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Microsoft's Motion to Dismiss.   (Public Version of Microsoft's Memorandum in Support of its Motion to Dismiss the Complaint or, in the Alternative, For Summary Judgment.)
Re: Bristol v. Microsoft.  (Case No. 398 CV 1657, U.S. District Court, Connecticut.)
Date: October 8, 1998.
Source: Microsoft.  The actual brief was filed under seal with the court, and is not available to the public. This document is the public (redacted) version of the document made available to the public. The caption and Certificate of Service have been omitted.


TABLE OF CONTENTS

Table of Authorities
Preliminary Statement
STATEMENT OF FACTS
   Background Facts
   The Nature of Bristol’s Claims [This section does not exist in the public version of the brief.]
ARGUMENT
   I.  THE STANDARDS OF REVIEW ON THIS MOTION
   II.  BRISTOL’S CLAIMS SHOULD BE DISMISSED
      A. Bristol’s Antitrust Claims Should Be Dismissed for Failure To Plead Antitrust Standing or Antitrust Injury
         1.  Antitrust Injury
         2.  Antitrust Standing
      B.  In Any Event, Bristol’s Monopolization Claims Have Been Refuted By Its Own Expert
      C.  Bristol’s Connecticut Unfair Trade Practices Act Claim Should Be Dismissed
      D.  Bristol’s Promissory Estoppel Claim Should Be Dismissed
CONCLUSION

TABLE OF AUTHORITIES

CASES

AD/SAT v. Associated Press, 920 F. Supp. 1287 (S.D.N.Y. 1996)

Anaren Microwave, Inc. v. Loral Corp., 49 F.3d 62 (2d Cir. 1995)

Associated Gen. Contractors of Cali., Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983)

Automated Salvage Transport, Inc. v. Wheelabrator Environmental Sys., Inc., __ F.3d __, 1998 WL 515702 (2d Cir. Aug. 20, 1998)

Balaklaw v. Lovell, 14 F.3d 793 (2d Cir. 1994)

Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183 (2d Cir. 1970)

Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982)

Brown Shoe Co. v. United States, 370 U.S. 294 (1962)

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977)

Celotex Corp. v. Catrett, 477 U.S. 317 (1986)

Centra Mortgage Holdings, Ltd. v. Mannix, No. 397-CV-1998, 1998 WL 514728 (D. Conn. May 14, 1998)

Conley v. Gibson, 355 U.S. 41 (1957)

Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42 (2d Cir. 1991)

Crimpers Promotions Inc. v. Home Box Office, Inc., 724 F.2d 290 (2d Cir. 1983)

Dacourt Group, Inc. v. Babcock Indus., Inc., 747 F. Supp. 157 (D. Conn. 1990)

Daley v. Gaitor, 16 Conn. App. 379, 547 A.2d 1375 (1988)

D’Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 520 A.D.2d 217 (1987)

Electronics Communications Corp. v. Toshiba Am. Consumer Prods., Inc., 129 F.3d 240 (2d Cir. 1997)

Frito-Lay, Inc. v. Bachman Co., 659 F. Supp. 1129 (S.D.N.Y. 1986)

Furlong, M.D. v. Long Island College Hosp., 710 F.2d 922 (2d Cir. 1993)

Gallo v. Prudential Residential Servs., Ltd. v. Mannix, 22 F.3d 1219 (2d Cir. 1994)

Lark v. Post Newsweek Stations Conn., Inc., No. 94-0705326, 1995 WL 491290 (Conn. Super. Ct. Aug. 9, 1995)

McKeown Distribs., Inc. v. GYP-Crete Corp, 618 F. Supp. 632 (D. Conn. 1985)

Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192 (3d Cir. 1993)

R.A.C. Corp. v. Great Atl. & Pac. Tea Co., NO. CV 86 02331764, 1992 WL 66643 (Conn. Super Ct. Mar. 21, 1992 aff’d, 31 Conn. App. 901, 623 A.2d 81 (Conn. App. Ct. 1993)

Redgate v. Fairfield Univ., 862 F. Supp. 724 (D. Conn. 1994)

Sage Realty Corp. v. ISS Cleaning Servs. Group, Inc., 936 F. Supp. 130 (S.D.N.Y. 1996)

SAS of Puerto Rico, Inc. v. Puerto Rico Telephone Co., 48 F.3d 39 (1st Cir. 1995)

Shawmut Bank Corp, N.A. v. L&R Realty, Nos. 523134, 522814, 1995 WL 384661 (Conn. Super. Ct. June 20, 1995), rev’d on other grounds, 46 Conn. App. 443, 699 A.2d 297 (1997), rev’d on other grounds, 246 Conn. 1, 715 A.2d 748 (1998)1

Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90 (2d Cir. 1998)

Trans Sport, Inc. v. Starter Sportswear, Inc., 964 F.2d 186 (2d Cir. 1992)

Triple M Roofing Corp. v. Tremco, Inc., 753 F.2d 242 (2d Cir. 1985)

United States v. Grinnell Corp., 384 U.S. 563 (1966)

Wizard Programming, Inc. v. Superstar/Netlink Group LLC, No. 397 CV 1062, 1997 WL 644082 (D. Conn. Oct. 10, 1997)

Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969)

RULES

Fed. R. Civ. P. 12(b)(6)

Fed. R. Civ. P. 56(c)

OTHER AUTHORITIES

Phillip Areeda & Donald F. Turner, Antitrust Law (1978)

Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law (1995)

C. Wright & A. Miller, Federal Practice & Procedure (1990)

[caption omitted]

MICROSOFT’S MEMORANDUM IN SUPPORT OF ITS
MOTION TO DISMISS THE COMPLAINT
OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT

Preliminary Statement

Bristol’s complaint, for all its colorful language and complex theorizing, fails for the most fundamental of reasons. It is black letter law that the Sherman Act is designed to protect competition, not the financial well-being of individual companies. Bristol’s failure even to allege any such injury to competition requires dismissal of its antitrust claims for lack of antitrust standing and antitrust injury.

Bristol’s antitrust theory is that Microsoft’s alleged "refusal" to give Bristol certain Microsoft source code has affected the competition between Microsoft’s Windows NT and rival operating systems (such as versions of UNIX) in the purported markets for technical workstation and departmental server operating systems. Even if that were true (and it is not), the proper parties to assert such claims are the makers of rival operating systems, not Bristol. Because Bristol is not a "competitor" in the "markets" it has identified, Bristol lacks "antitrust standing."

Similarly, Bristol’s complaint fails to allege any "antitrust injury" (i.e., harm to competition between Windows NT and UNIX) resulting from the alleged Microsoft conduct. Even if Bristol’s complaint could be read to include sufficient allegations on this subject, the now-undisputed facts show that there is no antitrust injury. According to Bristol, Bristol’s Wind/U product fosters competition between Windows NT and UNIX because it allows some Windows NT applications to run on some versions of UNIX. Bristol acknowledges that there are numerous other ways to achieve the same objective (i.e., causing an application to run on both Windows NT and UNIX), including the use of a product called MainWin, which is sold by Bristol’s chief competitor Mainsoft Corporation ("Mainsoft"), and which is the functional equivalent of Bristol’s Wind/U.

Bristol’s monopolization claims should also be dismissed for a separate reason  -- Microsoft does not have monopoly power in either of the "markets" in question here. At deposition, Bristol’s own expert acknowledged that Microsoft does not have monopoly power in either of the "markets" for operating systems for technical workstations or departmental servers. This testimony is entirely consistent with all of the market share data presented by Bristol.

Bristol’s Connecticut state law claims are also deficient. As Bristol has implicitly acknowledged, its claim for promissory estoppel cannot satisfy the "clear and definite promise" requirement recently articulated by the Connecticut Supreme Court for maintaining such claims. Moreover, neither Bristol’s promissory estoppel nor unfair trade practices claim can be maintained as a matter of law in the face of a written contract that clearly defines the parties’ rights -- particularly since that contract contains an integration and "no oral modification" clause.

STATEMENT OF FACTS

Background Facts

Bristol was formed by Keith Blackwell, Jean Blackwell (his wife) and Ken Blackwell (Keith’s brother) in 1991. (Complaint,  44.) Shortly thereafter -- before it had any association with Microsoft or any access to any of Microsoft’s proprietary source code -- Bristol developed Wind/U and brought it to market. (Complaint,  45-46, 48.) Wind/U is a "cross-platform tool" designed to translate some applications written for Microsoft operating systems (such as Windows NT) to run on several types of "UNIX" operating systems. (Complaint,  47-48. In the early 1990s, Microsoft and Bristol began negotiating a license agreement pursuant to a Microsoft program entitled Windows Interface Source Environment ("WISE"). (Complaint,  48-49.) Microsoft and Bristol executed their license agreement on September 21, 1994 (the "1994 Contract"). The 1994 Contract provided that Microsoft would license certain "source code" for specified Windows operating systems to permit Bristol to use that code to improve its Wind/U product. (Complaint,  50; 1994 Contract, attached as Ex. 1 to the accompanying affidavit of Michael T. Tomaino, Jr., sworn to on October 8, 1998 ("Tomaino Aff.") at 3(b).) The 1994 Contract unambiguously provided that Microsoft’s obligation to deliver that source code to Bristol expired on September 21, 1997 (although Bristol was entitled to continue thereafter using code provided before that date, and was obligated to continue paying royalties with respect to its use of that code). (1994 Contract (Tomaino Aff., Ex. 1) at 3(b), 7(a). The 1994 Contract contained the following "integration" and "no oral modification" clauses:

 

Upon execution by both parties, this Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof and merges all prior and contemporaneous communications. It shall not be modified except by a written agreement signed on behalf of Bristol and Microsoft by their respective duly authorized representatives.

(1994 Contract (Tomaino Aff., Ex. 1) at  23. Bristol acknowledges that its competitor, Mainsoft, also signed a WISE license in 1994. (See Complaint,  62; 1994 Mainsoft Contract (Tomaino Aff., Ex. 2); see also Declaration of W. Keith Blackwell, executed on August 18, 1998,  43.) That license also provided that Microsoft would deliver similar source code to Mainsoft for a period of three years. (See Tomaino Aff., Ex. 2 at  3(b). Bristol and Microsoft began to negotiate a new license agreement in 1997, this one meant to cover source code for Windows NT 4.0 and NT 5.0. (See Complaint,  60.) During the same period, Microsoft was also discussing a new agreement with Mainsoft, and, on August 25, 1998, Microsoft and Mainsoft executed a new WISE license. (1998 Mainsoft Contract (Tomaino Aff., Ex. 3). Bristol and Microsoft did not agree to the terms of a new agreement. Instead, Bristol chose to bring this action against Microsoft despite numerous Microsoft proposals made in 1998. Even after the commencement of this action, Microsoft confirmed that it would offer a WISE license to Bristol on the same material terms to which it had agreed with Mainsoft. (See Tomaino Aff., Ex. 4. The Nature of Bristol’s Claims

Bristol has alleged twelve antitrust claims (under the Sherman Act and the Connecticut Antitrust Act), a claim under the Connecticut Unfair Trade Practices Act, and a promissory estoppel claim. Bristol asserts that Microsoft has a monopoly in the "market" for personal computer ("PC") operating systems (Complaint,  23), but this "market" is not directly relevant to Bristol’s claims. Instead, Bristol alleges that its Section 2 claims pertain to the purported "markets" for operating systems for (a) "technical workstations" and (b) "departmental servers." (Complaint, 24.) In those "markets," according to Bristol, Microsoft has "market" shares of new sales of approximately 30% and 45%, and UNIX operating systems have shares of about 70% and 22%, respectively. (See Declaration of Richard N. Langlois, executed on August 17, 1998 ("Langlois Decl."), Tables 2, 3 (Tomaino Aff., Ex. 5).) Bristol alleges that competition in those two markets has been injured, because the sellers of UNIX operating systems will be disadvantaged in competing against Microsoft (which sells Windows NT operating systems) as a result of Microsoft’s conduct. Bristol does not allege any injury to competition in any market in which Bristol competes. (See Complaint,  25, 67-70. Bristol does not make or sell operating systems itself. (Complaint,  45.) Bristol makes and sells, among other things, a software product called "Wind/U." Wind/U is a "cross-platform tool" that enables software developers who choose in the first instance to write computer programs for a Microsoft operating system (such as Windows 95 or Windows NT) to "port" (or translate) those programs so they can run on specific UNIX operating systems. (Complaint,  45.) The buyer of Bristol’s product thus need not write its software program from scratch a second time to have it run on a UNIX operating system. Microsoft does not compete in Bristol’s market -- that is, Microsoft does not sell a "cross-platform tool" that enables software developers to port programs (also known as "applications") written for Windows to UNIX.

Microsoft and Bristol are thus not competitors. Bristol nevertheless claims that it facilitates competition between Windows NT and UNIX operating systems because, without Bristol’s "porting" program, operating systems customers might not buy UNIX for fear that programs written for Windows NT would not be available on UNIX. (See Complaint,  25, 47.) As demonstrated below, there is no logic, and there can be no evidence, to support this claim.

ARGUMENT

I.  THE STANDARDS OF REVIEW ON THIS MOTION.

Pursuant to Rule 12(b)(6), a court should dismiss a claim if the plaintiff "can prove no set of facts, consistent with its complaint, that would entitle it to relief." Electronics Communications Corp. v. Toshiba Am. Consumer Prods., 129 F.3d 240, 242-43 (2d Cir. 1997). As the Second Circuit recently explained, although the Supreme Court’s decision in Conley v. Gibson, 355 U.S. 41 (1957), "permits a pleader to enjoy all favorable inference from facts that have been pleaded, [it] does not permit conclusory statements to substitute for minimally sufficient factual allegations." Id. at 243 (quoting Furlong, M.D. v. Long Island College Hosp., 710 F.2d 922, 928 (2d Cir. 1983)).

Alternatively, summary judgment should be granted when the movant demonstrates that there is no genuine issue of material fact for trial and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). No genuine issue of fact exists if, on the basis of all the pleadings, affidavits and other papers on file, and after drawing all inferences and resolving all ambiguities in favor of the non-movant, it appears that the evidence supporting the non-movant’s case is so scant that a rational jury could not find in its favor. See Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1224 (2d Cir. 1994); Centra Mortgage Holdings, Ltd. v. Mannix, No. 397-CV-1998, 1998 WL 514728, *1 (D. Conn. May 14, 1998) (Hall, J.).

II.  BRISTOL’S CLAIMS SHOULD BE DISMISSED.

A.  Bristol’s Antitrust Claims Should Be Dismissed forFailure To Plead Antitrust Standing or Antitrust Injury.

As the Supreme Court explained in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977), an antitrust plaintiff

must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation. It should, in short, be "the type of loss that the claimed violations . . . would be likely to cause."

Brunswick, 429 U.S. at 489 (quoting Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 125 (1969)).

To support an antitrust claim, Bristol must demonstrate both "antitrust standing" in the sense that it is the proper party to bring such a claim and "antitrust injury" in the sense of harm to competition (i.e., "injury of the type the antitrust laws were intended to prevent"). See Triple M Roofing Corp. v. Tremco, Inc., 753 F.2d 242, 247 (2d Cir. 1985) ("Antitrust standing and its terminological cousin, antitrust injury, are often confused.").

Absent proper allegations of "antitrust standing" and "antitrust injury" in the complaint, a private plaintiff’s Sherman Act claims should be dismissed. Electronics Communications Corp., 129 F.3d at 242 (dismissing antitrust claims for failure to state a claim where complaint failed to allege antitrust injury); SAS of Puerto Rico, Inc. v. Puerto Rico Telephone Co., 48 F.3d 39, 43 (1st Cir. 1995); Balaklaw v. Lovell, 14 F.3d 793, 797 (2d Cir. 1994); see Associated Gen. Contractors of Cal., Inc. v. California State Council of Carpenters, 459 U.S. 519, 535-546 (1983); Frito-Lay, Inc. v. Bachman Co., 659 F. Supp. 1129, 1141 (S.D.N.Y. 1986) (questions of antitrust standing appropriate for resolution on a Rule 12(b)(6) motion).

1.  Antitrust Standing.

The Supreme Court has held that the "antitrust standing" doctrine requires that the court make the "determination whether the plaintiff is a proper party to bring a private antitrust action." Associated Gen. Contractors, 459 U.S. at 534-35 & n.31. In Associated Gen. Contractors, 459 U.S. at 535-46, the Supreme Court identified several factors that may be used to determine whether a plaintiff has standing to maintain a private antitrust cause of action. One of the most important factors identified by the Supreme Court is whether the plaintiff is a "consumer []or a competitor in the market in which trade was restrained." Id. at 539. See generally 2 Phillip Areeda & Donald F. Turner, Antitrust Law  340 (1978) ("Areeda & Turner") ("indirect" competitors generally lack antitrust standing).

Bristol alleges that the relevant competition here is between Microsoft operating systems and UNIX (and other) operating systems in the "markets" for technical workstations and departmental servers. (See Complaint,  25, 67-70.) The Complaint states that Bristol is not in the business of purchasing or selling operating systems (id.,  45), and it makes no allegation that it has plans to do so either. Thus, Bristol does not and cannot claim that it is a consumer or competitor of Microsoft in any of the operating system "markets" it identifies. This alone warrants dismissal of Bristol’s antitrust claims on standing grounds. See Associated Gen., 459 U.S. at 539; Automated Salvage Transport, Inc. v. Wheelabrator Environmental Sys., Inc., __ F.3d __, 1998 WL 515702, at *21 (2d Cir. Aug. 20, 1998) (standing requires that plaintiff "be a participant in the same market as the alleged malefactors").

Bristol’s claimed status vis--vis Microsoft is analogous to that of a competitor’s supplier. It does not offer an alternative operating system, but rather helps to "supply" Windows-based applications that will run on UNIX operating systems by enabling software developers to port their Windows applications to UNIX. (See Complaint,  25, 45, 47.) However, as the Second Circuit explained in Crimpers Promotions Inc. v. Home Box Office, Inc., 724 F.2d 290 (2d Cir. 1983), suppliers such as these do not have antitrust standing. Id. at 294 (citing 2 Areeda & Turner  340(e) at 217 (1978)); accord Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183, 186-89 (2d Cir. 1970) (standing denied to plaintiff that licensed information and supplied ingredients to competitor of alleged monopolist); 2 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law 375d (1995) ("Areeda & Hovenkamp") (antitrust victims’ suppliers generally lack antitrust standing).

In Crimpers, defendants HBO and Showtime were networks that purchased movies from independent producers and then sent them to cable television operators around the country. 724 F.2d at 291. The plaintiff (Crimpers) produced a cable television trade show designed to bring together independent producers and cable operators. Id. The Second Circuit held that Crimpers had standing to challenge the defendants’ organized boycott of the trade show because Crimpers was a direct competitor of the defendants: "Crimpers was not just a ‘supplier’ of a competitor, to whom standing is generally denied . . . . It was endeavoring to forge a link in the chain of the sale of programming, to wit, direct contact between program producers and cable television stations, that would compete with defendants in their role as middlemen." Id. at 294 (citing 2 Areeda & Turner  340(e) at 217 (1978)); see also 2 Areeda & Hovenkamp  375d (recognizing that Crimpers’ "competing alternative" to defendants’ service justified standing). Here, by contrast, Bristol does not compete directly with Microsoft; at most, it merely assists the ability of UNIX operating systems to compete with Microsoft systems. (Complaint,  25. Even if Bristol’s Wind/U product can be viewed as comprising a portion of a UNIX operating system or working together with a UNIX operating system -- and such a view would be strained, at best, and is nowhere pleaded in Bristol’s complaint -- Bristol’s complaint is still deficient. The Second Circuit has rejected just such a claim in denying antitrust standing. See Anaren Microwave, Inc. v. Loral Corp., 49 F.3d 62, 63 (2d Cir. 1995) (plaintiff "merely supplied a subsystem of" competing product; plaintiff "neither was a [the competing company’s] partner in this venture, nor did [plaintiff] submit its own bid . . . to produce a system competing with" defendant’s).

By Bristol’s theory, Microsoft’s "refusal" to extend a license to Bristol (at least on the terms Bristol demands) may cause damage to competition between Windows NT and UNIX operating systems. (Complaint, 67-70.) Under that theory, sellers of rival operating systems -- not Bristol -- are the only parties that might have antitrust standing to assert claims like those at issue here.

2.  Antitrust Injury.

It is fundamental that the antitrust laws were enacted for "the protection of competition, not competitors." Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962). Here, although Bristol -- which is not a Microsoft competitor -- may suffer economic harm (as a result of its own choice not to sign a new contract with Microsoft), there can be no harm to competition in any of the "markets" alleged by Bristol. As described above, Bristol’s theory is that Microsoft’s conduct might harm competition between Microsoft operating systems and UNIX. (Complaint,  25, 67-70.) Yet Bristol does not and could not allege that the absence of Wind/U (even assuming for a moment that Bristol goes out of business) would have any adverse impact on this competition. Instead, Bristol offers only conclusory statements that are insufficient as a matter of law. See Electronics Communications Corp., 129 F.3d at 243, 245; Sage Realty Corp. v. ISS Cleaning Servs. Group, Inc., 936 F. Supp. 130, 135 (S.D.N.Y. 1996).

Even if Bristol’s complaint were not facially deficient, the undisputed evidence demonstrates that the absence of Wind/U would not result in any harm to competition between Windows and UNIX. Thus, summary judgment should be entered in Microsoft’s favor on all of Bristol’s antitrust claims.

Mainsoft, its primary competitor, offers the same type of product to the marketplace that Bristol offers -- a "cross-platform" tool that allows software developers to "port" a Windows-compatible application to run on UNIX. (See

 

Thus, even if Bristol were correct that tools such as Wind/U are important to UNIX’s ability to compete with Windows NT -- an assertion that is startling in its illogic and completely baseless in fact -- Mainsoft’s product accomplishes the same objective.

Moreover, it is undisputed that there are many other alternatives available to software developers for writing to both Windows NT and UNIX. (See Declaration of Richard L. Schmalensee, executed on September 25, 1998 ("Schmalensee Decl."), 11;

Neault Dep. (Tomaino Aff., Ex. 8) at 190-92.) First and most fundamentally, many software developers write applications themselves for both Windows and UNIX environments, without the use of any "cross-platform" tool, and of all the applications that run on both Windows and UNIX -- including those that employ a cross-platform tool -- the majority do so without any cross-platform tool like Bristol’s Wind/U. (See Kruger Dep. (Tomaino Aff., Ex. 9) at 190-95; Share Dep. (Tomaino Aff., Ex. 10) at 30-32; Neault Dep. (Tomaino Aff., Ex. 8) at 191-92.) Moreover, a new computer language called "Java," which is licensed by a large Microsoft competitor (Sun Microsystems), advertises that developers can "write once, run anywhere" (i.e., develop an application written in Java that will run on both Windows NT and UNIX).

Neault Dep. (Tomaino Aff., Ex. 8) at 191; Kruger Dep. (Tomaino Aff., Ex. 9) at 188-90; Share Dep. (Tomaino Aff., Ex. 10) at 24-25, 27, 32-33.) There are also "emulators" available that allow Windows applications to run on UNIX. Neault Dep. (Tomaino Aff., Ex. 8) at 191-92; Kruger Dep.

(Tomaino Aff., Ex. 9) at 188; Share Dep. (Tomaino Aff., Ex. 10) at 18-21.) Finally, there are a number of companies that offer cross-platform tools that give software developers the option of writing applications for UNIX and then porting them to run on Windows operating systems.

Neault Dep. (Tomaino Aff., Ex. 8) at 191-92; Kruger Dep. (Tomaino Aff., Ex. 9) at 186-88; Share Dep. (Tomaino Aff., Ex. 10) at 25-27. There is thus no dispute that Bristol’s Wind/U product is merely one option of many in a thriving competitive market. (See

Neault Dep. (Tomaino Aff., Ex. 8) at 190-92; Kruger Dep. (Tomaino Aff., Ex. 9) at 185-98; Share Dep. (Tomaino Aff., Ex. 10) at 26-27, 32-34.) Indeed, Bristol concedes that Wind/U is not indispensable to competition between Windows NT and UNIX;

The absence of any adverse impact on competition can easily be seen by comparing the amount of software that is ported to UNIX using Bristol’s Wind/U product with total UNIX software sales. Total annual sales of UNIX software are about $28 billion. (See Schmalensee Decl. 12.) By contrast, during the past five to six years combined, sales of software ported to UNIX by using Bristol’s Wind/U have been about $100 million

-- or an average of about $20 million per year -- which is less than 0.01% of the overall market for UNIX software. (See Schmalensee Decl. 12.) Thus, Bristol’s presence is far too insignificant -- even if Mainsoft’s product and many other alternatives were not available as a substitute for Wind/U -- to have any impact on the competition between Windows NT and UNIX. (Schmalensee Decl. 12; see also

 

 

Accordingly, it is undisputed that even if Bristol’s business declines or disappears, there would be no detrimental impact on competition between Windows NT and UNIX. This is a fundamental flaw in all of Bristol’s antitrust claims. See Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90, 96-97 (2d Cir. 1998) (dismissing claims because plaintiff’s inability to compete in a market "does not alone prove an adverse effect on competition as a whole"); Electronics Communications Corp., 129 F.3d at 242 (dismissing antitrust claims because plaintiff did not show how conduct "had an effect on competition market-wide"); Balaklaw, 14 F.3d at 800 (plaintiff "has alleged no threat of ‘adverse economic consequences’ to anyone but himself"); Sage Realty, 936 F. Supp. at 135 ("plaintiff must show that ‘the challenged action has had an actual adverse effect on competition as a whole in the relevant market’").

In this respect, Bristol is similar to a terminated distributor claiming antitrust violations by a manufacturer who has chosen a different distributor. Such claims have repeatedly been rejected because, although the terminated distributor undoubtedly suffers harm, its injuries are not related to any damage to competition because other distributors are there. See, e.g., Electronics Communications Corp., 129 F.3d at 243-46; Trans Sport, Inc. v. Starter Sportswear, Inc. 964 F.2d 186, 190-91 (2d Cir. 1992) ("we see no traces of the burdensome effects generally associated with illicit monopolist activity" based on defendant’s choice to limit number of retailers).

* * *

Bristol’s lack of antitrust standing and the absence of any antitrust injury are two independently sufficient grounds for the Court to dismiss all of Bristol’s antitrust claims (claims 1-12 alleged in the complaint), or to grant summary judgment in Microsoft’s favor on those claims.

B.  In Any Event, Bristol’s Monopolization Claims Have Been Refuted By Its Own Expert.

At deposition, Bristol’s expert, Richard Langlois, unequivocally admitted that

Microsoft does not possess monopoly power in either of the "markets" for operating systems for "technical workstations" or "departmental servers." (Langlois Dep. (Tomaino Aff., Ex. 11) at 81-83.) This is perfectly consistent with the only market share data presented by Bristol, which shows Microsoft’s share of new operating systems for the technical workstation and departmental server "markets" as 27.8% and 43.7%, respectively, and its share of the server installed base (the only installed base figures provided) was only 15.5%. (Langlois Decl., Tables 2-4 (Tomaino Aff., Ex. 5)); see, e.g., AD/SAT v. Associated Press, 920 F. Supp. 1287, 1300 (S.D.N.Y. 1996) ("[m]any courts in the Second Circuit have found market shares of less than 50% or even 60% insufficient to support" even a showing of "dangerous probability" of acquiring a monopoly).

Bristol’s concession that Microsoft lacks monopoly power in either workstation or server operating systems requires dismissal of Bristol’s claims 2-4 and 8-10. See United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966) (first element of Section 2 claim is "possession of monopoly power in the relevant market").

C.  Bristol’s Connecticut Unfair Trade Practices Act Claim Should Be Dismissed.

Bristol asserts a claim under the Connecticut Unfair Trade Practices Act ("CUTPA"). (Complaint,  114-20 (claim 13).) Bristol premises this claim on the very same "representations" that form the basis of Bristol’s promissory estoppel claim. (Complaint,  117.) Yet to succeed on such a claim when a written contract exists, Bristol has to demonstrate, at a minimum, that Microsoft acted in contravention of Bristol’s contractual rights. See McKeown Distribs., Inc. v. GYP-Crete Corp., 618 F. Supp. 632, 643-44 (D. Conn. 1985) ("there can be nothing unfair or deceptive" if defendant acted consistently with contractual terms); Shawmut Bank Conn., N.A. v. L & R Realty, Nos. 523134, 522814, 1995 WL 384661, at **32-33 (Conn. Super. Ct. June 20, 1995), rev’d on other grounds, 46 Conn. App. 443, 699 A.2d 297 (1997), rev’d on other grounds, 246 Conn. 1, 715 A.2d 748 (1998); R.A.C. Corp. v. Great Atl. & Pac. Tea Co., No. CV 86 02331764, 1992 WL 66643, *2 (Conn. Super. Ct. Mar. 21, 1992) (CUTPA claim "is contrary to the Appellate Court’s determination that the lease was properly terminated"), aff’d, 31 Conn. App. 901, 623 A.2d 81 (Conn. App. Ct. 1993); see also Wizard Programming, Inc. v. Superstar/Netlink Group LLC, No. 397 CV 1062, 1997 WL 644082, *7 (D. Conn. Oct. 10, 1997) (plaintiff’s CUTPA claim fails "[w]ithout the existence of a contract requiring [defendant] to act in a contrary manner").

Bristol does not allege that Microsoft has any contractual obligation to provide Windows NT 4.0 or 5.0 source code under the parties’ 1994 Contract. Indeed, Bristol does not (and could not) allege a breach of contract claim. For this reason alone, Bristol’s CUTPA claim (claim 13) must be dismissed.

D.  Bristol’s Promissory Estoppel Claim Should Be Dismissed.

Bristol asserts a claim for "estoppel," contending that, because of its "representations" to Bristol, Microsoft is estopped from refusing to provide Bristol with "source code" -- without specifying the source code that must be provided or the terms that are required. (Complaint,  121-25 (claim 14).) To assert a claim for promissory estoppel under Connecticut law, Bristol must show "[1] a clear and unambiguous promise; [2] a reasonable and foreseeable reliance by the party to whom the promise is made; and [3] an injury sustained by . . . reason of his reliance." Dacourt Group, Inc. v. Babcock Indus., Inc., 747 F. Supp. 157, 161 (D. Conn. 1990). Because Bristol’s allegations do not satisfy at least the first two of these requirements, this claim should be dismissed.

In its most recent decision in this area, the Connecticut Supreme Court recognized the importance of closely guarding against claims of promissory estoppel that do not rely on "the existence of a clear and definite promise." D’Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 213, 520 A.D.2d 217, 221 (1987). In that case, the court dismissed a promissory estoppel claim by a teacher against her school based on the school’s written notice that "[a]ll present faculty members will be offered contracts for next year" because that statement (as well as others) was not a sufficiently definite promise to support a claim. 202 Conn. at 214-15, 520 A.D.2d at 221-22. Other courts, relying on this decision, have rejected promissory estoppel claims based on insufficiently definite promises. See Redgate v. Fairfield Univ., 862 F. Supp. 724, 730-31 (D. Conn. 1994) (promises of "employment for ‘ten or twenty years’ and ‘for as long as you want’" are "insufficiently promissory and insufficiently definite" for promissory estoppel claim); Dacourt Group, 747 F. Supp. at 161 (defendant’s statement (among others) that it "would provide a keep-well agreement" did not form basis for claim of estoppel); Daley v. Gaitor, 16 Conn. App. 379, 385 n.6, 547 A.2d 1375, 1378 n.6 (1988) (pronouncement that "‘at least 50 percent’ of all persons" will be allowed to take test is insufficiently "definite or promissory").

These courts have reasoned that, to form the basis for a promissory estoppel claim, a promise must manifest a "present intention . . . to undertake immediate contractual obligations" and must contain "the material terms that would be essential to" the contract; a mere "expectation of a future contract" is not sufficient. D’Ulisse-Cupo, 202 Conn. at 214-15, 520 A.D.2d at 221-22; accord Redgate, 862 F. Supp. at 731; Dacourt Group, 747 F. Supp. at 161 ("[a]t the time these alleged promises were made, material terms remained unresolved").

Here, there is no doubt that Microsoft’s alleged "representations" cannot satisfy these standards. Bristol does not even allege the specific representations that form the basis for its estoppel claim. (See Complaint, 49, 121-25.) This alone merits dismissal of Bristol’s claims. D’Ulisse-Cupo, 202 Conn. at 214-15, 520 A.D.2d at 221-22 (dismissing claim based on the inadequacy of statements alleged in complaint). Even if Bristol were permitted to amend its complaint in this regard, not one of the Microsoft statements referred to by Bristol ever manifested a "present intention" to enter into a new contract with Bristol or any other specific WISE licensee years later. To the contrary, all of the statements merely showed Microsoft’s recognition that it was under multi-year contracts with both Mainsoft and Bristol. The statements were made years ago, while the 1994 Contract was being performed, yet Bristol now seeks to rely on them long after Microsoft’s obligation to provide specified source code to Bristol under the 1994 Contract has, as Bristol acknowledges, expired. Moreover, none of the statements mentions any terms of a new contract, much less the material terms (which Bristol now apparently refuses to accept).

Second, Bristol cannot, as a matter of law, demonstrate reasonable and foreseeable reliance by Bristol on any Microsoft "representation." The law of Connecticut is clear that, when a written contract delineates the rights of the parties (here, a three-year term for Microsoft to provide source code for now-old operating systems, not Windows NT 4.0 or 5.0), those are the only rights upon which the party can reasonably rely. Lark v. Post Newsweek Stations Conn., Inc., No. 94-0705326, 1995 WL 491290, at *3 (Conn. Super. Ct. Aug. 9, 1995). This is reinforced by the integration and no oral modification clauses in the 1994 Contract. Shawmut, 1995 WL 384661, at **21, 28-29 ("to use the doctrine of promissory estoppel . . . to enforce the oral promise . . . would contradict the parol evidence rule insofar as it would vary the terms of an integrated written agreement"). Thus, as a matter of law, Bristol cannot assert that Microsoft is estopped from currently "withholding" Windows NT 4.0 or 5.0 source code when a written contract between the parties provides that Microsoft’s duty to provide source code existed only between September 1994 and September 1997, and only for earlier versions of Windows NT not here at issue.

CONCLUSION

For the foregoing reasons, Bristol’s claims should be dismissed, with prejudice, for failure to state any claim upon which relief can be granted. In the alternative, because Bristol’s own admissions and the undisputed, material facts plainly demonstrate that Bristol’s claims have no merit as a matter of law, the Court should grant summary judgment to Microsoft.

Respectfully submitted,

____________________________

SULLIVAN & CROMWELL
David B. Tulchin (ct19375
Michael T. Tomaino, Jr. (ct19376
Marc De Leeuw (ct19377
Elizabeth P. Martin (ct19378
125 Broad Street
New York, NY 10004-2498
(212) 558-4000

DAY BERRY & HOWARD LLP
Stefan R. Underhill (ct00372
One Canterbury Green
Stamford, Connecticut 06901
(203) 977-7320

MICROSOFT CORPORATION
Steven J. Aeschbacher
One Microsoft Way
Redmond, Washington 98052
(425) 936-8080

Counsel for Microsoft Corporation

October 8, 1998

[Certificate of Service omitted]

Footnotes

1 Because Bristol refers to the 1994 Contract in its complaint (Complaint, 50), it is not “outside the pleading” for purposes of Rule 12(b)(6), even though Bristol opted not to attach it to the complaint. See Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 47-48 (2d Cir. 1991) (permitting district court to consider on motion to dismiss documents plaintiff relied on in complaint because plaintiff had notice of documents); Field v. Trump, 850 F.2d 938, 949 (2d Cir. 1988) (“we may of course refer to [documents] which were annexed to the defendants’ motion to dismiss and are documents that are integral to plaintiff's claims”); Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196-97 (3d Cir. 1993) (considering contract relied on in complaint); 5 C. Wright & A. Miller, Federal Practice & Procedure 1327, at 762-63 (1990) (“when plaintiff fails to introduce a pertinent document as part of his pleading, defendant may introduce the exhibit as part of his motion attacking the pleading”).

2 In briefing its motion for a preliminary injunction, Bristol failed to articulate any consistent or comprehensible theory to explain how it “competes” with Microsoft. Failing that, Bristol argued -- based on a misreading of Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982), and Crimpers -- that Bristol has antitrust standing because it is the “direct victim” of Microsoft’s conduct. The Second Circuit has held that such characterizations are not instructive for purposes of antitrust standing. See Billy Baxter, 431 F.2d at 188 (requiring more than “[r]eference to . . . [plaintiff’s] products as a target” but rather whether plaintiff “has the requisite relationship to the type of wrong alleged”). Indeed, the Supreme Court denied antitrust standing to a plaintiff that was “neither a consumer nor a competitor in the market in which trade was restrained,” observing that the plaintiff in Blue Shield of Virginia had antitrust standing because she was a consumer in the relevant market. Associated Gen., 459 U.S. at 538-39.

3 In its reply memorandum in support of its preliminary injunction motion, Bristol implicitly admitted that it cannot meet these Connecticut state law requirements, arguing instead for a “broader estoppel doctrine which extends to statements outside the promissory context.” (Bristol’s Reply Mem. at 35-37.) Whatever the vitality of this questionable doctrine in the other jurisdictions cited by Bristol, Bristol has not cited, and Microsoft is not aware of, any Connecticut authority for such a claim. Indeed, such an amorphous claim is precisely what the Connecticut courts have attempted to avoid by rigorously holding plaintiffs to the three requirements of a promissory.

 


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