Opposition to Motion for Summary Judgment.
DOJ v. Microsoft II, Case No. 98-CV-1232, 1233.
Date: August 31 or September 1, 1998.
Source: U.S. Department of Justice.

Editor's Notes: The "Plaintiffs' Joint Response to Microsoft's Motion for Summary Judgment and Reply in Support of Motions for Preliminary Injunction" was filed late on Monday, August 31, 1998, under seal.  Tech Law Journal has not seen any part of it.  The Plaintiffs also filed a second document with the court on Tuesday, September 1, 1998, entitled "PUBLICLY FILED VERSION".   This HTML document is a representation of that document.  The DOJ actually created three versions of this public document: the paper document filed with the court, an HTML version published in the Department of Justice website, and a WordPerfect 5.1 version published in the DOJ website.

The Publicly Filed Version is 89 pages, excluding caption, table of contents, and table of authorities.  It has been spread over several HTML pages in this website.

I.  INTRODUCTION

Microsoft’s motion for summary judgment misstates plaintiffs’ claims, the evidence concerning them, and the applicable law. When there is a claim that Microsoft does not want to deal with, it simply ignores it. When there is evidence contrary to Microsoft’s factual assertions, it ignores that too, even when it is contained in the same document or deposition on which Microsoft seeks to rely. When controlling precedent is at odds with Microsoft’s arguments, it [begin page 2] either ignores the authority or treats it as having been overruled sub silentio by lower court rulings.

For purposes of its summary judgment motion, Microsoft does not, and could not, dispute that it has monopoly power in the market for PC operating systems. And on summary judgment, Microsoft does not, and could not, dispute the existence of a pattern of anticompetitive conduct that has preserved its dominance of the PC operating system market and which threatens to extend that dominance to other markets. In essence, Microsoft’s summary judgment motion thus invites this Court to rule, as a matter of law, that because of supposedly unique characteristics of the computer software business, the antitrust laws do not (and cannot) prohibit an entrenched software monopolist like Microsoft from engaging in the broad series of anticompetitive acts at the core of this case.

Microsoft enjoys the most important and perhaps the most durable monopoly in the economy today. Microsoft has been the dominant supplier of personal computer desktop operating systems for more than 15 years, with market shares (depending on how they are measured) ranging from 80 percent to 95 percent.

PC manufacturers have, and recognize they have, no realistic alternative to Microsoft’s Windows operating systems. Microsoft prices its Windows operating systems virtually without regard for the prices of other operating systems. Microsoft’s monopoly power is illustrated by its ability to secure agreements from competitors and potential competitors (including companies as powerful as Intel) to reduce or eliminate their competition with Microsoft.

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Successful entry or expansion of new operating systems competitors has proven impossible, in significant part because of the applications programming barrier to entry. Computer users want PCs that will run the widest range, and largest number, of programs. Because of Microsoft’s market share and sustained dominance, many more PC applications have been developed for its operating systems than for those of any other manufacturer. Windows’ high market share begets more applications, which in turn preserve and increase its high market share, which in turn begets still more applications, and so on. Unless and until the success of a particular operating system comes to depend less on the number of applications written specifically for it and more on the merits of that operating system, Microsoft’s power is likely to remain self-perpetuating.

In the past few years, two related industry developments have occurred that have the potential to erode the applications programming barrier to entry, and thereby ultimately to threaten Microsoft’s PC operating system monopoly.

One development was Java, software sponsored by Sun Microsystems that is designed in part to enable programmers to write applications that can be used "cross platform" (i.e., on multiple operating systems) without substantial modification.

 [redacted material]  (As used herein, "SJ Ex" refers to exhibits which accompany this Joint Response.)

Another development was the explosion in popularity of the World Wide Web, and of Internet browser applications (primarily Netscape’s Navigator browser) used to access and view material on the Web. Because of the explosive growth of the Internet, and the ease with which [begin page 4] Netscape’s browser enabled computer users to access the Internet, Netscape’s browser quickly came to be widely distributed and used.

The widespread distribution and use of Netscape’s browser was significant in two ways. First, the browser itself was a platform to which applications could be written -- and thereafter run on any of the many operating systems with which that browser was usable.

• By May 1995 Microsoft’s CEO recognized Netscape as a competitive threat [redacted material] United States’ Memorandum in Support of Motion for Preliminary Injunction, filed May 18, 1998, ("PI Brief"), Exhibit (hereinafter "PI Ex.") 2.
• [redacted material]
• [redacted material]
• [redacted material]

Second, Netscape’s Navigator browser became a primary method by which the Java components necessary for computer users to utilize and benefit from Java programs were distributed. Indeed, in July 1997, [redacted material] [begin page 5] SJ Ex. 61, p.1. The more applications that were written to the "Java Virtual Machine" component shipped with Netscape’s browser, the more applications that could be used on non-Microsoft operating systems -- and the more the applications programming barrier to entry would erode.

Microsoft immediately set out to eliminate the potential threats posed by Netscape and Java. At the specific and pointed direction of Microsoft CEO Bill Gates, Microsoft set out to [redacted material]  In support of this effort, Microsoft entered into a series of anticompetitive agreements with customers and competitors to restrict the use of Java and to substitute the use of Microsoft’s version of Java, known as "J/Direct."

[redacted material] PI Ex. 101.

At the same time, Microsoft (again at the specific direction of CEO Bill Gates) set out to eliminate Netscape as a viable browser supplier -- and thereby to eliminate both Netscape’s distribution of Java and Netscape’s evolution into a platform that could erode the applications programming barrier to entry. Microsoft first attempted to monopolize the browser market by a patently illegal proposal to Netscape that the two companies divide the market and restrict or [begin page 6] eliminate competition (with Netscape agreeing not to compete in offering its browser for Windows 95). When Netscape rejected Microsoft’s illegal proposal, Microsoft undertook to eliminate Netscape’s ability to compete effectively as a browser supplier, and to preserve and increase barriers to entry in the PC operating system market by a series of predatory and anticompetitive acts and agreements. Among other things, Microsoft:

• Set out to "cut off Netscape’s air supply" by giving Microsoft’s browser away for free (and thereby eliminating Netscape’s ability to charge for its browser) and entering into agreements with Internet Content Providers which required those ICPs to agree not to pay Netscape;
• Discouraged customers, suppliers, and others from doing business with Netscape by announcing publicly (and telling customers privately) that Microsoft would make its browser "forever free" and that Netscape therefore had no viable business;
• Entered into agreements with PC manufacturers and Internet Service Providers that effectively foreclosed Netscape from the most important channels of distribution and substantially increased Netscape’s costs;
• Entered into agreements with ISPs, ICPs, and others to eliminate or reduce those firms’ promotion and/or distribution of Netscape’s browser;
• Used its monopoly power to induce major computer industry firms, including Apple and Intel, to limit or reduce their use of and support for Netscape’s browser; and

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• Tied Microsoft’s Internet Explorer browser to its monopoly Windows PC operating system and prohibited PC makers from removing that browser.

Although Microsoft also set out to improve its browser (which was initially so poor in quality and function that it would have received virtually no distribution if not for Microsoft’s restrictive agreements and the tie to Windows), Microsoft recognized that [redacted material] PI Ex. 23. Because Microsoft believed that it could not win what it repeatedly described as "the browser war" legitimately and on the merits, it resorted to the predatory and anticompetitive agreements and conduct described above; and it is those agreements and conduct that unlawfully maintain Microsoft’s operating systems monopoly and threaten to extend that monopoly to the browser market.

The cumulative effect of Microsoft’s anticompetitive and illegal conduct has been, and continues to be, to increase Microsoft’s share of Internet browser usage; to reduce the revenues and increase the costs of rival browser manufacturers; to deter innovation by other browser manufacturers and, more generally, by others in the industry that would otherwise seek to develop new software products in competition with Microsoft; and to further entrench Microsoft’s operating system monopoly.

Microsoft’s conduct with respect to Java and browsers is part of a broad pattern of antitcompetitive conduct designed to eliminate competition, to maintain and strengthen Microsoft’s core monopoly over PC operating sytems, and to monopolize key applications markets.  [redacted material] [begin page 8]

For example, Microsoft’s proposal to Netscape to divide the market and restrict or eliminate competition is part of a pattern that includes similar discussions with Intel (concerning Intel not continuing software development), Apple (concerning Apple agreeing to stop marketing QuickTime for use with Windows), and a small company called Real Networks (concerning a Real Networks assurance that it would get out of the base streaming media platform business and not share its technology with Microsoft’s competitors). Microsoft’s response to Netscape’s rejection of its proposed market division is part of a pattern that includes Microsoft’s response to Apple when Apple refused to withdraw its "QuickTime" software from competition with Microsoft’s "NetShow" software. [redacted material]  SJ Ex. 60, p.0104683, is part of a pattern of using its control over the monopoly operating system to make competing products operate, or appear to operate, less effectively, a pattern that began at least as early as the Microsoft code designed to disrupt the use of DR-DOS. And Microsoft’s tying of its browser to Windows is part of a pattern of tying applications to the operating system -- a pattern that will have no limit if Microsoft prevails in its view that it is free to combine any product it wishes with the operating system.

The extraordinary potential costs to consumers and the economy of Microsoft’s conduct are particularly clear with respect to Java and the browser. First, Microsoft preserves its operating systems monopoly as both a rich and powerful monopoly in itself and as the engine for dominating related markets. Second, Microsoft extends its monopoly to browsers -- and thereby puts itself in a position to wield tremendous influence in directing computer users to particular products, services, and sites on the Web.

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Because Microsoft’s unlawful practices are continuing and are imposing ongoing harm to competition, plaintiffs filed with their Complaints motions for a preliminary injunction. Microsoft has opposed those motions and has itself moved for summary judgment. Microsoft’s summary judgment motion (and its opposition to plaintiffs’ motion for preliminary injunction) asks this Court to create a virtual exemption from the antitrust laws for Microsoft (and the entire computer software industry) and to permit a software monopolist such as Microsoft to use anticompetitive means to entrench and extend its monopoly without fear of judicial intervention. Microsoft further urges the Court to exempt from Section 1 of the Sherman Act any Microsoft decision to coercively tie together two separate products, so long as Microsoft can merely suggest a plausible claim of benefit from the tie. Such an exemption would be virtually complete, since the very nature of computer software makes it easy for software developers to join together separate products in ways that create some "plausible" benefit and that introduce some "plausible" technical interdependencies that may appear difficult to disentangle. Microsoft’s extraordinary propositions go far beyond the rules previously adopted by any court, and are directly contrary to controlling Supreme Court precedent.

In addition to seeking wholesale exclusion from the reach of antitrust scrutiny for its anticompetitive activities, Microsoft’s motion also tries to justify summary judgment by distorting and mischaracterizing the extensive factual record in this case.

• Contrary to Microsoft’s representation, MS Memo at 75-80, there is substantial evidence that Microsoft, with its entrenched monopoly in the market for PC operating system software, engaged in a series of predatory acts to maintain that monopoly and extend it to the market for internet browser software.

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• Contrary to Microsoft’s representation, id., there is substantial (indeed, overwhelming) evidence that its predatory and exclusionary conduct was undertaken for the purpose of impeding competition.
• Contrary to Microsoft’s representation, MS Memo at 59-74, there is substantial evidence that Microsoft’s exclusionary agreements with PC manufacturers and Internet Service Providers and Internet Content Providers have raised barriers to competition and effectively foreclosed competitors from significant distribution channels.
• Contrary to Microsoft’s representation, id., there is substantial evidence that the anticompetitive effects of these restrictive agreements far outweigh any purported business justifications.
• Contrary to Microsoft’s representation, MS Memo at 38-49, there is substantial evidence of separate demand in the marketplace that proves Microsoft’s Internet browser is a separate product from the operating system.
• And contrary to Microsoft’s representation, MS Memo at 51-59, there is substantial evidence that the bootup and screen restrictions in Microsoft’s contracts with PC manufacturers are far more onerous than is necessary to protect Microsoft’s rights under federal copyright laws.

As this Court recognized at the August 6 hearing, the presence of even a single material factual dispute, without more, would require denial of Microsoft’s motion. Transcript, Aug. 6, 1998 at 11:9-13. In fact, on every material issue the plaintiffs’ evidence, even at this stage while discovery is still ongoing, is either uncontroverted or directly counters Microsoft’s assertions.  [redacted material] [begin page 11] Given the strength and breadth of the plaintiffs’ proof, Microsoft’s claim that there are no genuine issues of fact is frivolous.¹

Much of the evidence that Microsoft ignores comes from its own files. Microsoft’s approach in depositions and in its motion for summary judgment is to deny what its contemporaneous documents plainly say -- and to claim an astonishing lack of recall. Executives who are stated to be the author of documents claim not to remember writing them. Executives who are the stated recipients of documents claim not to remember receiving them. And both authors and recipients claim not to know what the documents mean.

Microsoft’s CEO Bill Gates, who is placed at the center of key events by numerous documents, displayed a particular failure of recollection at his deposition. Compare, e.g., SJ Ex. 63 with Gates Dep., 89-92; SJ Ex.18 with Gates Dep. 94-95; SJ Ex. 64 with Gates Dep., 95,100,102,104,107-108; SJ Ex. 65 with Gates Dep., 160-62; SJ Ex. 354, p.6012956 with Gates Dep., 128-29, 207-08, 215-17; SJ Ex. 67 with Gates Dep., 132-33,135-36,163-64,165-66; SJ Ex. 68 with Gates Dep., 153,155,156-57; and SJ Ex. 69 with Gates Dep., 173-74,177,181-82,189-91,194-95.

As discussed below, Microsoft’s attempt to get Netscape to divide markets is well established by sworn testimony of participants and by contemporaneous notes. [redacted material] [begin page 12] [redacted material] By contrast, contemporaneous documents show that [redacted material]

Mr. Gates further testified that [redacted material]

(a) [redacted material]  SJ Ex. [redacted material]

(b) [redacted material]  SJ Ex. 70  [redacted material]

Mr. Gates’ testimony appears to be part of a pattern of Microsoft attempting to rewrite history. For example, [redacted material] [begin page 13] Microsoft in its recent papers (and in the testimony of its deponents -- except when they slip) studiously avoids the term "browser." Although browser is a term used throughout Microsoft’s documents and licenses, the industry literature, and even in the dictionary Microsoft publishes for software professionals, in the interest of Microsoft’s litigation arguments it becomes a non-word. Witnesses claim they don’t know what a browser is. What used to be browsers are now simply "bits" of "browsing technologies." Microsoft’s refusal to recognize the existence of a browser extends not only to the "integrated" browser but to the stand-alone products Microsoft offers.

At the trial the trier of fact will undoubtedly give Microsoft’s current positions the weight they deserve. There is, of course, no way that Microsoft can back away from its contemporaneous documents and statements in a summary judgment motion.

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