The New York Times

January 19, 1999

Browsers and Borders Are Argued at the Microsoft Trial

By STEVE LOHR

ASHINGTON -- In the Microsoft antitrust trial, the Government spent most of Tuesday attacking the company's central defense -- that its Internet browsing software is a seamless feature of its Windows operating system and not a stand-alone product. The Government is trying to prove that the browser and operating system are two products, illegally bundled together mainly to stifle competition.

But the Justice Department and 19 states suing the Microsoft Corporation face an uphill struggle to confirm that allegation. In a related case, a Federal appeals court ruled last June that Microsoft had virtually unlimited freedom to include anything it wanted in its products. The decision pointedly noted the "undesirability of having courts oversee product design."

In the current trial, Judge Thomas Penfield Jackson of United States District Court is not necessarily bound by the appeals court ruling. But it does suggest that the Government must make some very convincing arguments to prevail.

David Boies, the lead trial lawyer for the Justice Department, spent hours today trying to show that Microsoft's position on the issue was contradicted by the company's own internal documents and by common sense. Using other products as examples to illustrate his point, Boies insisted that it was possible to do what Microsoft says is nearly impossible -- draw a boundary line in software code, separating one product from another.

Microsoft, Boies said, could do the same thing with its popular word-processing program, Word, as it did with its Internet Explorer browser. "But the mere fact that two programs share some software code -- and a company can make it difficult to disentangle that code" -- by no means proved that they were a single product, Boies said.

Boies directed question after question at Microsoft's first witness, Richard L. Schmalensee, an economist who is the dean of the Sloan School of Management at the Massachusetts Institute of Technology.

The Justice Department lawyer noted that even Michael Dertouzos, the director of M.I.T.'s Computer Science Laboratory -- who was initially on Microsoft's witness list but was later dropped -- had testified in a deposition that he considered the browser an application program, separate from the operating system.

Schmalensee held his ground, however, cautioning the court against immersing itself too deeply in software code. "One thing this industry teaches is that the borders between products vary over time as technology advances," he said.

At another point, he explained that he did not give "any particular weight" to the testimony from expert witnesses that the browser and operating system were separate products. "Testimony as to the way things are," Schmalensee said, should not be binding in determining "guidelines that are going to affect the evolution of this industry" -- a nod to the expectation that whatever the verdict for Microsoft, the case will have a far-reaching effect on the nation's high-technology economy.

The Government argues that Microsoft's decisions to bundle its browser with Windows and to place contract restrictions on personal computer makers add up to anticompetitive behavior.

Is the Internet Explorer a feature of Windows or a stand- alone product?

Pursuing that line, Boies asked Schmalensee if Microsoft had bundled its browser with Windows in part to increase the distribution of its browser.

"It certainly had that effect," the witness replied.

Next, Boies asked if one purpose for the bundling was to make it more difficult for a Microsoft rival, the Netscape Communications Corporation, to distribute its browser.

"Yes," Schmalensee replied, "but that would have happened anyway. Competition would have plausibly raised Netscape's distribution costs."

"Competition on the merits can raise rivals' costs," he added, "but that says nothing about anticompetitive effects."

The M.I.T. business school dean insisted that the Government had not shown any current harm to consumers from Microsoft's decision to fold browsing software into its operating system and to give the browser away. And in determining whether business practices are legitimate competition or anticompetitive predation, Schmalensee emphasized that "the touchstone has to be ultimate impact on consumers."

The Government contends that Microsoft's practices effectively limited Netscape's access to mainstream channels of distribution where most people obtain their browsing software -- from computer makers who load it onto new PC's and from Internet service providers.

"And that harms consumers because it deprives them of choice," Boies said today on the courthouse steps.