Judge Awards Bristol $1M in Punitive Damages from Microsoft

(September 4, 2000) Judge Hall awarded Bristol $1,000,000.00 in punitive damages from Microsoft under the Connecticut unfair trade practices law, based upon a jury verdict that awarded Bristol $1.00 in compensatory damages.

U.S. District Court Judge Janet Hall released her 103 page ruling on Bristol Technology's post-verdict motions for punitive damages and injunctive relief on August 31 in the case Bristol Technology v. Microsoft.

Bristol filed its 14 count Complaint against Microsoft on August 18, 1998. 12 of the 14 counts alleged violations of federal or state antitrust law. The jury ruled for Microsoft on all of these counts. A very small part of the case was a claim that Microsoft violated the Connecticut Unfair Trade Practices Act (CUTPA). Last July, the jury found that Microsoft had violated CUTPA, but awarded Bristol only $1 in compensatory damages.

Bristol's CUPTA's claim was based on its allegations that Microsoft had mislead developers back in 1994 and 1995 that it would always make its source code for Windows NT available under its WISE program.

The CUPTA count was only a very minor part of the case. It was an antitrust case. However, unlike the Department of Justice's famous case in Washington DC, which dealt with Microsoft's Windows desktop operating systems for PCs, the Bristol case dealt with Microsoft's NT operating systems for workstations and servers.

Microsoft would not give NT 4.0 source code to Bristol under the terms sought by Bristol; and this, Bristol alleged, violated antitrust law. Bristol alleged monopoly leveraging of Microsoft's alleged monopoly of PC operating systems, refusal to deal in connection with its alleged monopoly in workstation operating systems, refusal to deal in connection with its alleged monopoly in departmental server operating systems, denial of an alleged essential facility, and attempted monopolization of the markets for workstation and departmental server markets. The Complaint also alleges six violations of Connecticut antitrust law.

And unlike the Washington DC case, the Bristol case was tried before a jury. Hence, all counts, except the 14th (estoppel, which is an equitable remedy) were tried by the jury. The jury found that Microsoft had violated only the CUTPA. This limited Judge Hall's authority to only the CUTPA count.

Judge Hall's ruling stated that this violation was "wanton and reckless", and awarded Bristol $1,000,000.00 in punitive damages. Judge Hall also issued an injunction barring Microsoft from making certain statements about its WISE program. While Microsoft opposes this injunction, it is essentially a moot issue.

Bristol develops software that enables computer application programs originally written for Windows operating systems to be converted or recompiled to run on alternative operating systems, such as UNIX, OpenVMS, and OS/390. Its main product is Wind/U. Bristol had a contract with Microsoft that commenced in September 1994, and expired in September 1997, under which Microsoft provided Bristol with source code for Windows NT 3.0 and earlier OS software. Microsoft was not obligated under this contract to provide Bristol with Windows NT 4.0 or 5.0 source code, and Microsoft did not provide it to Bristol. Bristol and Microsoft negotiated, but did not reach, a contract to provide 4.0 and 5.0 source code.

A six week trial was held in June and July of 1999 in Connecticut, the home state of Bristol. After its resounding loss before the jury, Bristol filed two post verdict motions; one for an award of punitive damages, and the other for a permanent injunction. Both were based on the solitary count upon which the jury found for Bristol.

Judge Hall wrote that she awarded Bristol punitive damages "in a amount sufficient to punish Microsoft for its deceptive practices with respect to the WISE program and to deter similar conduct by Microsoft and others in the future."

She wrote that "the deceptive conduct engaged in by Microsoft clearly rises to the level of reckless and wanton indifference to the harm it caused Bristol and others, including ISVs, that relied on Microsoft's assurances regarding the viability of products under the WISE Program to allow porting of applications written for Microsoft's latest NT source code."

The 103 pages defends her ruling, and anticipates the many legal challenges that Microsoft will raise on appeal. First, the ruling details the factual background of Bristol, Microsoft, and the WISE program. She wrote that "In 1994, Microsoft launched the WISE Program to allow customers to integrate Windows-based solutions with UNIX and Macintosh systems. The technology developed in the WISE Program allowed application developers to write software to Windows APIs and run the resulting applications on Macintosh and UNIX systems. The technology would thereby enable developers to write to a standard set of APIs and then run the applications across any Windows, UNIX, or Macintosh platform, hence the term "cross-platforming."

She then detailed a number of statements and events in 1994 and 1995 in which Microsoft lead developers and independent software vendors to believe that Microsoft would continue to make Windows NT source code available to WISE licensees. Where the facts were disputed by Bristol and Microsoft, Judge Hall found Bristol to have the more credible witnesses.

Judge Hall then explained why the law, as applied to these facts, warranted an $1,000,000 punitive damages award.

Judge Hall wrote that she had authority under Connecticut law to "order, in addition to damages or in lieu of damages, injunctive or other equitable relief." (Conn. Gen. Stat. § 42-110(g). She elaborated on Connecticut cases which held that judges may award punitive damages in CUPTA cases. She also wrote that her ruling does not deprive Microsoft of its right to a jury trial on this issue.

Judge Hall defended the size of her award at length. Most appellate courts reviewing awards of punitive damages require some rational relationship between the size of a punitive damages award and the underlying award of compensatory damages, such as matching amount, or a small multiple. She wrote that these cases are inapplicable to awards of nominal damages, where the judge's purpose is deterrence.

Judge Hall also elaborate on why Microsoft's conduct met the legal requirement of "reckless and wanton" deceptive behavior. She wrote that,

"The court finds that Microsoft led ISVs and developers to believe -- and wanted them to believe -- three key factual predicates: 1) the source code for Windows NT would be available to Microsoft's WISE Program partners into the future; 2) NT server technologies would be included with the source code provided Microsoft's WISE Program partners; and 3) Microsoft's WISE Program partners had and would have "the very latest" code for each version of Windows NT and its APIs."

She continued that this amounts to a classic bait and switch:

"Microsoft's deceptive statements regarding the viability and scope of the WISE Program are, at their core, like a classic "bait-and-switch" tactic perpetrated on the targeted ISVs, developers, and UNIX users whom Microsoft sought to convert to Windows use and on its WISE Program partner Bristol whom Microsoft coopted into the role of facilitator of this tactic."

Bristol also sought an injunction, including both a prohibition and corrective behavior -- in this case, advertising. Judge Hall ruled that Microsoft be enjoined from making certain enumerated statements about its WISE program. However, the injunction moot. She declined to order advertising.

Judge Hall dismissed the 14th count of the complaint -- estoppel.

Judgment has not yet been entered.