Microsoft's Objections to Expansion of Allegations and Claims for Relief.
Re: DOJ v. Microsoft, Case No. 98-1232, 1233.
Date: October 8, 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 OBJECTIONS TO PLAINTIFFS’ NEW REQUESTS FOR RELIEF AND ATTEMPT TO EXPAND THIS CASE BEYOND THE ALLEGATIONS IN THE COMPLAINTS

Plaintiffs’ joint pretrial statement confirms what Microsoft has long suspected and first brought to the Court’s attention over a month ago: plaintiffs are disenchanted with the claims they filed against Microsoft in May 1998—involving only the purported "tying" of Windows 98 and its Internet Explorer element and largely moot challenges to provisions in contracts with OEMs, ISPs, ICPs and OLSs—and thus are seeking to expand substantially the scope of the case. The transformation in plaintiffs’ claims is so sweeping that plaintiffs’ allegations now bear little resemblance to those set forth in their complaints.

Based on plaintiffs’ explicit representation that their case was narrowly focused and could be ready for trial in a very short time, the Court established a pretrial schedule providing for an extremely compressed discovery period, limited each side to twelve trial witnesses and ordered the parties to submit their direct examinations in writing. Over the last several months, Microsoft has conducted discovery, designated witnesses and prepared for trial based on the understanding that the allegations and requested relief in plaintiffs’ complaints defined the contours of the case. Microsoft will be denied its right to due process if plaintiffs are permitted to try an expanded case that is fundamentally different from the one laid out in their complaints. If this is now an omnibus monopolization case, as plaintiffs apparently perceive it, then it would be fundamentally unfair to rush to judgment on the punishing schedule established by the Court. The Court therefore should either restrict plaintiffs to the claims alleged and relief sought in their complaints or require plaintiffs to amend their complaints and then adjust the discovery period and trial procedures to reflect plaintiffs’ expanded allegations.

Plaintiffs’ complaints allege four discrete causes of action. First, plaintiffs allege that Microsoft’s agreements with certain ISPs, ICPs, OLSs and OEMs violate Section 1 of the Sherman Act because they "restrain[] competition in the Internet browser market." (DOJ Compl. ¶ 131; States First Am. Compl. ¶ 97.) Second, plaintiffs allege that Microsoft unlawfully "tied" its Internet Explorer technologies to Windows 98—"thereby restraining competition in the Internet browser market"—in violation of Section 1 of the Sherman Act. (DOJ Compl. ¶¶ 135-37; States First Am. Compl. ¶¶ 94-95.) Third, plaintiffs allege that Microsoft has unlawfully maintained a monopoly in a purported market for "PC operating system software" in violation of Section 2 of the Sherman Act "[t]hrough the actions complained of in [their] Complaint[s]," i.e., the same conduct that plaintiffs claim violates Section 1 of the Sherman Act. (States First Am. Compl. ¶ 87; DOJ Compl. ¶ 139.) Fourth, plaintiffs allege that Microsoft has unlawfully attempted to obtain a monopoly in a purported "Internet browser market" in violation of Section 2 of the Sherman Act. (DOJ Compl. ¶ 141; States First Am. Compl. ¶ 89.)

Plaintiffs again seek in their joint pretrial statement to distance themselves from the claims alleged in their complaints. When plaintiffs filed their complaints in May 1998, their central contention was that Microsoft had improperly "tied" its Internet Explorer technologies to Windows 98. (See DOJ Compl. ¶¶ 18-23, 103-23, 134-37; States First Am. Compl. ¶¶ 47-50, 54-69, 93-95.) Yet in their joint pretrial statement, plaintiffs downplay the significance of their tying claim, listing it dead last among the various alleged anticompetitive acts they now claim they are challenging. (Pls. Joint Pretrial Statement at 4.) Indeed, plaintiffs assert that Microsoft’s conduct with respect to "browsers"—the sole focus of their complaints—are merely "examples" of "a broad pattern of anticompetitive conduct designed to eliminate competition, to maintain and strengthen Microsoft’s core monopoly over PC operating systems, and to monopolize key applications markets." (Id.)

Even worse, notwithstanding the Court’s statement at the September 17, 1998 hearing that it "would not predicate any relief on a finding with respect to the matters that [Microsoft] contends are extraneous" (9/17/98 Tr. at 7), plaintiffs attempt to use their joint pretrial statement as a vehicle to amend their requests for relief. Each of the specific requests for relief set forth in plaintiffs’ complaints is directed at "Internet browser software," which should come as no surprise given that plaintiffs’ complaints focused entirely on Microsoft’s alleged foreclosure of the ability of Netscape and other competitors to supply their web browsing software to consumers. (See DOJ Compl. Prayer for Relief.) In their joint pretrial statement, however, plaintiffs attempt to dismiss those requests as describing relief that was "immediately necessary" in May 1998 "to preserve competition for internet browser software," not the permanent relief that plaintiffs will seek at the conclusion of the case. (Pls. Joint Pretrial Statement at 8.) Plaintiffs now assert that "[d]epending on the nature and scope of the violations determined by the Court at trial," they "will seek additional permanent relief as is necessary to restore competitive conditions and to prevent Microsoft from committing similar violations in the future." (Id. at 9.) Plaintiffs go so far as to state that they "may request that the Court conduct additional proceedings for the purpose of hearing evidence concerning such additional relief." (Id.) Plaintiffs seek to justify these requests for "additional relief" (i.e., relief not requested in their complaints) based on the boilerplate requests for other appropriate relief included at the end of the DOJ’s prayer for relief.

The prayers for relief included in plaintiffs’ complaints identify plaintiffs’ requests for permanent relief following trial on the merits. Plaintiffs should not be permitted in their pretrial statement to amend their requests for relief by relying on general, boilerplate requests that do not provide Microsoft with sufficient notice of the nature of the injunctive relief plaintiffs are seeking. In fact, plaintiffs fail even in their joint pretrial statement to identify the specific "additional permanent relief" that they say they may seek following trial. It is impossible to understand the true nature of a party’s claims without understanding the relief that the party is seeking. Microsoft should not be forced to proceed to trial on a highly expedited basis when the true nature of plaintiffs’ case is shrouded in mystery.

More fundamentally, plaintiffs’ joint pretrial statement makes it painfully clear that plaintiffs now view this case very differently than they did in May 1998. At the May 22, 1998 hearing following the filing of their complaints, plaintiffs assured the Court that their claims did not raise "a lot of disputed factual issues" that "would take a long time for discovery or for a hearing" and that the case could be ready for trial by "late July or early August." (5/22/98 Tr. at 23-24.) Since the Court of Appeals handed down its decision on June 23, 1998, however, plaintiffs have been singing a very different tune. Recognizing that they have no hope of satisfying the standard set out by the Court of Appeals, plaintiffs have attempted to transform this case from a narrow tying action challenging Microsoft’s design of Windows 98 into an omnibus monopolization action reminiscent of the DOJ’s suits against IBM and AT&T—which properly required years of pretrial preparation to explore the complex issues raised by such suits.

The Court set the present schedule based on plaintiffs’ representation that they had brought a narrow case challenging an alleged tying arrangement (as well as certain specific contracts) that could be ready for trial in a few months. If plaintiffs now want to bring a broad monopolization case against Microsoft, plaintiffs should be required to amend their complaints and give Microsoft fair notice of the claims they are now asserting. Basic principles of due process also mandate that Microsoft be given adequate time to conduct discovery and prepare its defense against such sweeping claims, and be permitted to call more than the allotted twelve witnesses. Microsoft needs at least those twelve witnesses (and more than the four months it has been permitted thus far to conduct discovery) to respond to the allegations in plaintiffs’ complaints. Permitting plaintiffs to throw in the kitchen sink at this late date (including claims that are the subject of entirely separate investigations) is highly prejudicial to Microsoft.

If plaintiffs are permitted to convert this action into a plenary monopolization case, then the schedule for trial and the procedures to be observed at trial should be adjusted to reflect this profound change in the nature of the case. Microsoft is aware of no major monopolization case that has been tried with only four months of discovery and twelve witnesses per side, and there is no reason why this case should be dealt with in such a hurried and summary manner. As they must, plaintiffs have abandoned their claims of urgency, which they utilized at the time their complaints were filed to justify a schedule of pretrial proceedings compressed into a time frame of unprecedented brevity. In short, there is no reason to try this important case on such an expedited schedule, and requiring Microsoft to do so will deprive Microsoft of a full and fair opportunity to defend itself against plaintiffs’ claims.

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For the foregoing reasons, the Court should either (i) restrict plaintiffs to the claims alleged and relief sought in their complaints, or (ii) require plaintiffs to amend their complaints, and then adjust the discovery period and trial procedures to reflect plaintiffs’ expanded allegations.

Dated: New York, New York
October 8, 1998

Respectfully submitted,
 

__________________________
John L. Warden (Bar No. 222083)

[other signatories omitted]

[Certificate of Service omitted]