we wait, the Inquirer's Lawrence Latif has an article explaining what Mr. Gates would like to explain to the jury:

One of Novell's exhibits appears to show then Microsoft CEO Bill Gates saying to his subordinates that the firm should make it harder for the likes of Lotus and Novell to compete with its own Microsoft Office suite. The email sent by Gates on 3 October 1994 stated, "We [Microsoft] should wait until we have a way to do a high level of integration that will be harder for [the] likes of Notes, WordPerfect to achieve, and which will give Office a real advantage."

Later Gates denied his email formed the basis of any anti-competitive behaviour, stating in a March 2009 deposition, "The decision I was making in this memo is about: Is this an important thing? And I'm saying it's not." Novell on the other hand has a different view, stating in its complaint, "He [Gates] candidly admitted that Microsoft's own products could not compete without the benefit of these anti-competitive acts."

Here's a transcript [PDF] of that 2009 deposition I believe he is referencing. And here's the Gates memo [PDF], one of many exhibits Novell provided the court [more here and here; you can find Microsoft's on our Timeline page, as well].

We at Groklaw have transcribed many of the Comes v. Microsoft exhibits, so they'd be searchable, some of which are appearing in this case, and I'll tell you honestly, it is impossible, for me, anyway, to read them without coming to believe that Microsoft was a very bad boy. But read them for yourself. Come to your own opinion. That's what Groklaw is for. Here's the page that is mostly from the relevant time frame. But feel free to look at all the pages. If you don't throw up at the end, you need to see your doctor, please, right away. Something might be wrong with you.

And by the way, when Gates starts 'splaining, maybe he can tell us what this exhibit that surfaced in the Comes v. Microsoft antitrust trial, an email from Microsoft's Satoshi Nakajima, dated from the same October 1994 time frame as Gates' memo, is talking about, when it says a recent decision had been made at Microsoft:

Based on the recent decision, we are hiding one of shell extension mechanisms (see below for details). I marked all those interfaces and definitions ";internal" so that we don't put them in the SDK header files any more. Out dev. partners will receive these new headers (shlobj.h and shlguid.h) before M7 release.

Notes:

Capone/Marvel - They may keep building their modules with our old public header files until M7, should use new public header after M7. Fonts folder - George (M), We need to establish a way to update those private headers that Elsware has.

We won't change the definitions of those interfaces until M7 release so that those name space extensions (Capone and Marvell) run well. We may change those interfaces (or at least their GUID) after M7 to intentionally break those apps (please let me know if you are using those mechanisms internally).

Does it mean that Microsoft had decided to intentionally break non-partners' apps? If so, is that not pretty much what Novell is claiming, that the playing field wasn't even?

Update:

More details from Chris's notes:

I got to the courtroom about 8:35.

Before Jeff Johnson gave Novell's opening statement, he introduced the other attorneys at the table including Novell's own Jim Lundberg.

Novell's Opening Statement:

Mr. Johnson told the jury that this is a case about fair play; that Microsoft is a monopoly and took anti-competitive actions against competitor's WordPerfect and Quattro Pro.

He said people buy computers for their applications, not their operating systems. He said Microsoft pulled a bait and switch with Windows 95 features.

He presented a May 18, 1989 email from Bill Gates.

He then presented an August 17, 1997 email from Microsoft's Jeff Raikes to Warren Buffett where Mr. Raikes explained that if [Microsoft] owns the key "Franchises" built on top of the operating system, [they] dramatically widen the "moat" that protects the operating system business.

He presented a June 3, 1995 email from Steve Balmer "If we cannot get Office in the stores we will need to move the Windows 95 street date... absolute requirement for me."

He said Novell aimed to have its products out on the shelves 30 to 90 days after the Windows 95 release. He said this was not met because of Microsoft's anti-competitive acts.

He said the jury would hear more in the factual findings in the case against Microsoft in Washington DC.

He described middleware. He quoted from the findings of fact that middleware reduces the barrier to entry. The more popular the middleware becomes...

He said that WordPerfect had PerfectFit middleware API, and there were also Appware APIs.

He showed an email from Jim Allchin to Bill Gates (missed details).

He referred to the deposition of Paul Maritz where he's asked if Appware is a competitive threat. Mr. Maritz replied "Very much... Long term one of our most significant threats."

He described Microsoft evangelism, developer conferences, alpha/beta releases, SDKs, first wave agreements, forums, and premier support. He said Novell was a first wave participant and had access to the premier support line.

He described the Windows 95 explorer, saying that the left hierarchical pane included namespaces. For example Network Neighborhood is a namespace extension.

He showed an email from Paul Maritz to Jim Allchin from June 1993 regarding the Hood Canal retreat. Mr. Maritz was directing to make the shell non-extendable and claimed that "we couldn't get it done in time".

However Mr. Johnson said that Microsoft was already using it, that Microsoft withheld features from the ISVs so it could uniquely leverage it themselves.

He quoted from the Capone (email): "The only reason Mail is in Chicago (Windows 95) is to help WGA achieve dominance in the mail market... (Bill's words not mine)".

An email reporting on a Microsoft meeting with WordPerfect showed WordPerfect was enthusiastic about Chicago (Windows 95).

Mr. Johnson told the jury that Microsoft will claim that WordPerfect was late for other reasons.

He compared Microsoft's File Open dialog with WordPerfect's more advanced QuickFinder features. He described how not being able to add new namespaces would be a step backwards for WordPerfect.

He said the Chicago (Windows 95) M6 beta was released in June of 1994 -- that, as promised, the namespace extension API was documented.

He said the shared code team at Novell was responsible for the file open dialog. The team liked the Microsoft technology and started coding expecting to receive these extensions. By October 1994, the team was 80% completed.

He then showed an email from Bill Gates to bobkr and others dated October 4, 1994, subject "Frankenberg Speech at Agenda" (conference September 20, 1994) which reads in part:

"Corsair was demoed. Cross platform... unified views! Browser is called Ferret. 3-D views... Launched WP 6.1 and showed how its hypertext capability lets you navigate around the world using URLS!!! Basically corsair is a shell that includes a WWW browser with some APIs. This emphasizes the importance of our shell integration. Novell is a lot more aware of how the world is changing than I thought they were.
Mr. Johnson said this is the only correspondence of Bill Gates they've seen with three exclamation points.

He then showed plaintiff exhibit 1, an email dated October 3, 1994 from Bill Gates to a lot of people with subject "Shell plans - iShellBrowse" reading Time for decision. Microsoft should not publish these extensions. Mr. Johnson interjects that this is despite their already having made the decision a year earlier and it had been published to ISVs. The email goes on to say, Wait until we can do a high level of integration...

Mr. Johnson said Microsoft delayed publishing to advantage Microsoft at the expense of competitors. He said Microsoft immediately "hid" the namespace extensions from ISVs.

Microsoft told ISVs that they were not providing them because they would be difficult to support long term and may go away.

Mr. Johnson told the jury that Microsoft will advance other reasons for Bill Gate's decision but that the evidence will show otherwise.

He says the loss of the namespace APIs delayed Novell more than a year and caused it to lose 40%(?) of its functionality. He said the file open dialog was "critical path" in release of PerfectOffice suite.

He claimed that Microsoft continued to use namespace extensions. In Athena, it showed "Internet Mail" and "Internet News" namespaces. In Office 96 specifications, crucial interfaces included IShellFolder and IShellView.

At the Windows 95 release, Microsoft was the sole provider of Office Applications designed for Windows 95.

He showed a chart of DOS/Windows 3.1/Windows95/98 sales figures which showed WP sales increasing until 1995 when (their product was delayed).

He said he won't really go into damages, but their experts will. However he said that Novell wound up selling WordPerfect and Quattro Pro to Corel for $146 million, taking a loss of a billion dollars.

Mr. Johnson ended his statement.

Microsoft's Opening Statement:

David Tulchin then provided the opening statement for Microsoft.

Mr. Tulchin told the jury that this case is only regarding the period from July 1994 until March of 1996, the period that Novell owned WordPerfect.

He said Novell made bad decisions with WordPerfect.

He said the Windows 95 beta was not a final product, that the namespace extension was a Microsoft invention, owned by Microsoft.

He said that Microsoft had an operating system monopoly, but that Novell's expert has previously testified that Microsoft legally obtained its monopoly. He went on that conduct is not anti-competitive if it was taken for a legitimate business purpose.

He described Microsoft history and growth... Bill Gates, the writing of Basic, PC/MS DOS, Windows.

He showed the timeline of Microsoft Word and Excel GUI release for Apple Macintosh in 1985. Then he showed the WordPerfect (GUI) timeline with WordPerfect 1.0 for Macintosh in 1988, then nothing for Microsoft Windows until 1991.

He says the evidence will show the reason they were slow was that WordPerfect was always late.

Novell bought WordPerfect, but they didn't own it at this time (referring to the GUI releases shown on the timeline).

He said that at the time Novell was well-known for NetWare, that the emails Novell will be showing were from 1991, 1992, 1993 about competition that was about Microsoft competition with NetWare, not the software at issue in this case.

He said in 1994 Novell bought Quattro Pro from Borland.

He showed a timeline of WordPerfect market share of DOS and said that WordPerfect dominated the market. He showed the Microsoft Word timeline for DOS share (very low).

He said Microsoft Word was very successfull on the Macintosh, a GUI platform.

He said that when Windows 3.0 was released in May of 1990, users moved in droves from DOS to Windows. But WordPerfect didn't have a product for Windows -- they were miles behind.

He shows on a chart the first WordPerfect release for Microsoft Windows was 1.5 years later.

He showed a chart of WordPerfect market share for Windows and Microsoft Word, generally showing Wordperfect's share increasing until 1995 then dropping, while Microsoft Word's share was increasing.

(Chris: In my notes I estimate the data points as: WordPerfect, 1991 release 15%, 1992 32%, 1993 29%, 1994 25%, 1995 18%, 1996 8%. And for Word: 1990 92%, 1991 70%, 1992 58%, then line increases to 90+% tracking decrease in WP).

Mr. Tulchin showed a Novell (WordPerfect) document dated Dec 21, 1993 describing WordPerfect 6 as "too slow, too many bugs to be considered sufficiently stable. Requires too much memory and too much disk space."

He shows Novell's 1996-1998 business plan dated June 29, 1995 which reports that they are still recovering from WordPerfect 6.0 for Windows which was too slow and buggy.

He shows a document dated July 15, 1994 from a PerfectOffice Suite Business Review Exercise "Microsoft Office is currently the industry-leading suite... It's one-two punch, Word and Excel, is the strongest combination in the industry."

Mr. Tulchin told the jury that if you have a product, and its quality is not too high, and you have a competition that's the "one-two punch", well, you can tell what happens.

He showed a Novell August 1994 business plan reporting that their partnering with Borland had not been received well.

He showed a chart indicating the market shift to suites, and it showed revenue from sales of suites versus stand-alone applications. It depicted a decline of stand-alone spreadsheets and word processors and a corresponding increase in revenue from suites. He pointed out that by 1995 suites were three times the combined revenue of standalone spreadsheets and word processors.

He said that the time Novell purchased these products, there had been two major changes in the market -- first, the shift from DOS platform to GUIs and second, the shift to suites.

He claimed that in effect Novell was purchasing products in decline, that Novell and the companies before it were not adapting to technology. He showed a graphic of a 24-frame film roll versus an 8GB SD card holding up to 5,000 photos. He said that if you don't adapt, you'll be left by the wayside.

He showed a chart of Novell's stock price at the time Novell announced the purchase of WordPerfect and Quattro Pro, saying it indicates the market reaction to Novell's decision. He said the announcement came after the market closed on March 21, 1994, that it closed the day at $23.75, but the next day it was down to $20, then the day after that to $19. He says that Novell's market capitalization fell 20% or a drop of $1,467,849,750 on an announced WordPerfect and Quattro Pro purchase price of $1,555,000,000.

He claims that investors recognized that it was the purchase of declining products, that these two products were not worth what Novell was willing to pay.

He said that Chicago (Windows 95) represented a big advance in the user interface, that namespace extensions were only a small part, that the namespace extension APIs accounted for just 4 out of approximately 2,500 APIs in Windows 95, that their expert estimates Window 95 has as many as 2,800+.

He said there were three reasons for withdrawing support for the namespace extension APIs.

First, third-party programs that called the namespace extension APIs could crash the Windows 95 shell.

Second, namespace extension APIs were not compatible with future versions of Windows then under development in 1994 (Windows 95, the unreleased Cairo, and Windows NT). He said the Windows NT team, developing Windows for servers, were very concerned with stability. They lobbied Bill Gates hard to eliminate support for the namespace extension APIs.

Third, the namespace extension APIs did not achieve the functionality Bill Gates hoped could be achieved. He had wanted users to be able to launch from the hierarchical view in the left pane and run in the right hand content pane.

He said that Windows 95 allowed users to launch WordPerfect and Quattro Pro multiple ways -- from the Start menu and from WordPerfect and Quattro Pro icons on the desktop. He said these were new features in Windows 95. He claimed Microsoft invented these methods.

He said what Novell wanted was a third way to get to WordPerfect and Quattro Pro via the Explorer. He showed a graphic of a prototype of the unreleased "InfoCenter". The graphic showed Explorer with a namespace mailbox inbox with email messages in the content pane.

He showed how ISVs were able to add folders, visible in Explorer, to get to WordPerfect and Quatro Pro.

He further said that namespace extensions were never removed from Windows 95, and if Novell really needed them, they were there. Support was removed, and it was not guaranteed to stay there.

He referred to Novell's exhibit 1 and highlighted the portion before that section pointed out by Novell, "... Having the Office team really think through the information intensive scenarios and be a demanding client of systems is absolutely critical to our future success. We can't compete with Lotus and WordPerfect/Novell without this".

Mr. Tulchin said Novell's highlighted section is not about the namespace extension APIs; it's about the application developers making their product the best possible. He said that Novell could have written their own software to get that functionality, or they could have used the remaining APIs.

He then referred to a Microsoft non-disclosure agreement/contract for pre-release products signed May 24, 1994 by WordPerfect which reads: "The Product may not operate correctly and may be substantially modified prior to first commercial shipment. Company assumes entire risk with respect to the use of the product."

He said that Novell claims the reason they were late is because they had to do the work themselves rather than rely on Microsoft's work.

(break for lunch)

Resuming, Mr. Tulchin then showed reasons Novell was late.

He displayed an email dated August 3, 1994 from Ad Rietveld to Jim Tolonen "After Windows 3.1 (16-bit) products are released this year, move large percentage of Windows resources over to Chicago (32-bit)... There are very few resources on Chicago at this time."

He displayed an email dated April 3, 1995. Novell Business Applications Business Plan "Tremendous growth in the suite category has resulted in a corresponding drop in the growth rate of standalone applications... Weak vis-a-vis Microsoft in perception for corporate strategy, vision, and ability to develop software... Third to suite market. Microsoft has enormous momentum."

A May 3, 1995 Novell Employee Survey: "48% of employees originally hired at WordPerfect are thinking about quitting."

From December 23, 1995 email from Bruce Brerton regarding Quattro Pro developers quitting: "15 additional people submitted their resignations. All (except 1) will be going to Oracle. From a development standpoint, this leaves us with just 2 people."

Mr. Tulchin said that the Novell suite could not get released until Quattro Pro was complete.

He showed an August 3, 1994 email from Ad Rietveld regarding Novell/WordPerfect/Quattro Pro Unification Plan: "Increase resources on internationalizing Quattro Pro for faster time to market support for localized versions."

Another email dated February 2, 1995 which Mr. Tulchin pointed out is 6 months later: "Quattro Pro folks still working on international version of Quattro Pro 6.0. Expect to finish that by end of March and then will begin on next version of Quattro Pro."

Mr. Tulchin said this is 2 months after the namespace extension decision. He says this is still the DOS version they are working on. He said Novell claimed the only reason for the delay was the namespace extension, but here Quattro Pro says it won't be until the end of March before they start on the next version of Quattro Pro, only a few months before Windows 95 comes out.

He showed a chart of market share of office suites for the Windows platform from 1993 to 1996. (Chris: I estimate the data points to be: Microsoft 1993 80%, 1994 81%, 1995 88%, 1996 89%, Borland Office/PerfectOffice 1993 3%, 1994 4%, 1995 5%, 1996 7%).

He said that Microsoft was the first company to come out with a suite and that Novell's office suite was never successful.

Novell contends it's Microsoft's fault they were late, that it was solely Bill Gates' decision on the namespace extension. He claimed that, instead, Novell made bad decisions -- they paid too much (the market indicated that), Novell's products were slow, they were buggy, they were late to market even before the namespace extension.

He said that Microsoft made its decision: not to make the best product for Novell, but to make the best Windows 95 for Microsoft.

According to Novell's theory, if a version of WordPerfect for Windows 95 had been released much earlier than it was, that event would have resulted in a sharp decline in Microsoft Windows popularity.

He says he has a witness, a Microsoft employee, that will say that a WordPerfect employee told him that WordPerfect will be "OK" with Microsoft's decision on the namespace extension.

Mr. Tulchin said there was no complaint from Novell way back then, that they only filed this lawsuite 10 years later. If it was such a big deal, do you think they would have remained silent for these 10 years?

Mr. Tulchin finished his opening statement (approx 1pm).

Collateral estoppel

Judge Motz turned to collateral estoppel and assured the jury that by reading these fact to them it will save a lot of time. He said that in previous litigation in the District of Columbia certain factual findings were made, and that they would now be read to them.

Judge Motz directed Novell to read for 30 minutes, then continue in the morning.

Novell's attorney (if I recall correctly, it was Mr. Wheeler) began reading from the findings a description of applications...

I then left the courtroom.

Update 2: Tom Harvey reports on the day's events in the Salt Lake Tribune. He says there were about 25 lawyers in the room:
At least 25 lawyers from both sides populated the Salt Lake City courtroom presided over by federal Judge J. Frederick Motz of Baltimore, who has been overseeing the antitrust cases against Microsoft.

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