|United States v. Microsoft Corp.|
|Court||United States Court of Appeals for the District of Columbia Circuit|
|Full case name||United States of America v. Microsoft Corporation|
|Argued||February 26–27, 2001|
|Decided||June 28, 2001|
|Citation(s)||253 F.3d 34|
|Prior history||United States v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000); 97 F. Supp. 2d 59 (D.D.C. 2000), direct appeal denied, pet. cert. denied, 530 U.S. 1301(2000).|
|Subsequent history||Microsoft Corp. v. United States, 534 U.S. 952(2001) (pet. cert. denied); 224 F. Supp. 2d 76 (D.D.C. 2002); 231 F. Supp. 2d 144 (D.D.C. 2002) (on remand), aff'd in part and rev'd in part, 373 F.3d 1199 (D.C. Cir. 2004)|
|The finding of the District Court that Microsoft violated the Antitrust Act is confirmed, the order of that court is reversed, and remanded for the drafting of a subsequent order.|
|Judge(s) sitting||Harry T. Edwards, CJ; Stephen F. Williams, Douglas H. Ginsburg, David B. Sentelle, A. Raymond Randolph, Judith W. Rogers, and David S. Tatel, JJ.|
|15 U.S.C. § 2|
United States v. Microsoft Corporation, 253 F.3d 34 (D.C. Cir. 2001)is a noted American antitrust law case in which the U.S. government accused Microsoft of illegally maintaining its monopoly position in the personal computer (PC) market primarily through the legal and technical restrictions it put on the abilities of PC manufacturers (OEMs) and users to uninstall Internet Explorer and use other programs such as Netscape and Java. At trial, the district court ruled that Microsoft's actions constituted unlawful monopolization under Section 2 of the Sherman Antitrust Act of 1890, and the U.S. Court of Appeals for the D.C. Circuit affirmed most of the district court's judgments.
The plaintiffs alleged that Microsoft had abused monopoly power on Intel-based personal computers in its handling of operating system and web browser integration. The issue central to the case was whether Microsoft was allowed to bundle its flagship Internet Explorer (IE) web browser software with its Windows operating system. Bundling them is alleged to have been responsible for Microsoft's victory in the browser wars as every Windows user had a copy of IE. It was further alleged that this restricted the market for competing web browsers (such as Netscape Navigator or Opera), since it typically took a while to download or purchase such software at a store. Underlying these disputes were questions over whether Microsoft had manipulated its application programming interfaces to favor IE over third-party web browsers, Microsoft's conduct in forming restrictive licensing agreements with original equipment manufacturers (OEMs), and Microsoft's intent in its course of conduct.
Microsoft argued that the merging of Windows and IE was the result of innovation and competition, that the two were now the same product and inextricably linked, and that consumers were receiving the benefits of IE free. Opponents countered that IE was still a separate product which did not need to be tied to Windows, since a separate version of IE was available for Mac OS. They also asserted that IE was not really free because its development and marketing costs may have inflated the price of Windows.
The case was tried before Judge Thomas Penfield Jackson in the United States District Court for the District of Columbia. The DOJ was initially represented by David Boies. Compared to the European decision against Microsoft, the DOJ case is focused less on interoperability and more on predatory strategies and market barriers to entry.
By 1984 Microsoft was one of the most successful software companies, with $55 million in 1983 sales. InfoWorld wrote:
[Microsoft] is widely recognized as the most influential company in the microcomputer-software industry. Claiming more than a million installed MS-DOS machines, founder and chairman Bill Gates has decided to certify Microsoft's jump on the rest of the industry by dominating applications, operating systems, peripherals and, most recently, book publishing. Some insiders say Microsoft is attempting to be the IBM of the software industry.
Although Gates says that he isn't trying to dominate the industry with sheer numbers, his strategy for dominance involves Microsoft's new Windows operating system ... "Our strategies and energies as a company are totally committed to Windows, in the same way that we're committed to operating-system kernels like MS-DOS and Xenix," says Gates. "We're also saying that only applications that take advantage of Windows will be competitive in the long run."
Gates claimed that Microsoft's entrance into the application market with such products as Multiplan, Word and the new Chart product was not a big-time operation.
The Federal Trade Commission began an inquiry in 1992 over whether Microsoft was abusing its monopoly on the PC operating system market. The commissioners deadlocked with a 2–2 vote in 1993 and closed the investigation, but the Department of Justice led by Janet Reno opened its own investigation on August 21 of that year, resulting in a settlement on July 15, 1994 in which Microsoft consented not to tie other Microsoft products to the sale of Windows but remained free to integrate additional features into the operating system. In the years that followed, Microsoft insisted that Internet Explorer (which, in addition to OEM versions of Windows 95, appeared in the Plus! Pack sold separately) was not a product but a feature which it was allowed to add to Windows, although the DOJ did not agree with this definition.
In its 2008 Annual Report, Microsoft stated:
Lawsuits brought by the U.S. Department of Justice, 18 states, and the District of Columbia in two separate actions were resolved through a Consent Decree that took effect in 2001 and a Final Judgment entered in 2002. These proceedings imposed various constraints on our Windows operating system businesses. These constraints include limits on certain contracting practices, mandated disclosure of certain software program interfaces and protocols, and rights for computer manufacturers to limit the visibility of certain Windows features in new PCs. We believe we are in full compliance with these rules. However, if we fail to comply with them, additional restrictions could be imposed on us that would adversely affect our business.
The suit began on May 18, 1998, with the U.S. Department of Justice and the Attorneys General of twenty U.S. states (and the District of Columbia) suing Microsoft for illegally thwarting competition in order to protect and extend its software monopoly. In October 1998, the U.S. Department of Justice also sued Microsoft for violating a 1994 consent decree by forcing computer makers to include its Internet browser as a part of the installation of Windows software. While the DOJ was represented by David Boies, the States were separately represented by New York Attorneys General Alan Kusinitz, Gail Cleary and Steve Houck.
Bill Gates was called "evasive and nonresponsive" by a source present at his videotaped deposition.He argued over the definitions of words such as "compete", "concerned", "ask", and "we"; certain portions of the proceeding would later provoke laughter from the judge, when an excerpted version was shown in court. Businessweek reported that "early rounds of his deposition show him offering obfuscatory answers and saying 'I don't recall' so many times that even the presiding judge had to chuckle. Many of the technology chief's denials and pleas of ignorance have been directly refuted by prosecutors with snippets of email Gates both sent and received." Intel Vice-President Steven McGeady, called as a witness, quoted Paul Maritz, a senior Microsoft vice president, as having stated an intention to "extinguish" and "smother" rival Netscape Communications Corporation and to "cut off Netscape's air supply" by giving away a clone of Netscape's flagship product for free.
A number of videotapes were submitted as evidence by Microsoft during the trial, including one that demonstrated that removing Internet Explorer from Microsoft Windows caused slowdowns and malfunctions in Windows. In the videotaped demonstration of what then-Microsoft vice president Jim Allchin stated to be a seamless segment filmed on one PC, the plaintiff noticed that some icons mysteriously disappear and reappear on the PC's desktop, suggesting that the effects might have been falsified.Allchin admitted that the blame for the tape problems lay with some of his staff. "They ended up filming it—grabbing the wrong screen shot", he said of the incident. Later, Allchin re-ran the demonstration and provided a new videotape, but in so doing Microsoft dropped the claim that Windows is slowed down when Internet Explorer is removed. Mark Murray, a Microsoft spokesperson, berated the government attorneys for "nitpicking on issues like video production". Microsoft submitted a second inaccurate videotape into evidence later the same month as the first. The issue in question was how easy or hard it was for America Online users to download and install Netscape Navigator onto a Windows PC. Microsoft's videotape showed the process as being quick and easy, resulting in the Netscape icon appearing on the user's desktop. The government produced its own videotape of the same process, revealing that Microsoft's videotape had conveniently removed a long and complex part of the procedure and that the Netscape icon was not placed on the desktop, requiring a user to search for it. Brad Chase, a Microsoft vice president, verified the government's tape and conceded that Microsoft's own tape was falsified.
When the judge ordered Microsoft to offer a version of Windows which did not include Internet Explorer, Microsoft responded that the company would offer manufacturers a choice: one version of Windows that was obsolete, or another that did not work properly. The judge asked, "It seemed absolutely clear to you that I entered an order that required that you distribute a product that would not work?" David Cole, a Microsoft vice president, replied, "In plain English, yes. We followed that order. It wasn't my place to consider the consequences of that."
Gates and his successor as CEO Steve Ballmer were so worried about the outcome of the case that they discussed leaving Microsoft "if they really screw the company that badly, really just split it up in a totally irrational way", Gates recalled.Microsoft vigorously defended itself in the public arena, arguing that its attempts to "innovate" were under attack by rival companies jealous of its success, and that government litigation was merely their pawn (see public choice theory). A full-page ad run in The Washington Post and The New York Times on June 2, 1999, by The Independent Institute delivered "An Open Letter to President Clinton From 240 Economists On Antitrust Protectionism." It said, in part, "Consumers did not ask for these antitrust actions – rival business firms did. Consumers of high technology have enjoyed falling prices, expanding outputs, and a breathtaking array of new products and innovations. ... Increasingly, however, some firms have sought to handicap their rivals by turning to government for protection. Many of these cases are based on speculation about some vaguely specified consumer harm in some unspecified future, and many of the proposed interventions will weaken successful U.S. firms and impede their competitiveness abroad."
Judge Thomas Penfield Jackson issued his findings of fact on November 5, 1999, which stated that Microsoft's dominance of the x86-based personal computer operating systems market constituted a monopoly, and that Microsoft had taken actions to crush threats to that monopoly, including Apple, Java, Netscape, Lotus Software, RealNetworks, Linux, and others.Judgment was split in two parts. On April 3, 2000, he issued his conclusions of law, according to which Microsoft had committed monopolization, attempted monopolization, and tying in violation of Sections 1 and 2 of the Sherman Antitrust Act. Microsoft immediately appealed the decision.
On June 7, 2000, the court ordered a breakup of Microsoft as its remedy.According to that judgment, Microsoft would have to be broken into two separate units, one to produce the operating system, and one to produce other software components.
After a notice of appeal was filed in the intermediate appellate court, the D.C. Circuit Court of Appeals, the district (trial) court certified appeal directly to the U.S. Supreme Court under 15 U.S.C. §29(b), which gives the Supreme Court jurisdiction to hear direct appeals from the district court in certain antitrust cases initiated by the federal government if "the district judge who adjudicated the case enters an order stating that immediate consideration of the appeal by the Supreme Court is of general public importance in the administration of justice." The states also filed a petition for certiorari before judgment in the Supreme Court, which requested that the Supreme Court hear their appeals from the district court's decision without proceeding first through the court of appeals. However, the Supreme Court declined to hear the federal government's appeal, remanding the case to the court of appeals, and also denied the states' petition for certiorari before judgment.
The D.C. Circuit Court of Appeals overturned Judge Jackson's rulings against Microsoft. This was partly because the appellate court had adopted a "drastically altered scope of liability" under which the remedies could be taken, and also partly due to the embargoed interviews Judge Jackson had given to the news media while he was still hearing the case, in violation of the Code of Conduct for US Judges.Judge Jackson did not attend the D.C. Circuit Court of Appeals hearing, in which the appeals court judges accused him of unethical conduct and determined he should have recused himself from the case.
Judge Jackson's response to this was that Microsoft's conduct itself was the cause of any "perceived bias"; Microsoft executives had, according to him, "proved, time and time again, to be inaccurate, misleading, evasive, and transparently false. ... Microsoft is a company with an institutional disdain for both the truth and for rules of law that lesser entities must respect. It is also a company whose senior management is not averse to offering specious testimony to support spurious defenses to claims of its wrongdoing."However, the appeals court did not overturn the findings of fact. Although the D.C. Circuit found that it was possible to examine high-tech industries with traditional antitrust analysis, the court announced a new and permissive liability rule that repudiated the Supreme Court's dominant rule of per se illegality for tie-ins, due to the court's concern for the dynamic effects that a per se rule would have on innovation. The D.C. Circuit remanded the case for consideration of a proper remedy under a more limited scope of liability. Judge Colleen Kollar-Kotelly was chosen to hear the case.
The DOJ announced on September 6, 2001 that it was no longer seeking to break up Microsoft and would instead seek a lesser antitrust penalty. Microsoft decided to draft a settlement proposal allowing PC manufacturers to adopt non-Microsoft software.
On November 2, 2001, the DOJ reached an agreement with Microsoft to settle the case. The proposed settlement required Microsoft to share its application programming interfaces with third-party companies and appoint a panel of three people who would have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance. [ citation needed ] On June 30, 2004, the U.S. appeals court unanimously approved the settlement with the Justice Department, rejecting objections that the sanctions were inadequate.[ citation needed ]However, the DOJ did not require Microsoft to change any of its code nor prevent Microsoft from tying other software with Windows in the future. On August 5, 2002, Microsoft announced that it would make some concessions towards the proposed final settlement ahead of the judge's verdict. On November 1, 2002, Judge Kollar-Kotelly released a judgment accepting most of the proposed DOJ settlement. Nine states (California, Connecticut, Iowa, Florida, Kansas, Minnesota, Utah, Virginia and Massachusetts) and the District of Columbia (which had been pursuing the case together with the DOJ) did not agree with the settlement, arguing that it did not go far enough to curb Microsoft's anti-competitive business practices.
The dissenting states regarded the settlement as merely a slap on the wrist. Industry pundit Robert X. Cringely believed a breakup was not possible, and that "now the only way Microsoft can die is by suicide."Andrew Chin, an antitrust law professor at the University of North Carolina at Chapel Hill who assisted Judge Jackson in drafting the findings of fact, wrote that the settlement gave Microsoft "a special antitrust immunity to license Windows and other 'platform software' under contractual terms that destroy freedom of competition."
Law professor Eben Moglen noted that the way Microsoft was required to disclose its APIs and protocols was useful only for “interoperating with a Windows Operating System Product”, not for implementing support of those APIs and protocols in any competing operating system.
Microsoft’s obligations under the settlement, as originally drafted, expired on November 12, 2007.However, Microsoft later "agreed to consent to a two-year extension of part of the Final Judgments" dealing with communications protocol licensing, and that if the plaintiffs later wished to extend those aspects of the settlement even as far as 2012, it would not object. The plaintiffs made clear that the extension was intended to serve only to give the relevant part of the settlement "the opportunity to succeed for the period of time it was intended to cover", rather than being due to any "pattern of willful and systematic violations".
Economist Milton Friedman believed that the antitrust case against Microsoft set a dangerous precedent that foreshadowed increasing government regulation of what was formerly an industry that was relatively free of government intrusion and that future technological progress in the industry will be impeded as a result.In the January 2007 edition of the Business & Economic Research, Jenkins and Bing argue that, contrary to Friedman's concerns, the settlement actually had little effect on Microsoft's behavior. The fines, restrictions, and monitoring imposed were not enough to prevent it from "abusing its monopolistic power and too little to prevent it from dominating the software and operating system industry." They conclude that, remaining dominant and monopolistic after the trial, it had continued to stifle competitors and innovative technology.
Jean-Louis Gassée, CEO of Be Inc., claimed Microsoft was not really making any money from Internet Explorer, and its incorporation with the operating system was due to consumer expectation to have a browser packaged with the operating system. For example, BeOS comes packaged with its web browser, NetPositive. Instead, he argued, Microsoft's true anticompetitive clout was in the rebates it offered to OEMs preventing other operating systems from getting a foothold in the market.
Chris Butts, writing in the Northwestern Journal of Technology and Intellectual Property, highlighted that the United States government recognized the benefits of including a web browser with an operating system. At the appellate level, the U.S. government dropped the claim of tying given that—as laid out in Section 1 of the Sherman Act—it would have had to prove that more harm than good resulted from the instance of tying carried out by Microsoft.
Internet Explorer is a discontinued series of graphical web browsers developed by Microsoft and included in the Microsoft Windows line of operating systems, starting in 1995. It was first released as part of the add-on package Plus! for Windows 95 that year. Later versions were available as free downloads, or in-service packs, and included in the original equipment manufacturer (OEM) service releases of Windows 95 and later versions of Windows. New feature development for the browser was discontinued in 2016 in favor of new browser Microsoft Edge. Since Internet Explorer is a Windows component and is included in long-term lifecycle versions of Windows such as Windows Server 2019, it will continue to receive security updates until at least 2029. Microsoft 365 ended support for Internet Explorer on August 17, 2021, and Microsoft Teams ended support for IE on November 30, 2020. Internet Explorer will be discontinued on June 15, 2022, after which, the alternative will be Microsoft Edge with IE mode for legacy sites.
Netscape Navigator was a proprietary web browser, and the original browser of the Netscape line, from versions 1 to 4.08, and 9.x. It was the flagship product of the Netscape Communications Corp and was the dominant web browser in terms of usage share in the 1990s, but by around 2003 its use had almost disappeared. This was partly because the Netscape Corporation did not sustain Netscape Navigator's technical innovation in the late 1990s.
Tying is the practice of selling one product or service as a mandatory addition to the purchase of a different product or service. In legal terms, a tying sale makes the sale of one good to the de facto customer conditional on the purchase of a second distinctive good. Tying is often illegal when the products are not naturally related. It is related to but distinct from freebie marketing, a common method of giving away one item to ensure a continual flow of sales of another related item.
A browser war is competition for dominance in the usage share of web browsers. The "First Browser War" during the late 1990s pitted Microsoft's Internet Explorer against Netscape's Navigator. Browser wars continued with the decline of Internet Explorer's market share and the popularity of other browsers including Firefox, Google Chrome, Safari, Microsoft Edge and Opera.
Thomas Penfield Jackson was an American jurist who served as a United States District federal judge of the United States District Court for the District of Columbia.
The idea of the removal of Internet Explorer (IE) from Windows was proposed during the United States v. Microsoft Corp. case. Later, security advocates took up the idea as a way to protect Windows systems from attacks via IE vulnerabilities.
Netscape 7 is a discontinued Internet suite developed by Netscape Communications Corporation, and was the seventh major release of the Netscape series of browsers. It is the successor of Netscape 6, and was developed in-house by AOL. It was released on August 29, 2002 and is based on Mozilla Application Suite 1.0.
Microsoft has developed eleven versions of Internet Explorer for Windows from 1995 to 2013. Microsoft has also developed Internet Explorer for Mac, Internet Explorer for UNIX and Internet Explorer Mobile respectively for Apple Macintosh, Unix and mobile devices. The first two are discontinued but the latter runs on Windows CE, Windows Mobile and Windows Phone.
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Steven McGeady is a former Intel executive best known as a witness in the Microsoft antitrust trial. His notes and testimony contained colorful quotes by Microsoft executives threatening to "cut off Netscape's air supply" and Bill Gates' guess that "this antitrust thing will blow over". Attorney David Boies said that McGeady's testimony showed him to be "an extremely conscientious, capable and honest witness", while Microsoft portrayed him as someone with an "axe to grind". McGeady left Intel in 2000, but later again gained notoriety for defending his former employee Mike Hawash after his arrest on federal terrorism charges. From its founding in 2002 until its sale in November 2013, he was Chairman of Portland-based healthcare technology firm ShiftWise. He is a member of the Reed College Board of Trustees, the Portland Art Museum Board of Trustees, and the PNCA Board of Governors, and lives in Portland, Oregon.
Microsoft is a multinational computer technology corporation. Microsoft was founded on April 4, 1975, by Bill Gates and Paul Allen in Albuquerque, New Mexico. Its current best-selling products are the Microsoft Windows operating system; Microsoft Office, a suite of productivity software; Xbox, a line of entertainment of games, music, and video; Bing, a line of search engines; and Microsoft Azure, a cloud services platform.
Microsoft Corp. v. Commission (2007) T-201/04 is a case brought by the European Commission of the European Union (EU) against Microsoft for abuse of its dominant position in the market. It started as a complaint from Sun Microsystems over Microsoft's licensing practices in 1993, and eventually resulted in the EU ordering Microsoft to divulge certain information about its server products and release a version of Microsoft Windows without Windows Media Player. The European Commission especially focused on the interoperability issue.
Randall Boe is the former General Counsel for AOL and has been involved in many notable cases regarding internet law. He was named the commissioner of the Arena Football League in March 2018. He was born in Ohio and grew up in Iowa City, Iowa. He attended the University of Wisconsin–Madison and graduated in 1983 with majors in political science and economics. He graduated from the University of Pennsylvania Law School in 1987. After graduation, he went to work at Arent, Fox, Kintner, Plotkin & Kahn in Washington, D.C. While at Arent Fox, Boe specialized in complex litigation and tried a wide variety of matters, including antitrust cases, white collar criminal matters and product liability matters.
Alcatel-Lucent v. Microsoft Corp., also known as Lucent Technologies Inc. v. Gateway Inc., was a long-running patent infringement case between Alcatel-Lucent and Microsoft litigated in the United States District Court for the Southern District of California and appealed multiple times to the United States Court of Appeals for the Federal Circuit. Alcatel-Lucent was awarded $1.53 billion in a final verdict in August 2007 in the U.S. District Court for the Southern District of California in San Diego. The damages award was reversed on appeal in September 2009, and the case was returned for a separate trial on the amount of damages.
A web browser is a software application for retrieving, presenting and traversing information resources on the World Wide Web. It further provides for the capture or input of information which may be returned to the presenting system, then stored or processed as necessary. The method of accessing a particular page or content is achieved by entering its address, known as a Uniform Resource Identifier or URI. This may be a web page, image, video, or other piece of content. Hyperlinks present in resources enable users easily to navigate their browsers to related resources. A web browser can also be defined as an application software or program designed to enable users to access, retrieve and view documents and other resources on the Internet.
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