The New York Times

November 18, 1998

 

Microsoft Told to Stop Shipments That Violate Contract With Rival

By STEVE LOHR

The Microsoft Corporation, whose business practices are being challenged by the Government in a major antitrust case, suffered a legal setback on another front yesterday when a Federal judge in California ordered the company to stop shipping its own version of Java, a programming language owned by a rival, Sun Microsystems Inc.

Under a licensing agreement signed in March 1995, Sun gave Microsoft the right to ship Java, the most popular language for programs that run on the World Wide Web, with Microsoft's Windows operating system and its Web browser, Internet Explorer.

However, in 1997, Microsoft altered parts of the Java language so that programs written in Java for other operating systems would not run on Windows machines and vice versa. Microsoft said it was improving Java, but many others in the industry, including Sun, said it was an attempt to "pollute" a language that threatened Microsoft's operating system monopoly.

Sun sued, claiming that its licensing agreement did not allow Microsoft to make changes to Java.

Yesterday, Judge Ronald M. Whyte, who is hearing that suit, ruled that Sun was likely to prove its claim in a trial next year and ordered Microsoft to begin shipping Sun's version of Java within 90 days. If after that time, Microsoft continues to ship its operating system or browser with its own version of Java, it will be in contempt of court.

Last night, Microsoft said that the ruling would not require recalls of either Windows 98 or its World Wide Web browser, Internet Explorer 4.0. Although a company spokesman said that the changes ordered by the judge would be costly, he declined to be specific.

What, if any, impact yesterday's preliminary injunction in a private lawsuit in California might have on the Government's antitrust case, now being heard in Washington, is uncertain. But the allegations in the Government's suit do include the practices that are at the heart of the breach-of-contract case.

The Justice Department and 20 states suing Microsoft in the antitrust case say that this is part of a pattern of illegal practices by the software giant intended to protect and extend its tight grip on the market for personal computer software. If Sun's Java became an industry standard, the Government asserts, it could pose a serious challenge to Microsoft.

Java potentially allows developers to write a software program once and have it run on a wide variety of computers, regardless of the underlying operating system. That is a threat to Microsoft's control over the direction of software development.

Two factors interact to insure the continuation of Microsoft's operating system monopoly. First, the vast majority of programmers write their software first -- and often exclusively -- for the Windows operating system because has a better than 90 percent share of personal computer operating systems. Second, Windows users are reluctant to change operating systems because switching requires buying all new programs.

However, programs written in Java could, at least theoretically, run on any operating system, meaning that a user could abandon Windows for Apple Computer Inc.'s Mac OS or any flavor of the Unix operating system and run the same Java programs that he or she had purchased to run on Windows.

In E-mail exchanges among Microsoft executives made public in both the Sun trial and the Government antitrust case, this possibility was referred to as "commoditizing the platform," meaning that Windows would lose its proprietary grip on newly developed programs, a serious threat to Microsoft's monopoly.

The California ruling is badly timed for Microsoft, but the spillover, if any, to the antitrust case in Washington is difficult to determine.

"The Justice Department will argue that a breach of contract is part of the pattern of bad acts by Microsoft and of its intent to monopolize," said Robert Litan, a former senior official in the Justice Department's antitrust division. "It helps the atmospherics of the Government's case, but it's not clear beyond that what the effect will be."

The ruling yesterday is a preliminary injunction, Mr. Litan noted, and the Sun-Microsoft trial is not scheduled to begin until next year. Meanwhile, the antitrust trial is already well under way, and Judge Thomas Penfield Jackson is expected to rule early next year.

"If there was a final ruling in the contract case, it would have far more direct impact on the antitrust case," said Mr. Litan, who is now at the Brookings Institution.

The California ruling, industry analysts say, is not likely to have a significant impact on Microsoft's business anytime soon -- though it does raise questions about the company's strategy of trying to influence the industry to accept Microsoft's version of Internet software standards.

"Because the judge gave it 90 days to comply, there is no business interruption for Microsoft," said Richard Sherlund, an analyst for Goldman, Sachs & Company. "Microsoft does not have to pull products out of distribution."

But, Mr. Sherlund noted, the ruling does "rein Microsoft in, and it clearly comes at an awkward time for the company, given the antitrust case."

In its lawsuit, Sun accused Microsoft of trying to foil any chance for Java to become a universal programming language.

Microsoft said that it was disappointed by the ruling.

Paul Maritz, a Microsoft group vice president, said: "We don't anticipate any disruption to any products, including Windows 98. Customers need not fear any disruption."

In a conference call last evening with reporters and industry analysts, Mr. Maritz said that the "option of not supporting Java is open to us." But most industry analysts doubt that Microsoft would walk away altogether from Java, a popular Internet programming language developed by Sun.

Sun welcomed the preliminary ruling, and Michael Morris, the company's general counsel, said that when the case was tried, Sun planned to seek unspecified monetary damages from Microsoft.

The ruling came as many industry executives had gathered at a major computer trade show in Las Vegas, Nev., known as Comdex. The early reaction to word of the ruling was generally favorable, based on the assumption that the eventual effect of the decision would be to encourage a single, industry-standard version of Java for which software developers could write programs.

"A single Java standard is what the industry needs," said Eric Schmidt, the chief executive officer of Novell Inc., a maker of software that links computers in networks. Mr. Schmidt was Sun's chief technology officer at the time Sun introduced Java in 1995 as a language designed specifically for software that runs on the Internet.

In his 31-page ruling, Judge Whyte based his preliminary injunction on the his judgment that Sun was likely to "prevail on the merits" in its suit. The dispute between Microsoft and Sun focuses on whether the 1996 contract allowing Microsoft to license Java technology -- which was gaining a strong following in the industry -- also allowed Microsoft to tailor the Java language for use with its own software.

Microsoft argued that its fine tuning merely improved the performance of Java, but Sun countered that Microsoft's real agenda was to undermine a challenge to Microsoft by co-opting it. This tactic was described in the antitrust trial last week by an executive for the Intel Corporation, who quoted a Microsoft executive as saying, "embrace, extend and extinguish."

In his ruling, Judge Whyte wrote that Sun has "demonstrated a reasonable likelihood" that the contract "does not authorize Microsoft's extension of the Java language and its corresponding modifications to the Java language compiler."

Sun, among other things, took issue with Microsoft's licensing policies for distributing software that includes Microsoft's modified version of Java. Microsoft's licensing deals, according to Judge Whyte, require its business partners to exclusively distribute Microsoft's Java-based technologies.

"The court finds that negotiating for or enforcing the above-mentioned licensing terms constitutes an unfair business practice," Judge Whyte wrote. "Microsoft does not argue that these licensing provisions bear any utility which outweighs the harm asserted by Sun."