New York Times
October 27, 1997
The Justice Department v. Microsoft:
The Evidence and the AnswersLast week, the Justice Department renewed its antitrust scrutiny of the nation's largest software manufacturer. It asked a Federal judge to order the Microsoft Corporation to stop forcing makers of personal computers to include its Internet browser software in every machine they sell. The Attorney General, Janet Reno, said the company had violated its 1995 agreement not to tie the licensing of one of its products, like its ubiquitous operating system, to another, like the browser software that allows customers to find their way around the World Wide Web.
Microsoft and its rival, the Netscape Communications Corporation, which makes the widely used Netscape Navigator, have been engaged in a fierce battle for market share in the browser market.
A day after its announcement that it would seek a $1 million-a-day fine against Microsoft for civil contempt, the Justice Department released hundreds of pages of supporting evidence. Here, in point-counterpoint format, are excerpts from that evidence and Microsoft's position on those excerpts, as prepared by Mark Murray, a company spokesman.
ISSUE
Microsoft is accused of threatening computer manufacturers who delete the desktop icon for Microsoft's browser, which is called Internet Explorer.
Justice Dept. Evidence
The Oct. 17, 1997, deposition of Stephen A. Decker, director of software procurement for Compaq, during which Justice Department lawyers asked him why Compaq had wanted to remove the Internet Explorer icon from the desktops of its Presario computers:
"At the time, we had a relationship with Netscape and we had been shipping their product for a while. And therefore Netscape was actually the browser partner and we wanted to give that position on the Compaq Presario desktop . . .
"When (Microsoft) found out about it, they sent a letter to us telling us, you know, they would terminate our agreement for doing so.
"I believe that the reason for Microsoft wanting that was because the icon represents the ease of use for the customer . . . with the icon of the Internet Explorer visible and available to the consumer, they would naturally migrate to that particular product. . . ."
Microsoft's Position
"The New York Times would not allow a newsstand to tear out its business section, just because the newsstand wanted to sell more copies of The Wall Street Journal.
In the same way, computer manufacturers are free to ship any competitor product they wish, but they are not allowed to disable features of our products. Consumers need to know that Windows will work in a consistent manner no matter what kind of computer they buy.
"The 1994 consent decree expressly states that Microsoft may continue to integrate new features into the operating system without violating the decree.
Internet Explorer is an integrated feature of our Windows 95 operating system, and has been for more than two years.
"Computer manufacturers are free to ship any competitor software -- including Netscape's browser -- along with Microsoft's Windows 95 operating system.
Major computer manufacturers like Compaq and Dell have said they are featuring Internet Explorer on their machines because that's what their customers want."
Additional Evidence
Sworn declaration by Eric Browning, an executive of Micron Electronics Inc. responsible for negotiating licensing deals and installing software on new computers:
"Under terms of its Windows license agreement, as they have been explained to me by Microsoft representatives, Micron is required to preinstall the current version of Microsoft's Internet browser product . . . on every personal computer on which it preinstalls Windows 95. . . .
"In the summer of 1996, in the course of negotiations in connection with the seventh amendment of the Windows license agreement . . . I asked a Microsoft representative whether Micron could, under the terms of the agreement and for reasons similar to those underlying its earlier interest in deleting Internet Explorer from Windows 95, delete icons for online services. . . .
"As with the removal of Internet Explorer, the Microsoft representative informed me that deleting the icons would not be allowed. . . ."
Microsoft's Position
"Microsoft has never restricted any computer manufacturer from shipping Netscape Navigator or any other competitor software.
Many computer manufacturers sell machines preloaded with a Windows operating system and Netscape's browser, so consumers have freedom to choose whichever browser they want to use.
"Computer manufacturers are not allowed, however, to delete features from the Windows operating system, such as the Internet Explorer icon. . . . Consumers tell us they want to know that Windows will work the same, no matter what kind of computer they buy.
"Ford would not allow one of its dealers to pull the factory installed engine out of a Mustang, and substitute a Chevy engine.
We're simply preserving the customer experience with the product we've built. . . ."
ISSUE
Justice contends that the terms of Microsoft's nondisclosure agreement impede the Government's ability to gather evidence of antitrust violations.
Justice Dept. Evidence
A copy of Microsoft's standard nondisclosure agreement, including the following language:
"Confidential information includes, without limitation, information relating to released or unreleased disclosing party software or hardware products, the marketing or promotion of any disclosing party product, disclosing party's business policies or practices. . . .
"Receiving party shall not disclose confidential information or confidential materials to third parties for five years. . . .
"However, receiving party may disclose confidential information or confidential materials in accordance with judicial or other governmental order, providing receiving party shall give disclosing party reasonable notice prior to such disclosure and an opportunity to contest such an order. . . "
Microsoft's Position
"Microsoft's non-disclosure agreements are no different than anyone else's in the software industry and numerous other industries.
"The standard non-disclosure agreement used by Novell, for example, includes a similar provision requiring companies to give Novell 'prompt notice' when they receive a legal or governmental request to disclose information.
Sun Microsystems's license agreement includes a similar provision requiring "prior notice" before disclosing confidential information under a legal or governmental request.
"Companies throughout the software industry use these kinds of agreements to protect their confidential business information and intellectual property -- the software code that we spend years creating.
There is nothing in our non-disclosure agreements that prevents anyone from giving information to the government as part of any inquiry, and we have repeatedly advised the Justice Department, in writing, that we do not interpret our license agreements as requiring anyone to provide notice to Microsoft before disclosing information to the Justice Department."
ISSUE
Competitive browser software may represent a significant threat to Microsoft's bread-and-butter product, its operating system.
Justice Dept. Evidence
Sept. 19, 1997, deposition of James Joseph Von Holle, Gateway 2000 executive responsible for software acquisition and resale.
Justice Department lawyers asked Mr. Van Holle about the threat the Netscape Communicator poses to Microsoft's operating system. The Netscape product theoretically allows computer users to gain access to programs on the Internet written in Sun Microsystems's Java programming language. The ability to do this could render Microsoft software irrelevant:
"Sun has released a product called Java, and there's promise in this product according to the developers that it would be an application or an operating-system-independent environment.
"I think the value to Gateway and anyone in our business is the fact that there would be more competition in the industry. . . .
"I believe it would create an environment where the competition would do things. It would force lower prices in the industry and it would also force more innovation. . . ."
Microsoft's Position
"As the meteoric rise of Netscape and strong developer interest in the Java programming language demonstrate, the software industry is the most dynamic and competitive industry in the world. . . . Any company that stops innovating will be overtaken quickly by the pace of competition. Consumers are the big winners, as competition drives every company to deliver better products at lower prices."