Microsoft's Pretrial Statement.
Re: DOJ v. Microsoft, Case No. 98-1232, 1233.
Date: October 6, 1998.
Source: Microsoft. The caption, signatories, and Certificate of Service have been deleted.   Otherwise, this document has been edited for HTML, but not for content.

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DEFENDANT MICROSOFT CORPORATION’S PRETRIAL STATEMENT

Defendant Microsoft Corporation ("Microsoft") respectfully submits this pretrial statement in accordance with Local Rule 209(b) and paragraph 1 of the proposed Second Amended Scheduling Order filed with the Court on October 6, 1998.

Statement of the Case

The plaintiffs in these consolidated actions are the United States of America, twenty States and the District of Columbia. (The twenty States are California, Connecticut, Florida, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New York, North Carolina, Ohio, South Carolina, Utah, West Virginia and Wisconsin. The States and the District of Columbia are collectively referred to herein as the "States.") Microsoft is the defendant and counterclaim plaintiff. The States’ respective attorneys general are the counterclaim defendants.

On May 18, 1998, the Antitrust Division of the U.S. Department of Justice ("DOJ") and the States, by and through their respective attorneys general, commenced these actions by filing separate complaints alleging that Microsoft had violated federal and state antitrust laws. (The States filed a First Amended Complaint on July 17, 1998.) On the same day they filed their complaints, the DOJ and States also filed separate motions for a preliminary injunction. By Order dated May 22, 1998, the Court consolidated the DOJ’s and States’ actions for all purposes pursuant to Rule 42(a) of the Federal Rules of Civil Procedure, and further consolidated their requests for preliminary injunction with the trial on the merits pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure. The Court has jurisdiction over these actions pursuant to Section 4 of the Sherman Act, 15 U.S.C. § 4, and pursuant to 28 U.S.C. §§ 1331, 1337.

Plaintiffs’ complaints allege four causes of action. First, plaintiffs allege that Microsoft’s agreements with certain Internet Service Providers ("ISPs"), Internet Content Providers ("ICPs"), Online Services ("OLSs") and original manufacturers of personal computers ("OEMs") unreasonably restrain trade in violation of Section 1 of the Sherman Act by foreclosing the ability of Netscape Communications Corporation ("Netscape") and other competitors to supply their web browsing software to consumers. Second, plaintiffs allege that Microsoft has unlawfully "tied" its Internet Explorer technologies to its Windows 98 operating system software in violation of Section 1 of the Sherman Act. Plaintiffs contend that the effect of this alleged tying arrangement is that Netscape and other competitors are denied access to OEMs as a channel for distributing their web browsing software. Third, plaintiffs allege that Microsoft has willfully maintained a monopoly in a purported market for personal computer operating systems in violation of Section 2 of the Sherman Act. Fourth, plaintiffs allege that Microsoft has attempted to monopolize a purported market for "Internet browsers" in violation of Section 2 of the Sherman Act. Plaintiffs’ monopolization and attempted monopolization claims are both premised on the same alleged anticompetitive conduct that underlies plaintiffs’ claims under Section 1 of the Sherman Act. Plaintiffs seek injunctive and declaratory relief.¹

Statement of Microsoft’s Claims

Microsoft has asserted two counterclaims against the various state attorneys generals who have filed state law claims on behalf of the States seeking to require Microsoft to (i) license and distribute altered versions of its copyrighted Windows 95 and Windows 98 operating system software, and (ii) allow further alteration of Microsoft’s copyrighted works by OEMs acting as Microsoft’s distributors. First, Microsoft seeks a declaration pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, that the state law claims asserted by the attorneys general are preempted by Article VI of the United States Constitution by virtue of their conflict with the Copyright Act. Second, Microsoft alleges that the attorneys general have violated 42 U.S.C. § 1983 by interfering with Microsoft’s federally guaranteed rights under the United States Constitution and the Copyright Act.

Statement of Microsoft’s Defenses

The facts of this case and the clear legal precedents refute each of the governments’ claims. Microsoft will show that its actions have been completely legal and have resulted in significant benefits to consumers.²

Microsoft interposes the following defenses against the claims asserted by the DOJ: (i) the complaint fails to state a claim upon which relief can be granted; (ii) the complaint is barred, in whole or in part, by the doctrine of equitable estoppel; (iii) the complaint is barred, in whole or in part, by the doctrine of collateral estoppel; (iv) the complaint is barred, in whole or in part, for failure to join one or more indispensable parties; (v) the complaint’s challenges to Microsoft’s agreements with certain ISPs and ICPs are moot because (a) Microsoft has waived the challenged provisions and (b) the agreements already have or soon will expire; (vi) the complaint’s challenges to Microsoft’s license agreements with OEMs are without legal merit by reason of Microsoft’s rights under the federal copyright and trademark laws.

Microsoft interposes the following defenses against the claims asserted by the States: (i) the complaint fails to state a claim upon which relief can be granted; (ii) the complaint is barred, in whole or in part, by the doctrine of equitable estoppel; (iii) the complaint is barred, in whole or in part, for lack of antitrust injury; (iv) the complaint is barred, in whole or in part, for failure to join one or more indispensable parties; (v) the complaint’s challenges to Microsoft’s agreements with certain ISPs and ICPs are moot because (a) Microsoft has waived the challenged provisions and (b) the agreements already have or soon will expire; (vi) the complaint’s challenges to Microsoft’s license agreements with OEMs are without legal merit by reason of Microsoft’s rights under the federal copyright laws; (vii) the complaint’s pendent state-law claims are preempted, in whole or in part, by the federal copyright and trademark laws.

The States interpose the following defenses against the counterclaims asserted by Microsoft: (i) the counterclaims fail to state a claim upon which relief can be granted; (ii) the counterclaims are barred for lack of subject matter jurisdiction; (iii) the counterclaims do not present an actual case or controversy; (iv) the counterclaims do not present any claim that is ripe for determination; (v) the counterclaims are not appropriately before the Court because any issue raised by them is implicated by defenses that Microsoft has already asserted against the States’ claims; (vi) the counterclaims are barred due to sovereign immunity; (vii) the counterclaims are barred due to prosecutorial immunity; (viii) the counterclaims are barred because the States’ filing of the First Amended Complaint is purportedly protected by the First Amendment.

Schedule of Witnesses To Be Called by Microsoft

In accordance with paragraph 2 of the proposed Second Amended Scheduling Order, Microsoft will file and simultaneously exchange with plaintiffs its final schedule of witnesses, as provided in paragraph 7 of the Court’s Pretrial Order No. 2, no later than 5:00 p.m. on October 8, 1998.

List of Exhibits

In accordance with paragraph 1 of the proposed Second Amended Scheduling Order, Microsoft attaches as Exhibit A to this pretrial statement a draft list of the exhibits Microsoft presently intends to offer into evidence at trial. This draft list is the most complete list available now. Microsoft will exchange its final list of exhibits with plaintiffs on October 10, 1998, and will file that list on October 13, 1998. Microsoft reserves the right to supplement its final list of exhibits in good faith and with adequate advance notice to plaintiffs as discovery is completed and in the course of trial.

Designation of Deposition Excerpts

In accordance with paragraph 4(b) Pretrial Order No. 2, Microsoft will file and serve the deposition excerpts that it intends to offer into evidence when it submits the written direct testimony of its witnesses.

Itemization of Damages

Microsoft does not seek any damages on its counterclaims.

Request for Other Relief

Microsoft seeks the dismissal of the actions brought by the DOJ and States in their entirety with prejudice. On its counterclaims, Microsoft seeks an order (i) declaring that the attorney generals’ state-law claims against Microsoft are preempted under the Supremacy Clause of the United States Constitution, (ii) declaring that the attorneys generals, in seeking to deprive, and depriving, Microsoft of rights guaranteed by the Constitution and laws of the United States, have violated 42 U.S.C. § 1983; (iii) permanently enjoining the attorneys general from asserting state law claims against Microsoft that would interfere with Microsoft’s unfettered exercise of rights guaranteed to it under the Copyright Act, (iv) awarding Microsoft the attorneys’ fees and costs of the action brought by the attorneys general, pursuant to 42 U.S.C. § 1988, and (v) granting Microsoft such additional relief as this Court deems just and proper.

Dated: New York, New York
October 6, 1998

Respectfully submitted,

__________________________
John L. Warden (Bar No. 222083)

[other signatories omitted]

[Certificate of Service omitted]