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Tech Law Journal |
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| News, records, and analysis of legislation, litigation, and regulation affecting the computer, internet, communications and information technology sectors | |
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[caption omitted] DEFENDANT MICROSOFT CORPORATION’S On September 2, 1998, defendant Microsoft Corporation ("Microsoft") filed a Motion To Limit Issues for Trial, seeking to limit the issues and evidence at trial to the matters that plaintiffs placed in issue in their complaints. Recently, plaintiffs have endeavored to expand this case to include a range of issues that exceed the allegations of their complaints. On September 3, 1998, the Court permitted the parties to proceed with discovery with respect to those issues, but reserved decision as to whether those issues properly may be included among those to be tried at the upcoming trial. (See Order, dated September 3, 1998.) Microsoft submits, and believes the plaintiffs agree, that preparation for (and presentation at) trial would be facilitated by the Court’s resolution of the proper scope of the trial at the conference on September 17, 1998. To assist the Court’s consideration of that matter, Microsoft identifies in this Statement the extraneous issues plaintiffs have attempted to introduce into this case that should be excluded from trial. Microsoft also respectfully refers the Court to its submissions in connection with its Motion To Limit Issues for Trial, dated September 2, 1998. Plaintiffs’ claims under Section 2 of the Sherman Act are predicated on the various supposedly anticompetitive acts specifically alleged in their complaints. For example, the DOJ alleges in paragraph 139 of its Complaint that Microsoft "has willfully maintained" its "monopoly power" in the purported "market" for PC operating systems "[t]hrough the anticompetitive conduct described herein" (emphasis added). The States similarly allege in paragraph 87 of their First Amended Complaint that Microsoft "has willfully and illegally used its monopoly power to maintain and extend its monopoly" in the purported market "[t]hrough the actions complained of in this Complaint" (emphasis added). As this Court recognized in its September 14, 1998 summary judgment opinion, plaintiffs allege essentially six antitrust violations (one has been dismissed) in their complaints, all of which relate to (1) the alleged tying of Microsoft’s Internet browser to Windows 98, (2) certain alleged "exclusive dealing" arrangements between Microsoft and Internet content and access providers, and (3) certain "boot and start-up screen" restrictions imposed by Microsoft on original equipment manufacturers ("OEMs"). (See Summary Judgment Opinion at 2.) Plaintiffs explicitly state in the above quoted paragraphs of their complaints that the alleged "exclusionary and predatory practices" that underlie their claims that Microsoft "illegally maintained a monopoly in its operating system software" are limited to the conduct described in their complaints, i.e., the very same alleged tying and "exclusive dealing" arrangements that plaintiffs claim violate Section 1 of the Sherman Act, and nothing else. Plaintiffs’ complaints also make clear that their "attempted monopolization" claims are limited to an alleged attempt to monopolize a purported market for "Internet browsers." (See DOJ Compl. ¶141, States First Am. Compl. ¶ 89.) The prayer for relief in plaintiffs’ complaints is similarly limited to the specific claims alleged in the complaints. Indeed, nearly all of the relief requested in plaintiffs’ complaints relates specifically to the distribution of web browsing software. If plaintiffs wish to add new claims to the case, they should seek leave to amend their complaints pursuant to Rule 15 of the Federal Rules of Civil Procedure, and if that motion is successful, the matter should proceed to an orderly adjudication in accordance with the Federal Rules of Civil Procedure. Plaintiffs also cannot rely on these other alleged "bad acts" to buttress their allegations concerning the June 1995 meeting between Microsoft and Netscape by claiming that those other alleged acts show that Microsoft has a regular practice of attempting to divide markets. Courts will not infer a routine business practice under Rule 406 of the Federal Rules of Evidence unless the plaintiff demonstrates a sufficient number of specific instances of conduct, i.e., many more than a few occasions, to support that inference. As one court explained,
Mobil Exploration and Producing U.S., Inc. v. Cajun Constr. Servs., Inc., 45 F.3d 96, 99-100 (5th Cir. 1995) (footnote omitted) (district court erred in refusing to admit evidence of 3,400 other incidents); accord G.M. Brod & Co. v. U.S. Home Corp., 759 F.2d 1526, 1532-33 (11th Cir. 1985) (holding that district court erred in admitting evidence to show that defendant "had a general policy of breaching contracts with small businesses in order to maximize its advantage and profits"). Plaintiffs’ allegations concerning Microsoft’s dealing with a handful of other companies—certainly not "substantially all other parties with whom the defendant has had similar business transactions"—are clearly insufficient to support an inference of a "routine practice" under Rule 406. More fundamentally, the newly-raised matters that plaintiffs seek to inject into this case relate to software products and technologies other than those that are the subject of the complaints. These new matters thus involve factual and legal issues—such as relevant product market, market power, and the nature and existence of any allegedly anticompetitive conduct or agreement—that are distinct from those at issue in this case. Even assuming plaintiffs’ allegations concerning these extraneous issues had any merit, development of the contours of the alleged misconduct and of the necessary understanding of the complex technologies relevant to each of those issues could alone require separate trials. Indeed, as Microsoft indicated in its Motion To Limit Issues for Trial, most of these matters are the subject of separate pending proceedings. Consequently, even if these matters were (by an exceptionally liberal standard) relevant to this case, they should be excluded because their probative value is outweighed by their tangential nature and the confusion, complexity and delay they will bring to the resolution of this action. See Fed. R. Evid. 403. Microsoft cannot prepare its defense to these new allegations in the month remaining before trial. Nor can Microsoft address these allegations at trial with its allotted twelve witnesses. Microsoft needs at least those twelve witnesses to respond to the allegations in plaintiffs’ complaints. If plaintiffs are permitted to transform this action into a plenary monopolization case—involving supposedly anticompetitive acts not specifically alleged in the complaints—then the schedule for trial and the procedures to be observed should be adjusted to reflect this profound change in the nature of the case. Otherwise, the timing of trial and limitations on proof contemplated by Pretrial Order Nos. 1 and 2 will be inconsistent with fundamental principles of due process. Microsoft sets forth below the specific extraneous allegations that should be excluded from trial because they have no relation to the case plaintiffs brought in May. 1. Allegations that Microsoft induced or attempted to induce Intel Corporation to limit or abandon efforts to develop and distribute (a) software, including Intel’s "native signal processing" software for real-time processing of audio and video data for computers using Windows 3.1; and (b) applications written for the Java programming language. The software relevant to these allegations does not include web browsing software, and thus plaintiffs’ allegations do not relate to, or contribute to the orderly adjudication of, plaintiffs’ assertion that Microsoft foreclosed distribution of competing web browsing software. 2. Allegations that Microsoft (a) attempted to induce Apple Computer to abandon efforts to develop and distribute software used to process on Windows-based computers streaming audio-video data and other multimedia content in exchange for an agreement by Microsoft to abandon all efforts to develop and distribute both similar software for Macintosh-based computers and software for the creation of multimedia content; (b) induced OEMs and ISVs not to support Apple’s multimedia software; and (c) intentionally developed incompatibilities between Windows operating system software and Apple’s multimedia product. Not only are these allegations found nowhere in the complaints, but they also are the subject of an on-going investigation by the DOJ and relate to multimedia streaming technology—not web browsing software or operating systems. Furthermore, the contours of these allegations are apparent only from the discovery that the DOJ has obtained from Apple, to which Microsoft’s in-house counsel does not have access because Apple has designated such discovery material as Highly Confidential under the Protective Order. 3. Similar allegations regarding Microsoft’s dealings with respect to Real Networks’ software for processing streaming audio and video data. These allegations, too, are the subject of an on-going DOJ investigation, and have no more connection to this case than do plaintiffs’ assertions regarding Apple’s multimedia streaming software. 4. Allegations that Microsoft endeavored to develop a proprietary set of tools for the Java programming language (originally developed by Sun Microsystems), as well as a so-called Java virtual machine used to run Java programs, in order to prevent the adoption of Java applications on a cross-platform basis. Although plaintiffs’ complaints include a few, extremely limited references to Java, those allegations focus solely on Microsoft’s purported desire to stop the distribution of Netscape’s web browsing software for the additional reason that such software is a vehicle for distributing Java to users. (See DOJ Compl. ¶¶ 7-8, 68.) This further allegation concerning Microsoft’s supposed motive adds nothing to the case. In addition, plaintiffs’ allegations regarding Java are also the subject of an extensive, highly-complex litigation between Microsoft and Sun Microsystems pending in the United States District Court for the Northern District of California in which the parties have conducted extensive discovery and have just concluded a three-day preliminary injunction hearing. Summary judgment motions are scheduled to be filed in that case in early October. 5. Allegations concerning the design, development, marketing, licensing and distribution of Microsoft’s MS-DOS operating system, which predate the 1995 Consent Decree and were explored exhaustively during the FTC and DOJ investigations that resulted in that Consent Decree. These allegations were, as to the DOJ, resolved by the Consent Decree and are the subject of a separate private lawsuit between Microsoft and Caldera, Inc., which is scheduled for trial in 1999 in the United States District Court for the District of Utah. Deposition discovery in that separate lawsuit began in October 1997. Since then, more than 40 depositions have been taken, and approximately another 40 remain to be taken before trial. The DOJ has served subpoenas on Caldera requesting copies of the transcripts of those depositions, and it is working closely with Caldera’s lawyers. 6. Allegations concerning Microsoft’s decision not to grant a source code license to Bristol Technologies for Windows NT 4.0 and 5.0 to be used to port Windows NT applications to the UNIX operating system. Not only do these allegations have nothing to do with the claims asserted by plaintiffs in their complaints, but they also are the subject of an action brought by Bristol against Microsoft in the United States District Court for the District of Connecticut. Expedited discovery is currently ongoing in that case in anticipation of a preliminary injunction hearing. * * * It is apparent even from this brief statement that the issues that plaintiffs belatedly seek to import into this action are tangential at best to the claims asserted in their complaints. Plaintiffs are essentially attempting to combine a number of separate lawsuits and investigations with this case. Given the expedited schedule for trial and the limitations imposed on witnesses, Microsoft respectfully requests that the court exclude the foregoing issues, and any evidence relating to them, from the trial. Dated: New York, New York September 16, 1998 Respectfully submitted,
______________________________ John L. Warden (Bar No. 222083)
1735 New York Avenue, N.W. Counsel for Defendant Counterclaim-Plaintiff Microsoft Corporation [Certificate of Service omitted]
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