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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
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______________________________
UNITED STATES OF AMERICA,
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PLAINTIFF,
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VS.
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MICROSOFT CORPORATION
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DEFENDANT
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______________________________:
STATE OF NEW YORK, ET AL.
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PLAINTIFFS
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VS.
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MICROSOFT CORPORATION,
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DEFENDANT
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_______________________________
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C. A. NO. 98-1233
WASHINGTON, D. C.
MAY 24, 2000
(A. M. SESSION)
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C. A. NO. 98-1232
TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE THOMAS P. JACKSON
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COURT REPORTER:
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PHYLLIS MERANA
6816 U. S. COURTHOUSE
3RD & CONSTITUTION AVE., N.W.
WASHINGTON, D. C.
202-273-0889
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FOR THE UNITED STATES:
PHILLIP MALONE, ESQ.
DAVID BOIES, ESQ.
U. S. DEPT. OF JUSTICE
ANTITRUST DIVISION
SAN FRANCISCO, CA.
FOR THE DEFENDANT:
JOHN WARDEN, ESQ.
RICHARD J. UROWSKY, ESQ.
STEVEN L. HOLLEY, ESQ.
RICHARD PEPPERMAN, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK
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FOR THE STATE OF NEW YORK, ET AL: KEVIN J. O'CONNOR, ESQ.
ASSISTANT ATTORNEY
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P. O. BOX 7857
123 WEST WASHINGTON AVE
MADISON, WI.
53703
GENERAL
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I N D E X
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ARGUMENT BY MR. O'CONNOR
PAGE 5
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ARGUMENT BY MR. BOIES
PAGE 17
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ARGUMENT BY MR. WARDEN
PAGE 37
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P-R-O-C-E-E-D-I-N-G-S
THE DEPUTY CLERK:
CIVIL ACTIONS 98-1232 AND
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98-1233, UNITED STATES OF AMERICA VERSUS MICROSOFT
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CORPORATION, AND THE STATE OF NEW YORK, ET AL. VERSUS
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MICROSOFT CORPORATION.
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PHILLIP MALONE, STEPHEN HOUCK AND DAVID BOIES FOR
THE PLAINTIFF.
JOHN WARDEN, STEVEN HOLLEY, RICHARD UROWSKY AND
WILLIAM NEUKOM FOR THE DEFENDANT.
MR. O'CONNOR:
ONE CORRECTION.
THAT'S MR. KEVIN
O'CONNOR FOR THE PLAINTIFF, INSTEAD OF MR. HOUCK.
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THE COURT:
MR. WARDEN.
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MR. WARDEN:
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THE PLAINTIFFS WANT TO GO FIRST TODAY ON THE
YOUR HONOR, GOOD MORNING AGAIN.
BASIS
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THAT ITS THEIR PROPOSED REMEDY AND THEY HAVE THE BURDEN,
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WHICH IS FINE WITH ME.
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BEFORE WE BEGIN THAT, AS THE COURT KNOWS AND AS THE
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PLAINTIFFS KNOW, WE BELIEVE THERE ARE TWO MATTERS ON THE
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AGENDA BEFORE THE COURT TODAY, AND ONLY TWO MATTERS.
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THEM IS NOT THE ENTRY OF THE PLAINTIFF'S DECREE, AND THAT
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THIS ISN'T THE OCCASION FOR OPENING OR CLOSING ARGUMENTS.
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THE TWO MATTERS WE BELIEVE ARE BEFORE THE COURT
BUT I WANTED TO STATE FOR THE
RECORD
ONE
OF
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ARE OUR MOTION TO STRIKE THE DEMAND FOR BREAKUP AND THE
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COURT'S CONSIDERATION OF A SCHEDULE FOR FURTHER PROCEEDINGS
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AS MAY BE APPROPRIATE.
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THANK YOU.
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THE COURT:
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ARGUMENT ON BEHALF OF THE STATES
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ALL RIGHT.
MR. O'CONNOR:
GOOD MORNING, YOUR HONOR.
IT'S
GOOD TO BE HERE.
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WE THOUGHT IT WOULD BE HELPFUL, YOUR HONOR, IF
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MR. BOIES AND I DIVIDED UP THE TIME, AS WE HAVE IN THE
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I INTEND TO TALK BRIEFLY ABOUT THE LEGAL STANDARDS FOR
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RELIEF AND APPLY IT TO THE TWO PROPOSALS BEFORE THE COURT.
PAST.
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MR. BOIES WILL THEN DESCRIBE IN SOMEWHAT MORE DETAIL HOW
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VARIOUS OF THE REMEDY PROPOSALS ARE GROUNDED IN THE FACTS
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THIS CASE AND ACHIEVE THE PROPER PURPOSES UNDER THE
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ANTITRUST LAW FOR REMEDIES IN THIS CASE.
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THAT DISCUSSION, YOUR HONOR, WILL FLOW A DISCUSSION OF THE
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ISSUES THAT MR. WARDEN HAS JUST RAISED, AND I THINK WE CAN
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TALK ABOUT THOSE AT SOME POINT IN THE DISCUSSION TODAY.
OF
AND I THINK OUT
OF
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THE COURT:
ALL RIGHT.
I WANT TO RESOLVE ANY
UNCERTAINTY ON MR. WARDEN'S PART AT THE OUTSET, HOWEVER.
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I INTEND TO PROCEED TO THE MERITS OF THE REMEDY
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TODAY.
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TODAY.
I INTEND TO PROCEED TO THE MERITS OF THE REMEDY
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MR. O'CONNOR:
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FIRST, I WILL DISCUSS THE BASIC STANDARDS FOR
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THANK YOU, YOUR HONOR.
RELIEF IN A CASE LIKE THIS.
THEN I WILL DESCRIBE HOW
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MICROSOFT'S PROPOSED RELIEF DOESN'T EVEN COME CLOSE TO
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SATISFYING THE MOST BASIC ASPECTS OF THOSE STANDARDS.
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THEN, FINALLY, I WILL DISCUSS HOW THE GOVERNMENT'S PROPOSAL
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DOES SATISFY THOSE STANDARDS IN A MEASURED, EFFECTIVE
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MANNER.
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AND
LET ME BRIEFLY DISCUSS THE STANDARDS FOR RELIEF.
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AN ANTITRUST DECREE IN A CASE LIKE THIS MUST DO THREE
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THINGS, YOUR HONOR.
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RECURRENCE OF THE VIOLATION AND OTHERS LIKE IT, AND RESTORE
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COMPETITION.
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IT MUST END THE VIOLATION, PREVENT A
THE SUPREME COURT HAS STATED THIS IN A NUMBER OF
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CASES ALONG THE WAY IN THE LAST HUNDRED YEARS.
EXAMPLES
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INCLUDE THE NATIONAL SOCIETY OF PROFESSIONAL ENGINEERS
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WHICH I PUT UP ON THE SCREEN THERE, WHERE THE COURT STATED
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CLEARLY THAT THE GOALS OF RELIEF ARE "TO AVOID A RECURRENCE
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OF THE VIOLATION AND TO ELIMINATE ITS CONSEQUENCES."
CASE,
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SIMILARLY, IN THE FORD MOTOR COMPANY VERSUS
UNITED
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STATES CASE, THE COURT AGAIN STATED IN, I BELIEVE, SLIGHTLY
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DIFFERENT LANGUAGE, BUT TO SAME EFFECT, "THE RELIEF IN AN
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ANTITRUST CASE MUST BE EFFECTIVE TO REDRESS THE VIOLATIONS
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AND TO RESTORE COMPETITION."
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FINALLY, YOUR HONOR -- INDEED, YOUR HONOR, WHERE
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THE REMEDY IMPOSED BY A TRIAL COURT DOES NOT DO THESE
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THINGS, THE SUPREME COURT HAS ORDERED -- TYPICALLY ORDERED
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THE IMPOSITION OF MORE EXTENSIVE RELIEF, AS IT DID IN THE
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THE
UNITED STATES V. GLAXO GROUP CASE WHICH, AGAIN, INCLUDED
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SAME LANGUAGE OR SIMILAR LANGUAGE CONCERNING THE STANDARD
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FOR RELIEF IN CASES LIKE THIS.
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ANTITRUST CASE, SO FAR AS PRACTICABLE, IS TO CURE THE ILL
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EFFECTS OF THE ILLEGAL CONDUCT AND ASSURE THE PUBLIC
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FROM ITS CONTINUANCE."
"THE PURPOSE OF RELIEF IN
AN
FREEDOM
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FINALLY, YOUR HONOR, IN THIS BRIEF EXPOSE OF
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REMEDIES LAW, EFFECTIVE REMEDIES PLAINLY ARE NOT LIMITED TO
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BANNING THE PARTICULAR PRACTICE OR USE OF A PARTICULAR TOOL
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IN THE MONOPOLIST'S KIT BAG OF ANTICOMPETITIVE PRACTICES.
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AS THE COURT HAS REPEATEDLY STATED IN CASES LIKE ZENITH, IN
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GYPSUM AND BAUSCH & LOMB, "A FEDERAL COURT HAS BROAD POWER
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TO RESTRAIN ACTS WHICH ARE OF THE SAME TYPE OR CLASS AS
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UNLAWFUL ACTS WHICH THE COURT HAS FOUND TO HAVE BEEN
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COMMITTED OR WHOSE COMMISSION IN THE FUTURE, UNLESS
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ENJOINED, MAY FAIRLY BE ANTICIPATED FROM DEFENDANT'S
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IN THE PAST."
CONDUCT
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THIS IS ALL BRIEFED FAIRLY EXTENSIVELY IN OUR
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FILINGS, YOUR HONOR.
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VIOLATION, PREVENT A RECURRENCE, AND RESTORE COMPETITION.
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THE THREE ELEMENTS, AGAIN:
END THE
MICROSOFT'S REMEDY IS DEFICIENT AT EVEN THE MOST
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BASIC LEVEL.
IT DOESN'T EVEN END THE VIOLATIONS -- THE
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SPECIFIC VIOLATIONS AT ISSUE IN THIS CASE.
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REMEDY SURELY DOESN'T PREVENT A RECURRENCE OF THE
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ANTICOMPETITIVE CONDUCT OR OTHERS LIKE IT.
VERY
MICROSOFT'S
AND IT MAKES NO
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ATTEMPT TO REDRESS OR RESTORE COMPETITION.
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TYPICALLY SUCH LIMITED SIN-NO-MORE PROVISIONS, AS
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MICROSOFT HAS PROPOSED, ARE USED WHERE THE DEFENDANTS'
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CONDUCT WAS NIPPED IN THE BUD OR THERE WAS LITTLE OR NO
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DAMAGE TO THE COMPETITIVE PROCESS FROM A PER SE VIOLATION
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SOMETHING ALONG THOSE LINES.
OR
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BUT EVEN AT THIS MINIMAL LEVEL, IF THAT'S ALL
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MICROSOFT HAD DONE HERE, THEIR PROPOSED REMEDY FAILS THE
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TEST.
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CLOSELY AT MICROSOFT'S PROPOSED REMEDY, IT'S APPARENT THAT
IN FACT, WHEN YOU LOOK CLOSELY -- WHEN ONE LOOKS
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IT DOESN'T EVEN DEAL WITH THE MOST BASIC ISSUES IN THE
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IT DOESN'T DEAL WITH THINGS LIKE CONTRACTUAL TYING,
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TECHNOLOGICAL TYING, MICROSOFT'S REPEATED EFFORTS TO CUT A
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DEAL WITH NETSCAPE TO DIVIDE MARKETS OR TO NOT COMPETE WITH
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OTHERS LIKE IBM AND APPLE AND OTHERS.
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IGNORED IN MICROSOFT'S PROPOSED REMEDY.
CASE.
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VIOLATION
THESE ISSUES ARE ALL
AND EVEN WHERE THEY ADDRESS A PARTICULAR
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FOUND BY THE COURT, THEY DO SO IN A MANNER THAT WILL NOT
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THE VIOLATION.
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LICENSING AGREEMENTS WOULD NOT PROHIBIT MICROSOFT FROM
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PUNISHING DISFAVORED OEM'S BY WITHHOLDING NEEDED TECHNICAL
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INFORMATION OR IMPOSING PUNITIVE PRICE INCREASES.
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MICROSOFT'S OEM PROVISIONS ARE SIEVE-LIKE AND WILL DO
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TO END MICROSOFT'S PREDATORY BEHAVIOR IN THE OEM CHANNEL.
END
FOR EXAMPLE, MICROSOFT'S PROPOSAL ON OEM
LITTLE
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I COULD GO ON, BUT I THINK THE POINT TO BE MADE
HERE IS THE SAME POINT THAT BILL GATES MADE TO INTEL
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EXECUTIVES AFTER THE 1995 CONSENT JUDGMENT WAS ENTERED.
HE
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INDICATED THAT THIS ANTITRUST THING WILL BLOW OVER, AND WE
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HAVEN'T CHANGED OUR BUSINESS PRACTICES AT ALL, UNDERSCORING
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"AT ALL."
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CHANGE OUR E-MAIL RETENTION POLICIES.
AND THEN HE WENT ON TO SAY, EXCEPT THAT IT MAY
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I SHOULD NOTE, YOUR HONOR, THAT THE GOVERNMENT'S
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PROPOSAL DOES DEAL WITH E-MAIL RETENTION POLICIES, PERHAPS
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NOT IN THE WAY MR. GATES CONTEMPLATED.
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IN SHORT, BECAUSE MICROSOFT'S REMEDY IS SO FULL
OF
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TRAP DOORS AND ESCAPE HATCHES, IT CANNOT BE CONSIDERED A
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SERIOUS PROPOSAL HERE.
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STANDARDS FOR RELIEF, EVEN THE MINIMAL "END THE VIOLATION"
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STANDARD.
IT DOESN'T COME CLOSE TO MEETING
THE
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IT'S NOT AN OPTION.
THE GOVERNMENT PROPOSAL, ON THE OTHER HAND, YOUR
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HONOR, MEETS ALL THE STANDARDS FOR RELIEF.
NOT ONLY DOES
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END THE VIOLATION, IT WILL PREVENT RECURRENCES OF THE
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VIOLATION, IN WHATEVER FORM THEY TAKE, AND RESTORE
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CONDITIONS CONDUCIVE TO COMPETITION.
IT
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AS I'VE DISCUSSED, THE CONSISTENT THEME IN THE
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CASE LAW ON ANTITRUST REMEDIES IS THAT ANTITRUST REMEDIES
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MUST EFFECTIVELY RESTORE COMPETITION IN ADDITION TO ENDING
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THE VIOLATION AND PREVENTING A RECURRENCE.
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THE PROHIBITIONS OF CERTAIN PRACTICES ARE NOT SUFFICIENT TO
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ACHIEVE THAT GOAL, THE REMEDY MUST GO FURTHER.
WHERE, AS HERE,
AND, AS
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GOVERNMENT
REQUIRED BY THE CASE LAW, THE MANNER IN WHICH THE
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PROPOSES TO RESTORE COMPETITION ELIMINATED BY MICROSOFT'S
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CONDUCT IS NARROWLY TAILORED TO MEET -- AS THE SUPREME
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SAID IN THE FORD MOTOR COMPANY CASE WHICH I CITED EARLIER,
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TO MEET, QUOTE, "THE SPECIAL NEEDS OF THE INDIVIDUAL CASE,"
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END QUOTE.
COURT
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THE SPECIAL NEEDS IN THIS CASE, YOUR HONOR, ARE
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FOR A REMEDY THAT WILL REDUCE THE ENTRY BARRIERS THAT
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MICROSOFT'S ILLEGAL CONDUCT ERECTED AND DEFENDED, AND MAKE
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IT LESS LIKELY THAT MICROSOFT WILL HAVE THE INCENTIVE OR
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ABILITY TO INCREASE OR ABUSE THIS BARRIER IN THE FUTURE.
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THE REORGANIZATION PART OF THE GOVERNMENT'S
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PROPOSAL IS THE CORE OF THE GOVERNMENT'S PROPOSAL FOR AT
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LEAST FIVE RELATED REASONS.
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FIRST, A STRUCTURAL REMEDY IS MORE CONSISTENT
WITH
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THE EMPHASIS ON FREE MARKETS THAT UNDERLIES THE ANTITRUST
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LAWS.
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COURT IN THE DUPONT CASE HELD THAT, QUOTE, "DIVESTITURE IS
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THE MOST IMPORTANT OF ANTITRUST REMEDIES.
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TO ADMINISTER AND SURE."
SIMPLY PUT, THERE IS GOOD REASON WHY THE SUPREME
IT'S SIMPLE,
EASY
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END QUOTE.
IT'S MORE EFFECTIVE TO PLACE ASSETS IN THE HANDS
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OF MANAGERS WHO HAVE INCENTIVES TO COMPETE RATHER THAN
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RELYING SOLELY ON JUDICIAL REGULATION OF THEIR CONDUCT.
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EXPERIENCE OF THIS COURT IN THE CONSENT DECREE ENFORCEMENT
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MATTER IN '97 AND '98 OUGHT TO BRING THIS POINT HOME
THE
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SQUARELY.
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RELYING ON MARKET FORCES MEANS THAT THE RELIEF
CAN
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BE LESS INTRUSIVE AND YET MEET ALL THREE PRONGS OF THE
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REQUIREMENTS FOR RELIEF:
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RECURRENCE; AND RESTORING COMPETITION.
ENDING THE VIOLATION; PREVENTING
A
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SECONDLY, THE GOVERNMENT'S REORGANIZATION
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WILL SUBSTANTIALLY INCREASE THE LIKELIHOOD THAT THE
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APPLICATIONS BARRIER TO ENTRY WILL BE LOWERED AND
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COMPETITION IN THE P.C. OPERATING SYSTEM MARKET WILL HAVE
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OPPORTUNITY TO EMERGE.
PROPOSAL
AN
IT WILL DO THIS BY CREATING AN
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APPLICATIONS COMPANY, AN APPS CO, THAT WILL HAVE INCENTIVES
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TO INNOVATE AND COMPETE VIGOROUSLY, FREE FROM ITS CURRENT
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CORPORATE MANDATE TO PROTECT THE WINDOWS FRANCHISE.
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IT WILL DO THIS IN AT LEAST THREE DISTINCT WAYS.
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FIRST, AN INDEPENDENT APPS CO WILL HAVE MARKET-BASED
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INCENTIVES TO SEEK OUT NEW PLATFORMS WITHOUT THE NEED TO
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PROTECT THE OS MONOPOLY, WHETHER THROUGH INNOVATION ON ITS
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OWN OR THROUGH PARTNERING WITH OTHERS.
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SECOND, AN INDEPENDENT --
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THE COURT:
YOU SAY THAT, BUT AT LEAST ONE AMICUS
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CURIAE HAS MADE THE POINT THAT THE EFFECT OF A BISECTION OF
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THIS ENTERPRISE WILL, IN EFFECT, SIMPLY CREATE TWO SEPARATE
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MONOPOLIES WHO MAY HAVE NO INCENTIVE TO INTERFERE WITH EACH
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OTHER'S PROFITABILITY.
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MR. O'CONNOR:
YOUR HONOR, IT'S CORRECT THAT THE
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OR
PROPOSAL BEFORE THE COURT WOULD NOT UNDERMINE THE WINDOWS
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THE OFFICE STANDARD THAT'S OUT THERE OR THE MARKET POWER
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MICROSOFT --
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THE COURT:
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MR. O'CONNOR:
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BOTH OF WHICH ARE DOMINANT.
BOTH OF WHICH ARE DOMINANT, YOUR
HONOR, BUT THE --
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THE COURT:
AND IMMINENTLY PROFITABLE.
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MR. O'CONNOR:
THAT'S EXACTLY RIGHT, YOUR HONOR.
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BUT THAT'S WHAT MAKES THE APPLICATIONS COMPANY A POWERFUL
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POTENTIAL COMPETITOR OF THE OPERATING SYSTEM COMPANY.
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HAS A --
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THE COURT:
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MR. O'CONNOR:
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THE COURT:
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INSPIRE COMPETITION.
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IT
YOU TELL ME WHY THEY WOULD COMPETE.
PARDON?
TELL ME WHY THEY WOULD EFFECTIVELY
MR. O'CONNOR:
YOUR HONOR, RIGHT NOW MICROSOFT --
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IF THE APPLICATIONS COMPANY WERE A SEPARATE COMPANY, IT
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WOULD HAVE, IN THEORY, AN INCENTIVE TO PORT OFFICE TO
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LINUX -- THIS IS A GOOD EXAMPLE -- OR PORT OFFICE TO OTHER
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OPERATING SYSTEMS.
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VIEW, BECAUSE IT IS ATTEMPTING TO PROTECT THE WINDOWS
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OPERATING SYSTEM MONOPOLY.
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COMPANY COULD USE THE OFFICE PLATFORM IN THAT WAY.
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IT DOESN'T DO THAT BECAUSE -- IN OUR
A FREE-STANDING APPLICATIONS
AND A NUMBER OF OTHER INTERESTING ASPECTS TO THIS
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WHERE THE APPLICATIONS COMPANY COULD BE EXPECTED TO, FOR
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EXAMPLE, UPGRADE THE INTERNET EXPLORER BROWSER AND OFFER
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THAT AS A POTENTIAL ALTERNATIVE PLATFORM TO THE WINDOWS
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OPERATING SYSTEM.
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IN WHICH THE APPLICATIONS COMPANY COULD DO THIS.
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THERE IS A NUMBER OF VERY CREATIVE WAYS
THE STRONGEST ARGUMENT IN FAVOR OF IT IS THAT --
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THE STRONGEST ARGUMENT IN FAVOR OF THAT IS THAT THE
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APPLICATIONS COMPANY -- WE DON'T KNOW EXACTLY WHAT THEY ARE
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GOING TO DO, AND THAT'S WHY WE HAVE THE REORGANIZATION,
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BECAUSE THEY WILL HAVE AN INCENTIVE TO DO IT.
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THE INCENTIVE.
IT CREATES
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I KNOW MR. BOIES IS PREPARED TO DEAL WITH THIS
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FURTHER WHEN HE GETS UP HERE, SO I WILL LEAVE THAT UNTIL
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THEN.
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THE COURT:
OKAY.
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MR. O'CONNOR:
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THE SECOND REASON.
THANK YOU, YOUR HONOR.
AN INDEPENDENT APPS COMPANY
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WILL HAVE AN INCENTIVE TO PROMOTE COMPETITION IN THE OS
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MARKET GENERALLY SO AS NOT TO BE AT THE MERCY OF THE OS
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MONOPOLY, SORT OF LIKE THE DEFENSE DEPARTMENT HAS AN
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INCENTIVE TO GO OUT AND NOT GET LOCKED INTO A SINGLE
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SUPPLIER FOR MILITARY HARDWARE.
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WILL HAVE THAT KIND OF INCENTIVE.
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APPLICATIONS COMPANY WILL HAVE AN INCENTIVE TO DEVELOP THE
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CROSS-PLATFORM POTENTIAL OF OFFICE, AS I'VE MENTIONED.
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THE APPLICATIONS COMPANY
AND, FURTHERMORE, THE
CREATING SEPARATE AND INDEPENDENT APPS AND OPS
COMPANIES WILL END THE VIOLATION, PREVENT A RECURRENCE AND
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RESTORE COMPETITION, IN OUR VIEW.
IT WILL DO SO, YOUR
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HONOR, IN A WAY THAT, FITTINGLY, CREATES A MIDDLEWARE
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FOR THE WINDOWS OPERATING SYSTEM.
THREAT
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THE COURT:
ALL RIGHT.
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MR. O'CONNOR:
A THIRD REASON THAT THE
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REORGANIZATION FILLS THE SPECIAL NEEDS IN THIS CASE IS THAT
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STRUCTURAL RELIEF IS MORE LIKELY THAN CONDUCT RELIEF,
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STANDING ALONE, TO CREATE CONDITIONS THAT WILL ALLOW THE
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NEXT THREAT TO MICROSOFT'S OPERATING SYSTEM DOMINANCE AN
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OPPORTUNITY TO COMPETE ON THE MERITS.
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NEITHER NETSCAPE NOR JAVA ARE POTENTIALLY A
THREAT
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ANYMORE.
INTEL'S PLATFORM SOFTWARE EFFORTS HAVE ENDED.
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IT'S NOT CERTAIN WHERE THE FUTURE THREAT IS GOING TO COME
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FROM.
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INCENTIVE AND SAME ABILITIES TO USE ITS ARRAY OF
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ANTICOMPETITIVE TECHNIQUES AGAINST THESE INCIPIENT THREATS,
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IF THEY THREATEN THEIR OPERATING SYSTEM MONOPOLY, WHETHER
WITHOUT A REORGANIZATION, MICROSOFT HAS THE SAME
OR
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NOT IT'S AT THE EXPENSE OF CONSUMER WELFARE OR
TECHNOLOGICAL
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EFFICIENCY.
CONDUCT RELIEF, STANDING ALONE, WOULD REQUIRE US
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TO ANTICIPATE EACH OF THESE TECHNIQUES WITH PRECISION --
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WITH SOME PRECISION.
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HONOR, IS THAT IT CHANGES MICROSOFT'S INCENTIVES IN WAYS
THE BEAUTY OF THE REORGANIZATION,
YOUR
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LIKELY TO PROMOTE INNOVATION AND COMPETITION, MAKING THESE
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PREDICTIONS SIGNIFICANTLY LESS ESSENTIAL TO THE REMEDY
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PROCESS.
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FOURTH, THE WHOLE PURPOSE AND EFFECT OF THE
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PROPOSED RELIEF IS TO PROTECT AND RESTORE COMPETITION, NOT
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TO PUNISH MICROSOFT.
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"DISSOLUTION IS NOT A PENALTY; IT'S A REMEDY."
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IT'S A WAY TO RESTORE COMPETITIVE CONDITIONS.
TO QUOTE JUDGE HAND IN THE ALCOA
CASE,
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IN FACT,
THE RELIEF IS DESIGNED TO PROMOTE INNOVATION AND
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PROTECT CONSUMERS GOING FORWARD TO THE MAXIMUM EXTENT
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FEASIBLE.
AS A COROLLARY TO THIS POINT, IT BEARS EMPHASIS
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THAT THE GOVERNMENT'S PROPOSAL UNDERSCORES THE IMPORTANT,
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INDEED CRUCIAL, ROLE THAT THE GOVERNMENT EXPECTS THE
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CONSTITUENT PARTS OF MICROSOFT TO PLAY IN THIS INDUSTRY IN
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THE FUTURE.
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IN PARTICULAR, WE EXPECT THAT THE MICROSOFT
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APPLICATIONS COMPANY, UNHITCHED FROM THE INCENTIVES TO
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PROTECT THE OS MONOPOLY, WILL BECOME AN EVEN GREATER ENGINE
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OF INNOVATION AND GROWTH.
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AND, ALSO, YOUR HONOR, AS OUR INITIAL BRIEF
19
INDICATED ON REMEDIES, THE STATES DECIDED NOT TO PRESS, IN
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THIS PROCEEDING, THEIR RIGHT UNDER THEIR RESPECTIVE STATE
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LAWS TO OBTAIN MONETARY CIVIL PENALTIES, SUBSTANTIAL
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PENALTIES, FOR MICROSOFT'S EGREGIOUS CONDUCT.
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DISCUSSION, WE DECIDED COLLECTIVELY THAT IT WAS MORE
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IMPORTANT TO FOCUS ON THE PRO-COMPETITIVE RELIEF WE
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PROPOSED.
AFTER MUCH
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AND, FINALLY, YOUR HONOR, DIVESTITURE -- MY FINAL
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POINT, YOUR HONOR, IS THAT DIVESTITURE HAS LONG BEEN A PART
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OF SECTION TWO JURISPRUDENCE, GOING BACK TO THE STANDARD
4
AND AMERICAN TOBACCO CASES.
OIL
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MICROSOFT, RATHER THAN FAITHFULLY RECITING THIS
6
CASE LAW, ATTEMPTS TO DRAW PRECISELY THE WRONG LESSONS FROM
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IT.
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ASPECT OF THE AT&T CASE WHEN IT NOTES THE OBVIOUS -- BUT
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SIGNIFICANT POINT -- THAT THE DIVESTITURE WAS THE RESULT OF
FOR EXAMPLE, MICROSOFT FOCUSES ON PRECISELY THE WRONG
NOT
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A CONSENT JUDGMENT.
PUTTING ASIDE THE FACT THAT AT&T
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TO THE REORGANIZATION ONLY AFTER JUDGE GREENE'S ADVERSE
12
LEGAL RULINGS, THE MORE IMPORTANT POINT IS THAT THIS
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REORGANIZATION OF AT&T'S ASSETS WAS HIGHLY EFFECTIVE IN
14
ALLOWING COMPETITION IN THE LONG DISTANCE BUSINESS TO
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FLOURISH AND PROMOTING AN EXPLOSION OF INNOVATION IN MANY,
16
MANY AREAS OF TELEPHONY.
AGREED
17
NOTE ALSO THAT THE COURT IN AT&T WAS ABLE TO
18
RESOLVE MANY COMPLEX ISSUES OF DIVIDING FUNCTIONS AND
19
ADDRESSING JOINT INTELLECTUAL PROPERTY IN A PRACTICAL, FAIR
20
AND PROCOMPETITIVE MANNER, A POINT OVERLOOKED BY MICROSOFT
21
IN ITS BRIEFING.
22
IN CONCLUSION, YOUR HONOR, LET ME UNDERSCORE THAT
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THE GOVERNMENT PROPOSAL HAS THE UNANIMOUS SUPPORT OF ALL OF
24
THE PLAINTIFFS ON THE CONDUCT SIDE AND NEAR UNANIMOUS
25
SUPPORT FOR THE REORGANIZATION COMPONENT.
BOTH THE STATES
17
1
AND D.O.J. HAVE UNDERSTOOD FROM THE BEGINNING OF THIS CASE
2
THE IMPORTANCE OF OBTAINING AN APPROPRIATE REMEDY.
3
THE DIVERSITY OF REMEDIES THAT HAVE BEEN CONSIDERED OVER
4
PAST TWO YEARS, AND THE RANGE OF POLICY PERSPECTIVES
5
TO BEAR ON THIS ISSUE, IT IS SIGNIFICANT THAT WE WERE ABLE
6
TO CONVERGE ON A COMMON PROPOSAL.
GIVEN
THE
BROUGHT
7
THE COURT:
8
MR. O'CONNOR:
9
THE COURT:
10
11
FOR WHICH I AM GRATEFUL.
PARDON?
FOR WHICH I AM GRATEFUL.
MR. O'CONNOR:
THANK YOU, YOUR HONOR.
WE ALL ARE
GRATEFUL, I THINK, YOUR HONOR.
12
THE FACT THAT THE CHIEF LAW ENFORCEMENT OFFICERS
13
OF A WIDE RANGE OF STATES AND THE UNITED STATES DEPARTMENT
14
OF JUSTICE HAVE REACHED CONSENSUS ON WHAT WE BELIEVE IS A
15
MEASURED, EFFECTIVE REMEDY OUGHT TO GIVE THIS COURT A HIGH
16
DEGREE OF COMFORT GOING FORWARD.
17
THANK YOU, YOUR HONOR.
18
THE COURT:
19
ARGUMENT ON BEHALF OF THE UNITED STATES
20
MR. BOIES:
MAY IT PLEASE THE COURT.
21
THE COURT:
MR. BOIES.
22
MR. BOIES:
I THINK THE COURT HAS BEFORE IT TODAY
23
TWO BASIC QUESTIONS.
24
IS NOT SO EASY.
25
ALL RIGHT.
THANK YOU, MR. O'CONNOR.
ONE I THINK IS EASY, AND ONE I THINK
THE EASY QUESTION IS WHAT KIND OF CONDUCT RELIEF
18
1
NEEDS TO BE GRANTED.
I THINK THE GOVERNMENT HAS PUT BEFORE
2
THE COURT A CONDUCT RELIEF THAT IS DESIGNED TO LAST UNTIL
3
AND WHEN STRUCTURAL RELIEF IS IMPLEMENTED THAT WOULD
4
DIRECTLY ADDRESS THE VIOLATIONS OF LAW THAT THE COURT HAS
5
FOUND.
6
WITH ALL DUE RESPECT -- SIMPLY DOES NOT SERIOUSLY ADDRESS
7
THE FINDINGS AND CONCLUSIONS THAT THE COURT HAS ENTERED.
IF
8
9
I THINK THE MICROSOFT PROPOSAL -- AND I SAY THIS
AS AN EXAMPLE -- EXCUSE ME.
CHART.
I HAVE THE WRONG
IF I CAN FIND IT, YOUR HONOR --
10
THE COURT:
TAKE YOUR TIME.
11
MR. BOIES:
WHAT I DID WAS, FOR MY CONVENIENCE
AND
12
THE COURT'S, MADE A LIST.
I'VE LOST THE LIST.
BUT I CAN
13
REMEMBER THE LIST.
14
KINDS OF THINGS THAT MICROSOFT'S REMEDY WOULD ALLOW IT TO
15
CONTINUE TO DO, EVEN THOUGH THE COURT HAS EXPRESSLY,
16
REPEATEDLY FOUND IT TO BE UNLAWFUL.
17
ITS MONOPOLY POWER AND OTHER MEANS TO INDUCE AND TO
18
COMPETITORS TO AGREE NOT TO COMPETE.
19
FINDINGS, SET THAT OUT WITH RESPECT TO NETSCAPE, INTEL,
20
APPLE, REAL NETWORKS AND IBM.
AND WHAT THAT LIST SAYS IS IT LISTS THE
ONE OF THOSE WAS TO
USE
THREATEN
21
AND THE COURT, IN ITS
UNDER MICROSOFT'S PROPOSED REMEDY, THEY'RE
22
ENTIRELY FREE TO DO THAT.
THE COURT ALSO FOUND THAT THEY
23
HAD CONTRACTUALLY TIED TWO SEPARATE PRODUCTS WITHOUT ANY
24
INTEGRATION AT ALL, WITHOUT ANY JUSTIFICATION.
THEIR
25
PROPOSED REMEDY ALLOWS THEM TO CONTINUE TO DO THAT.
19
1
THE COURT FOUND THAT THEY HAD TECHNOLOGICALLY
2
BOUND TOGETHER TWO PRODUCTS WITH SEPARATE ECONOMIC DEMANDS,
3
WITHOUT ANY TECHNOLOGICAL JUSTIFICATION, FOR THE EXPRESS
4
PURPOSE OF PRECLUDING COMPETITION ON THE MERITS AND
5
MAINTAINING BARRIERS TO ENTRY.
6
THEM TO CONTINUE TO DO THAT.
THEIR PROPOSED REMEDY
ALLOWS
7
NUMBER FOUR, THE COURT FOUND THAT THEY MADE
8
PREDATORY EXPENDITURES WITH NO EXPECTATION OF MAKING ANY
9
PROFIT OR RECOVERING ANY LOSES, EXCEPT THROUGH MAINTENANCE
10
OF ITS MONOPOLY.
11
AND I WANT TO STOP HERE FOR A SECOND BECAUSE THIS
12
IS AN ITEM THAT WE DO NOT ADDRESS IN OUR CONDUCT REMEDY
13
EITHER.
14
THAT WAS THAT WE BELIEVED THAT BY IMPLEMENTING A STRUCTURAL
15
REMEDY, WE WERE ABLE TO AVOID SOME OF THE DIFFICULT CONDUCT
16
ISSUES THAT, FRANKLY, WOULD BE VERY DIFFICULT TO IDENTIFY
17
EXACTLY HOW THEY SHOULD BE SOLVED.
18
THEY, ADDRESSED THIS ISSUE IN OUR CONDUCT REMEDY.
AND ONE OF THE REASONS -- ONE OF THE REASONS FOR
19
THEY ALSO --
20
THE COURT:
21
22
AND SO NEITHER WE, NOR
WITH THE THOUGHT BEING THAT THE
STRUCTURAL REMEDY WOULD ADDRESS THE SAME PROBLEM.
MR. BOIES:
EXACTLY, YOUR HONOR.
FOR EXAMPLE, IF
23
YOU HAVE SEPARATED OUT THE BROWSER AND OTHER MIDDLEWARE
24
THE OPERATING SYSTEM, THERE IS NO ABILITY OR INCENTIVE TO
FROM
25
PROTECT
USE PREDATORY DISTRIBUTION OF MIDDLEWARE IN ORDER TO
20
1
THE OPERATING SYSTEM MONOPOLY.
2
THE COURT:
ALL RIGHT.
3
MR. BOIES:
OTHER EXAMPLES ARE THEY CAN RETALIATE
4
AGAINST OEM'S, EITHER FOR NOT USING MICROSOFT PRODUCTS OR
5
FOR USING SOMEBODY ELSE'S PRODUCTS.
6
THING WITH RESPECT TO IAP'S, JUST LIKE THE COURT FOUND THAT
7
THEY HAD DONE.
8
ISV'S.
9
THEY CAN DO THE SAME
THEY CAN DO THE SAME THING WITH RESPECT TO
THE COURT WILL RECALL THE FIRST-WAVE AGREEMENTS
IN
10
WHICH THEY SAY, IF YOU WANT TO GET ACCESS TO THIS MONOPOLY
11
INFORMATION THAT YOU HAVE GOT TO HAVE FOR YOUR BUSINESS,
12
HAVE GOT TO USE OUR JAVA AND OUR BROWSER.
YOU
13
IT WOULD ALSO ALLOW THEM TO CONTINUE TO DO
14
EVERYTHING THAT THEY DID WITH THE ICP'S.
AND WHILE THE
15
COURT FOUND THAT THEIR CONDUCT WITH RESPECT TO THE ICP'S,
16
UNLIKE THEIR OTHER CONDUCT, DID NOT HAVE A SUBSTANTIAL
17
EFFECT, NEVERTHELESS, IT IS THE KIND OF ANTICOMPETITIVE
18
CONDUCT THAT IS CLEARLY UNLAWFUL, AND THE COURT SO FOUND
19
SHOULD BE PROHIBITED.
AND
20
THEY WOULD ALSO BE ABLE TO CONTINUE TO CONDITION
21
THE AVAILABILITY OF APPLICATIONS TO APPLE AND OTHER
22
POTENTIAL OPERATING SYSTEM MANUFACTURERS ON THOSE
23
MANUFACTURERS NOT ENGAGING IN COMPETITION, OR LIMITING
24
COMPETITION, OR LIMITING THEIR DISTRIBUTION OF MIDDLEWARE.
THEIR
25
THIS IS ANOTHER POINT THAT FITS IN IMPORTANTLY WITH RESPECT
21
1
TO THE REMEDY -- THE STRUCTURAL REMEDY THAT WE HAVE
2
BECAUSE, AS THE COURT HAS FOUND, THEY CONTINUALLY USED
3
CONTROL OVER BOTH APPLICATIONS AND OPERATING SYSTEM TO
4
PROTECT EACH FRANCHISE.
PROPOSED
THEIR
5
THEY WOULD GO TO APPLE.
BECAUSE THEY CONTROLLED
6
OFFICE AND BECAUSE OFFICE WAS, AS THE COURT FOUND, CRITICAL
7
TO APPLE'S CONTINUED VIABILITY, THEY WOULD GO TO APPLE AND
8
SAY, IF YOU USE CROSS-PLATFORM JAVA OR UNLESS YOU AGREE TO
9
DISTRIBUTE OUR BROWSER, WE'RE NOT GOING TO GIVE YOU OFFICE.
10
THAT IS SOMETHING THAT, OBVIOUSLY, THEY COULDN'T DO UNLESS
11
THEY HAD JOINT CONTROL OVER BOTH OFFICE AND OVER THE
12
OPERATING SYSTEM.
13
AND MICROSOFT'S PROPOSED CONDUCT REMEDY WOULD
14
ALLOW IT TO BE CONTINUED TO BE FREE TO REDESIGN THEIR
15
OPERATING SYSTEM TO MAKE IT DIFFICULT TO INTER-OPERATE
16
BETWEEN COMPETITIVE SOFTWARE AND THE OPERATING SYSTEM.
17
DIFFICULT
THAT, I SUBMIT TO THE COURT WITH RESPECT, IS NOT A
18
QUESTION AS TO WHAT THE COURT OUGHT TO DO IN TERMS OF
19
CONDUCT.
20
STRUCTURE IS A MORE DIFFICULT ISSUE.
STRUCTURE
IS
21
AN ISSUE THAT IS DIFFICULT FOR TWO REASONS:
ONE, IT'S
22
ALWAYS A MORE SIGNIFICANT REMEDY; AND, TWO, THE STRUCTURAL
23
PROPOSAL WE HAVE PUT BEFORE THE COURT IS NOT A UNITED SHOE
24
TYPE OF STRUCTURAL PROPOSAL IN WHICH WE'RE TRYING TO
25
THREE COMPETING COMPANIES THAT ARE VERTICALLY INTEGRATED
DEVELOP
AND
22
1
THAT WILL IMMEDIATELY ELIMINATE THE MONOPOLY.
2
THE COURT:
THAT'S RIGHT.
3
MR. BOIES:
WE ARE PROPOSING --
4
THE COURT:
WHY AREN'T YOU DOING THAT?
5
MR. BOIES:
TWO REASONS, YOUR HONOR.
ONE IS THAT
6
WE LOOKED AT THIS -- AND THIS WAS ONE OF THE MOST DIFFICULT
7
QUESTIONS THAT WE FACED, AND VERY REASONABLE MINDS CAN
8
DIFFER ON THIS AND, AS THE COURT KNOWS FROM THE AMICUS
9
BRIEFS, THERE WERE STRONG PROPONENTS OF REQUIRING A
10
HORIZONTAL, IN EFFECT, DIVESTITURE THAT WOULD IMMEDIATELY
11
RESTORE CONDITIONS OF COMPETITION.
12
WE BELIEVED TWO THINGS.
FIRST, WE BELIEVED THAT
13
THAT REORGANIZATION WOULD HAVE MUCH MORE TIME-CONSUMING,
14
DISRUPTIVE EFFECTS.
15
IT HAD POTENTIAL DISRUPTIONS AND POTENTIAL INEFFICIENCIES
16
THAT THE PROPOSAL THAT WE CAME FORWARD WITH DID NOT.
17
IT WOULD TAKE LONGER TO IMPLEMENT, AND
SECOND, WE BELIEVED THAT THE DIVESTITURE THAT WE
18
WERE PROPOSING DIRECTLY MET THE CASE THAT WAS BEFORE THE
19
COURT.
20
USE OF ITS MONOPOLY POWER TO MAINTAIN AND PRESERVE THE
21
APPLICATIONS PROGRAMMING BARRIER TO ENTRY.
22
STRUCTURAL PROPOSAL WAS DESIGNED TO RESTORE COMPETITIVE
23
CONDITIONS WITH RESPECT TO THAT BARRIER TO ENTRY, THE
24
APPLICATIONS BARRIER TO ENTRY.
25
THE CASE THAT WAS BEFORE THE COURT WAS MICROSOFT'S
AND IT DID SO IN TWO WAYS:
AND THIS
FIRST, BY FREEING UP
23
1
APPLICATIONS, LIKE OFFICE, SO THAT THEY WOULD BE AVAILABLE
2
FOR OTHER OPERATING SYSTEMS AND, SECOND, BECAUSE OFFICE
3
ITSELF, AS THE TRIAL RECORD SHOWS, WAS SOMETHING THAT
4
COULD EXPOSE A LARGE NUMBER OF API'S, IT COULD PERFORM THE
5
FUNCTION OF MIDDLEWARE, MUCH LIKE THE BROWSER, WHICH THEY
6
CRIPPLED, COULD HAVE PERFORMED.
ITSELF
7
SO WE THOUGHT IT DIRECTLY MET THAT ISSUE AND,
8
LOOKING AT THE AT&T EXAMPLE, WHERE YOU ESSENTIALLY HAD A
9
VERTICAL DIVESTITURE -- YOU HAD LONG DISTANCE AND LOCAL
10
SEPARATED -- AND THEY EACH HAD AN INCENTIVE TO GROW INTO
11
OTHER.
12
THE DECREE IN AT&T, THEY WOULD HAVE GROWN INTO EACH OTHER'S
13
AREA EVEN FASTER BECAUSE THERE WERE LIMITATIONS ON WHEN THE
14
LOCAL BELL COMPANIES COULD MOVE INTO LONG DISTANCE AND VICE
15
VERSA.
THE
AND, INDEED, IF IT HADN'T BEEN FOR THE PROVISIONS
OF
16
SO WHAT YOU HAVE IS A SITUATION IN WHICH BOTH
17
COMPANIES WILL HAVE A POWERFUL INCENTIVE TO INVADE THE
18
OTHER'S TURF BECAUSE THE OPERATING SYSTEM COMPANY WILL
19
IMMEDIATELY HAVE AN INCENTIVE TO DO DEALS WITH THE OTHER
20
APPLICATIONS COMPANY BECAUSE THE DECREE FORBIDS IT, FOR A
21
PERIOD OF TEN YEARS, FROM DOING THOSE DEALS WITH ITS
22
DIVORCED SISTER.
23
24
THE APPLICATIONS COMPANY WILL SEE OTHER
APPLICATIONS COMPANIES NOW DEVELOPING THESE KINDS OF
25
WILL
RELATIONSHIPS WITH THE OPERATING SYSTEM COMPANY, AND IT
24
1
HAVE NO CHOICE BUT TO TRY TO DEVELOP SIMILAR KINDS OF
2
RELATIONSHIPS WITH OTHER POTENTIAL OPERATING SYSTEM
3
COMPANIES.
4
5
THE COURT:
NOW, THESE TWO SEPARATE COMPANIES ARE
FORBIDDEN TO SELL EACH OTHER'S PRODUCTS?
6
MR. BOIES:
YES, YOUR HONOR.
7
THE COURT:
BUT THEY CAN SHARE TECHNOLOGY?
8
MR. BOIES:
YES.
9
THE COURT:
WHAT'S THE BOUNDARY BETWEEN
TECHNOLOGY
10
11
AND PRODUCT?
MR. BOIES:
WELL, THEY CAN ONLY SHARE TECHNOLOGY
12
IN A NONDISCRIMINATORY WAY.
IN OTHER WORDS, THE
13
APPLICATIONS COMPANY COULD NOT SHARE ANYTHING WITH THE
14
OPERATING SYSTEM COMPANY THAT THE APPLICATIONS COMPANY DID
15
NOT SHARE WITH OTHER PEOPLE.
16
THE COURT:
OKAY.
17
MR. BOIES:
THE OPERATING SYSTEM COMPANY COULDN'T
18
SHARE ANYTHING WITH THE APPLICATIONS COMPANY THAT IT DIDN'T
19
SHARE WITH EVERYBODY ELSE.
20
SENSE OF MAKING THINGS, IN EFFECT, AVAILABLE TO THE ENTIRE
21
MARKET, BUT YOU CAN'T ENGAGE IN JOINT VENTURES THAT WOULD,
22
IN EFFECT, PUT THE TWO PIECES BACK TOGETHER AGAIN.
23
THE COURT:
YOU CAN SHARE TECHNOLOGY IN THE
BUT THAT STILL DOESN'T ANSWER THE
24
QUESTION AS TO WHERE THE BOUNDARY LIES BETWEEN THEM.
WHY
25
COULDN'T THEY SIMPLY JUST SHARE PRODUCTS AND SAY, "WE'RE
25
1
SHARING TECHNOLOGY"?
2
MR. BOIES:
BUT REMEMBER, IF -- WELL, THEY COULD,
3
TO SOME EXTENT, DO THAT, YOUR HONOR.
BUT TO THE EXTENT
4
DO THAT, REMEMBER, THEY WOULD HAVE TO GIVE THOSE PRODUCTS
5
EVERYBODY, AND ON A NONDISCRIMINATORY BASIS.
6
WORDS, ALTHOUGH I THINK THERE IS SOME POTENTIAL THERE, IT
7
WOULD BE VERY UNECONOMIC FOR THEM, IN EFFECT, TO EACH
8
DEDICATE ALL OF THEIR TECHNOLOGY, THEIR IMPORTANT
9
TECHNOLOGY, IN EFFECT, TO THE PUBLIC DOMAIN.
THEY
TO
IN OTHER
AND BECAUSE
OF
10
THE NONDISCRIMINATION PROVISIONS, THEY WOULD BE, IN EFFECT,
11
INTO THAT POSITION.
12
AND, AS THE COURT IS AWARE FROM THE BRIEFS, THE
13
ABILITY OF THE COMBINED COMPANY TODAY TO MANIPULATE THE
14
BOUNDARIES BETWEEN APPLICATIONS AND OPERATING SYSTEMS IS
15
SOMETHING THAT'S GOING ON RIGHT NOW.
16
CAN SEE THE INTENT OF WHAT MICROSOFT IS ABOUT FROM TWO OF
17
THE EXHIBITS THAT WE ATTACHED TO OUR PAPERS AND THAT WERE
18
UNSEALED THIS MORNING.
19
AND I THINK THE COURT
ONE IS OUR GOVERNMENT REMEDY EXHIBIT 1, WHICH WAS
20
AN E-MAIL FROM MR. GATES DATED JULY 11, 1999, ESSENTIALLY
21
JUST AFTER THIS TRIAL HAD COMPLETED.
22
THAT'S TALKING ABOUT PERSONAL DIGITAL ASSISTANTS, THE PALM.
23
AND THE PORTION I WANT TO GO TO IS THE VERY LAST PARAGRAPH
24
WHERE MR. GATES WRITES, "WE REALLY NEED TO DEMONSTRATE TO
AND IT'S AN E-MAIL
25
PEOPLE LIKE NOKIA WHY OUR PDA WILL CONNECT TO OFFICE IN A
26
1
BETTER WAY THAN OTHER PDA'S, EVEN IF THAT MEANS CHANGING
2
WE DO FLEXIBLE SCHEMA IN OUTLOOK AND HOW WE TIE SOME OF OUR
3
AUDIO AND VIDEO ADVANCED WORK TO ONLY RUN ON OUR PDA'S."
HOW
4
THE COURT:
PDA'S BEING WHAT?
5
MR. BOIES:
PERSONAL DIGITAL ASSISTANTS.
IF YOU
6
GO BACK UP INTO THE TEXT A COUPLE OF PARAGRAPHS, YOU WILL
7
SEE THEY ARE TALKING ABOUT PALM AS A COMPETITOR, AND THE
8
PALM PILOTS.
9
USE OUR CONTROL OVER OFFICE AND APPLICATIONS TO MAKE SURE
AND WHAT THEY ARE TALKING ABOUT IS HOW DO WE
10
THAT WE MANIPULATE THE INTERCONNECTIONS SO THAT THE
11
APPLICATIONS WILL ONLY WORK WITH OUR OPERATING SYSTEMS OR
12
ONLY WORK BEST WITH OUR OPERATING SYSTEMS.
13
MODERN-DAY VERSION OF THE JOLTING EXPERIENCE DOCUMENT THAT
14
THE COURT SAW.
15
IT'S A
AND IF WE CAN GO BRIEFLY TO GOVERNMENT EXHIBIT 2,
16
REMEDY EXHIBIT 2.
THIS IS A JUNE 28, 1998 MEMO FROM BILL
17
GATES, AND THIS IS ABOUT SMARTPHONE STRATEGY AND RESPONDING
18
TO SOMETHING CALLED SYMBIAN.
19
PAGE -- THE VERY TOP OF THE SECOND PAGE WHERE THEY ARE
20
TALKING ABOUT HOW SYMBIAN IS GOING TO PROMOTE JAVA API'S OR
21
ANY SUN-DRIVEN API'S OR PROTOCOLS.
22
PARAGRAPH IT SAYS, "IF EITHER OF THESE THINGS ARE THE CASE,
23
THEN THESE GUYS ARE REALLY AT WAR WITH US AND WE SHOULD DO
24
THE MOST EXTREME THINGS THAT WE CAN.
25
WORKING WITH THEM IN SOME OF THE OTHER AREAS LIKE SET-TOP,
AND IF WE GO TO THE SECOND
AND THEN IN THE NEXT
THIS MAY MEAN NOT
27
1
2
PHOENIX, ET CETERA."
AND THE COURT WILL RECALL HOW MICROSOFT USED ITS
3
POWER WITH INTEL.
4
THAT WOULD BE COMPETITIVE, MICROSOFT USED ITS POWER WITH
5
INTEL TO SAY, "WE'RE NOT GOING TO WORK WITH YOU IN THESE
6
OTHER AREAS THAT WE CONTROL UNLESS YOU AGREE TO DO WHAT WE
7
WANT IN THE OPERATING SYSTEM AREA."
8
THAT THE PROPOSED DIVESTITURE THAT WE HAVE PUT ON THE TABLE
9
WOULD DO IS TO TRY TO ELIMINATE THEIR ABILITY TO DO THAT.
10
WHEN INTEL WAS TRYING TO GET INTO AREAS
AND ONE OF THE THINGS
AND THESE DOCUMENTS ARE IMPORTANT NOT BECAUSE OF
11
THE SPECIFIC INSTANCES THAT ARE HERE, BUT BECAUSE OF WHAT
12
REVEALS ABOUT MICROSOFT'S STRATEGY -- CONTINUED STRATEGY TO
13
USE ITS POWER, TO USE ITS CONTROL OVER BOTH APPLICATIONS
14
OPERATING SYSTEMS TO MANIPULATE THE BOUNDARIES AND TO
15
INDUCE, THREATEN, AND FORCE PEOPLE TO DO WHAT IT WANTS TO
16
PRESERVE THE BARRIERS TO ENTRY BY DEPRIVING COMPETITORS OF
17
THE THINGS THAT THEY NEED.
IT
AND
18
AND IT IS ONLY, IN OUR VIEW, BY BREAKING THAT
19
CONTROL -- BY SEPARATING THE OPERATING SYSTEM FROM THE
20
APPLICATIONS BUSINESS ARE YOU ABLE TO ACHIEVE THAT.
21
BELIEVE THAT THAT WILL ACHIEVE THAT RESULT QUICKER AND MORE
22
EFFICIENTLY THAN A HORIZONTAL DIVESTITURE.
23
THERE IS ALSO --
24
THE COURT:
25
AND WE
DID YOU CONSIDER AS ONE ALTERNATIVE A
PROPOSAL MADE BY THE OTHER AMICUS CURIAE, "THE COMPUTER AND
28
1
COMMUNICATIONS INDUSTRY ASSOCIATION AND SOFTWARE AND
2
INFORMATION INDUSTRY ASSOCIATION"?
3
BY THE WAY.
4
IT'S AN "EXCELLENT BRIEF.
IT'S AN EXCELLENT
BRIEF,
I HAVE NEVER MET THE LAWYERS WHO WROTE IT, BUT
5
MR. BOIES:
IT WAS, YOUR HONOR.
6
THE COURT:
BUT THE PROPOSAL THAT THERE BE A
THIRD
7
8
9
INTERNET BROWSER COMPANY CREATED?
MR. BOIES:
WE DID, YOUR HONOR, AND THAT WAS
SOMETHING THAT WE VERY SERIOUSLY CONSIDERED.
AND I THINK
10
THAT OUR VIEW IS THAT THAT HAS A LOT OF ADVANTAGES TO IT.
11
THINK THAT IF WE HAD BEEN SITTING DOWN SIMPLY TO DEVELOP A
12
STRUCTURAL REMEDY THAT WE WOULD HAVE SIMPLY PUT INTO EFFECT
13
AND NOT HAD TO COME IN AND CONVINCE THE COURT TO DO, WE
14
MIGHT VERY WELL HAVE GONE FOR THOSE THREE ITEMS.
I
15
ON THE OTHER HAND, WE THOUGHT A TWO-PART
16
DIVESTITURE WAS SIMPLER TO IMPLEMENT AND WE WERE, TO SOME
17
EXTENT, TRADING OFF SIMPLICITY AND EASE OF IMPLEMENTATION
18
FOR WHAT ARE QUITE LEGITIMATE POLICY ADVANTAGES IN TERMS OF
19
SEPARATING THE INTERNET FROM THE APPLICATIONS.
20
WE ALSO THOUGHT THAT THERE MIGHT BE POSSIBLE
21
EFFICIENCIES BETWEEN THE APPLICATIONS AND THE INTERNET,
22
WHERE YOU WOULD PUT THE BROWSER, FOR EXAMPLE, THAT WE WERE
23
ABLE TO AVOID HAVING TO RESOLVE BY THE SEPARATION THAT WE
24
ARRIVED AT.
25
I WANT TO SAY ONE OTHER THING THAT IS A LITTLE
29
1
LESS CONCRETE THAN THE OTHER POINTS THAT I HAVE MADE.
2
THE COURT:
LET ME MAKE AN OBSERVATION HERE.
YOU
3
TALK OF SIMPLICITY OF IMPLEMENTATION, AND IT WOULD APPEAR
4
ME THAT THIS IS ANYTHING BUT SIMPLE TO IMPLEMENT.
5
ENTRUST A GREAT DEAL OF THE PLANNING AND THE EXECUTION TO
6
MICROSOFT ITSELF.
7
WILLING PARTICIPANT IN THAT ENDEAVOR.
TO
8
9
10
YOU
AND I DO NOT THINK THAT THEY WILL BE A
MR. BOIES:
THEM THE FIRST CRACK.
WHAT WE DID, YOUR HONOR, IS WE GAVE
WE GAVE THEM THE OPPORTUNITY TO COME
FORWARD WITH A PLAN.
11
NOW, THE PROPOSAL IS QUITE EXPLICIT ABOUT WHAT
12
THAT PLAN HAS TO DO.
AND IT'S QUITE EXPLICIT ABOUT THE
13
RIGHT OF ACCESS THAT THE GOVERNMENTS HAVE TO REVIEW WHAT
14
BEEN DONE SO THAT WE'RE SURE THAT THEY ARE NOT SORT OF
15
SECRETING PEOPLE, OR MOVING PEOPLE AROUND, OR CRIPPLING
16
PRODUCTS JUST BEFORE THE DIVESTITURE.
HAS
17
BUT YOU HAVE A SITUATION IN WHICH WE HAVE GIVEN
18
THEM THE OPPORTUNITY TO DO IT FIRST.
NOW, FRANKLY, YOUR
19
HONOR, IF THEY COME BACK WITH A PROPOSAL THAT IS SIMILAR TO
20
THEIR REMEDY PROPOSAL THAT SIMPLY DOESN'T MEET WHAT THE
21
REQUIREMENTS ARE, THEN THE GOVERNMENT WILL HAVE TO DRAFT
22
PROPOSAL.
23
THE GOVERNMENT HAS EXPERIENCE IN DOING THAT.
24
THE APPROPRIATE WAY TO PROCEED WAS TO GIVE THEM AN
THE
AND THE GOVERNMENT IS PREPARED TO DO THAT, AND
BUT WE
THOUGHT
25
THEN
OPPORTUNITY TO MAKE A GOOD FAITH PROPOSAL THAT WE COULD
30
1
WORK OFF OF.
2
THE COURT:
3
THAT CONNECTION.
4
APPEAL IN THE CASE?
NOW, LET ME ASK ANOTHER QUESTION IN
THE STRUCTURAL REMEDY IS STAYED PENDING
5
MR. BOIES:
YES, YOUR HONOR.
6
THE COURT:
IF I RETAIN JURISDICTION, WHY IS IT
7
NECESSARY TO DECIDE ON THE STRUCTURAL REMEDY AT ALL RIGHT
8
NOW?
9
APPEALS HAS HAD ITS CRACK AT IT?
10
11
12
ORDINARILY,
WHY DON'T WE JUST DEFER THAT UNTIL AFTER THE COURT OF
MR. BOIES:
ONE OF THE BLESSINGS AND MAYBE CURSES
THAT WE'RE FACED WITH IS THE EXPEDITING ACT.
IN ORDER TO
HAVE AN APPEAL, THERE MUST BE A FINAL JUDGMENT.
13
THE COURT, UNDER 1252(A), HAS THE ABILITY TO CERTIFY AND
14
HAVE THAT GO UP.
15
DOESN'T EXIST IN EXPEDITING ACT CASES, IT IS MY
16
UNDERSTANDING.
17
THE EXPEDITING ACT -- AND SOMEBODY WHO DOES THIS MORE OFTEN
18
CONFIRMS WHAT I AM SAYING.
19
12 -- THAT SECTION -- THAT (A) SECTION
THAT IS, I DON'T THINK THAT YOU HAVE, UNDER
15 U.S.C. 29(A) PROHIBITS ANY INTERLOCUTORY
APPEAL
20
21
UNDER 1292(B).
THE COURT:
OKAY.
WHAT YOU'RE SAYING IS THAT THE
22
APPELLATE TRIBUNAL, WHOEVER IT MAY BE, HAS GOT TO LOOK AT
23
THE REMEDY IN ITS ENTIRETY?
24
MR. BOIES:
YES.
25
THE COURT:
ALL RIGHT.
31
1
MR. BOIES:
WE ALSO THINK, YOUR HONOR, THAT
THAT'S
2
DESIRABLE FOR PLANNING PURPOSES, TOO.
EVEN WITH AN
3
EXPEDITED APPEAL, IF MICROSOFT IS SITTING THERE KNOWING
4
THIS IS LIKELY TO BE DIVIDED AT SOME POINT -- ONE OF THE
5
THINGS THEY ARE REQUIRED TO DO, ALTHOUGH THERE IS NO
6
DIVESTITURE, THEY ARE REQUIRED TO COME FORWARD WITH A PLAN
7
OF DIVESTITURE WHILE THE APPEAL IS GOING ON.
8
WORDS, THE IDEA IS THAT YOU TRY TO GET THINGS GOING NOW.
THAT
IN OTHER
9
AND WE THINK IT WOULD BE UNDESIRABLE AND UNWISE,
10
GIVEN THE WAY MICROSOFT HAS OPERATED PREVIOUSLY, TO HAVE A
11
VERY EXTENDED PERIOD WHERE THEY WERE FREE TO SORT OF
12
THEIR BUSINESS AND DIDN'T HAVE TO COME FORWARD WITH A PLAN,
13
KNOWING THAT THERE WAS GOING TO BE DIVESTITURE OR THE
14
LIKELIHOOD OF DIVESTITURE DOWN THE ROAD.
OPERATE
15
16
17
THE COURT:
APPEAL?
SO 1(A) IS NOT STAYED DURING THE
THEY HAVE GOT TO PRODUCE -MR. BOIES:
YOUR HONOR, I NEED TO CONFIRM THAT.
I
18
THOUGHT THAT THAT WAS THE CASE.
19
THE COURT:
20
ENTRY OF THIS FINAL JUDGMENT?
21
MR. BOIES:
22
I THOUGHT THAT --
NOT LATER THAN FOUR MONTHS AFTER THE
RIGHT.
AND THAT PORTION, I BELIEVE,
IS NOT STAYED.
23
THE COURT:
ALL RIGHT.
24
MR. BOIES:
THERE IS ONE OTHER POINT THAT I WANT
25
POINTS
TO MAKE THAT IS A LITTLE LESS CONCRETE THAN THE OTHER
32
1
THAT I HAVE BEEN MAKING AS TO WHY WE CHOSE THE TYPE OF
2
DIVESTITURE WE DID AS OPPOSED TO HORIZONTAL, THREE
3
INTEGRATED COMPANIES.
4
IN A BUSINESS THAT IS CHARACTERIZED BY NETWORK
5
EFFECTS, IN GENERAL, THE KIND OF COMPETITION THAT IS LIKELY
6
TO BE MOST EFFECTIVE AND MOST SUSTAINABLE OVER A LONG
7
OF TIME TENDS TO BE COMPETITION THAT HAS A SIGNIFICANT
8
PRODUCT DIFFERENTIATION ASPECT TO IT.
9
COMPETITION THAT WILL COME FROM AN APPLE, FROM A LINUX, OR
10
FROM A NEW OPERATING SYSTEM MAY BE BOTH MORE EFFECTIVE AND
11
MORE SUSTAINABLE THAN THE KIND OF COMPETITION THAT WOULD
12
COME SIMPLY FROM CLONES.
PERIOD
13
THAT IS, THE
THAT IF YOU WERE TO DIVIDE THIS COMPANY INTO
THREE
14
WINDOWS CLONES, YOU WOULD NOT HAVE THE PRODUCT
15
DIFFERENTIATION THAT, TO SOME EXTENT, CAN PRODUCE MORE
16
INNOVATION FOR CONSUMERS AND ALSO PROVIDE SUSTAINABILITY
17
THAT GOES BEYOND THE KIND OF FACTORS THAT YOU MAY HAVE IN A
18
NETWORK EFFECTS INDUSTRY.
19
AS I SAY, THIS HAS BEEN SOMETHING THAT WE HAVE
ALL
20
WRESTLED WITH, WHAT THE RIGHT FORM OF DIVESTITURE IS.
21
FORM SEEMED TO US TO BE INEVITABLE AS WE LOOKED AT THE NEED
22
TO RESTORE CONDITIONS OF COMPETITION.
23
DOESN'T EVEN ADDRESS THE RESTORATION ASPECT OF IT.
24
THANK YOU, YOUR HONOR.
MICROSOFT SIMPLY
SOME
25
OF
THE COURT:
ALL RIGHT.
LET ME ASK YOU A COUPLE
33
1
OTHER QUESTIONS.
AND IT MAY BE THAT MR. MALONE IS THE
2
APPROPRIATE ONE TO ANSWER THIS.
3
HAVE GOT A COPY OF THE LETTER WRITTEN BY THE ATTORNEYS FOR
4
MR. PAUL ALLEN --
I DON'T KNOW WHETHER YOU
5
MR. BOIES:
YES.
6
THE COURT:
-- WHO PLACES HIMSELF IN THE
MICROCOSM
7
OF STOCK OWNERSHIP AT 4 PERCENT.
SIMPLY TO AVOID ANY
8
PROBLEM WITH MR. ALLEN -- AND I DON'T KNOW WHETHER ONE IS
9
IMPENDING OR NOT -- WHAT WOULD BE YOUR POSITION WITH
RESPECT
10
TO A COMMON SHAREHOLDING THRESHOLD PROHIBITION --
11
PROHIBITION THRESHOLD OF 5 PERCENT RATHER THAN 3 PERCENT?
12
MR. BOIES:
YOUR HONOR, YOU COULD DO THAT.
13
THE COURT:
WOULD THAT ACCOMPLISH THE SAME THING?
14
MR. BOIES:
I THINK THAT WOULD.
15
WELL ACCOMPLISH THE SAME THING.
16
ALTERNATIVES THAT COULD BE DONE.
17
MR. ALLEN'S LEGAL POINTS, WE THINK THAT IT IS CLEAR UNDER
18
THE CASE LAW THAT (A), HE DOESN'T HAVE TO BE A PARTY, AND,
19
(B), HE COULD BE MADE A PARTY TO THE REMEDY PROCEEDING IF
20
THAT WERE NECESSARY.
21
22
THAT COULD VERY
I THINK THERE ARE OTHER
FIRST, JUST TO REPLY TO
ALL THAT'S BEING AFFECTED IS HIS SHAREHOLDING
INTEREST, AND THAT CAN BE AFFECTED THROUGH THE CORPORATION.
23
THE COURT:
I THINK IT CAN, BUT --
24
MR. BOIES:
AND WE'RE PREPARED -- AND THAT
25
PARTICULAR ISSUE COULD BE BRIEFED.
34
1
THE COURT:
I DON'T WANT ANY MORE BRIEFS.
2
MR. BOIES:
I UNDERSTAND.
3
BUT JUST IN TERMS -- MAYBE JUST TO CITE A COUPLE
4
5
6
7
8
OF THE CASES -THE COURT:
I DON'T NEED THE CASES.
NOT CHANGE THE THRESHOLD TO 5 PERCENT?
MR. BOIES:
YOU COULD.
NOW, HE IS STILL A MEMBER
OF THE BOARD OF DIRECTORS --
9
THE COURT:
OKAY.
10
MR. BOIES:
-- OF MICROSOFT.
11
I MEAN, WHY
AND 5 PERCENT
SHAREHOLDING IS A SUBSTANTIAL THRESHOLD.
12
THE COURT:
SURE.
13
MR. BOIES:
NOW, THERE ARE OTHER WAYS THAT IT
14
COULD BE HANDLED, IF THE COURT WERE TROUBLED BY IT, THOUGH.
15
I MEAN, ONE WAY WOULD BE TO HAVE HIS VOTING -- TO HAVE HIS
16
STOCK IN ONE COMPANY OR THE OTHER PUT INTO A VOTING TRUST
17
WHERE IT WOULD BE VOTED IN PROPORTION TO THE VOTES OF OTHER
18
SHAREHOLDERS, SO HE WASN'T AFFECTED --
19
THE COURT:
THAT PROBABLY WOULD BE SOMETHING YOU
20
ARE GOING TO HAVE TO WORK OUT WITH MR. ALLEN.
21
PURPOSES, SUFFICIENT UNTO THE DAY IS THE EVIL THEREOF.
22
DON'T WANT TO DEAL WITH MR. ALLEN'S PROBLEM.
23
TRYING TO FIND --
24
25
MR. BOIES:
AND, FOR MY
I
I WAS JUST
AND I THINK YOU COULD SOLVE THAT BY
RAISING THE THRESHOLD, YOUR HONOR.
35
1
THE COURT:
ALL RIGHT.
3
MR. BOIES:
I WILL.
4
THE COURT:
IT ALSO OCCURS TO ME THAT TO THE
2
WELL, GIVE THAT SOME
THOUGHT.
5
DEFINITIONAL SECTION THERE OUGHT TO BE AN AMENDMENT
6
THE TERM "MICROSOFT" TO INCLUDE THE LANGUAGE OF RULE 65,
7
TO WIT, ALL OFFICERS, DIRECTORS, AGENTS, SERVANTS,
8
AND ATTORNEYS AND THOSE IN ACTIVE CONCERT AND PARTICIPATION
9
WITH THEM.
DEFINING
EMPLOYEES
10
11
YES, YOUR HONOR.
THAT IS ABSOLUTELY
THE COURT:
OTHERWISE, THE JUDGMENT RUNS ONLY TO
RIGHT.
12
13
MR. BOIES:
MICROSOFT.
14
MR. BOIES:
THE COURT IS ABSOLUTELY RIGHT.
15
THE COURT:
ALL RIGHT.
16
LET'S SEE.
WHAT IS YOUR CONTEMPLATION WITH
17
RESPECT TO ENFORCEMENT OF THE CONDUCT REMEDIES PENDING
18
APPEAL?
19
THEY ARE SUFFICIENTLY EQUIPPED TO BE ABLE TO OVERSEE?
IS THAT SOMETHING THAT THE PLAINTIFFS THINK THAT
20
MR. BOIES:
YES, YOUR HONOR.
21
THE COURT:
OR WILL YOU NEED A SPECIAL MASTER --
22
MR. BOIES:
WE WOULD HOPE A SPECIAL MASTER WOULD
THE COURT:
-- IF I CAN FIND A WAY TO WRITE AN
23
24
25
NOT --
ORDER APPOINTING A SPECIAL MASTER THAT WILL GET THROUGH THE
36
1
2
COURT OF APPEALS.
MR. BOIES:
WE DON'T THINK A SPECIAL MASTER WOULD
3
BE NECESSARY, ALTHOUGH WE THINK A SPECIAL MASTER MIGHT
4
FACILITATE THINGS.
5
THE COURT:
ALL RIGHT.
6
MR. BOIES:
WE HAVE TRIED TO IDENTIFY THE CONDUCT
7
PROVISIONS IN A WAY THAT IS AS SELF-EXECUTING AS POSSIBLE
8
WITH AS MANY BRIGHT LINES.
9
FOR PEOPLE TO TRY TO TAKE ADVANTAGE OF PURPORTED
OBVIOUSLY, THERE IS ALWAYS ROOM
10
AMBIGUITIES.
WE BELIEVE THAT WE ARE EQUIPPED TO HANDLE
11
PENDING APPEAL.
12
MICROSOFT WOULD HAVE AN INCENTIVE NOT TO DO SOMETHING THAT
13
WOULD MAKE IT LOOK EVEN WORSE.
14
THE COURT:
ALL RIGHT.
15
MR. BOIES:
THANK YOU.
16
THE COURT:
MR. WARDEN, IN TELLING YOU THAT I WAS
THAT
AND, HOPEFULLY, DURING THE APPEAL,
THANK YOU.
17
GOING TO REACH THE MERITS OF THE REMEDIES TODAY, I DID NOT
18
MEAN TO PRECLUDE YOUR TRYING TO CONVINCE ME THAT YOU NEED
19
MORE TIME TO BE ABLE TO RESPOND.
20
21
22
MR. WARDEN:
NO.
I DIDN'T SO UNDERSTAND, YOUR
HONOR, AND YOU WON'T BE -THE COURT:
I THOUGHT IT WAS SOMEWHAT IRONIC
THAT,
23
SINCE YOUR CLIENT IS CONVINCED THAT ITS TRAVAIL WILL END
24
ONCE IT GETS INTO THE COURT OF APPEALS, YOU'RE,
25
NEVERTHELESS, ASKING TO SPEND MORE TIME IN THIS COURT.
37
1
BUT BE THAT AS IT MAY --
2
ARGUMENT ON BEHALF OF MICROSOFT
3
MR. WARDEN:
YOUR HONOR, WE FULLY EXPECT TO
4
PREVAIL ON APPEAL, WHEREVER THE APPEAL MAY BE DETERMINED,
5
YOUR HONOR KNOWS.
6
DEATH AND TAXES.
7
OBVIOUSLY, MORE FULLY -- ACQUIESCE IN OUR OWN COMMERCIAL
8
DEMISE, EVEN AS A DIM POTENTIALITY IN ORDER TO EXPEDITE OUR
9
TRIP UPSTAIRS.
AS
BUT NO LITIGATION RESULT IS AS CERTAIN
AS
10
AND WE CANNOT -- AND I WILL DISCUSS THIS,
YOUR HONOR ALSO WILL NOT BE SURPRISED, I DON'T
11
THINK, THAT IN THE COURSE OF ADDRESSING OUR MOTION AND OUR
12
DESIRE FOR THE ESTABLISHMENT OF A FURTHER SCHEDULE, I SHALL
13
ADVERT TO THE MERITS OF BOTH OUR DECREE AND THE PLAINTIFFS'
14
DECREE.
15
THE COURT:
16
MR. WARDEN:
ALL RIGHT.
NOW, I DO WANT TO SAY, THOUGH, WITH
17
RESPECT TO PROCESS, THAT I FIND THE GOVERNMENT'S POSITION
18
THAT WE WERE HERE TODAY TO MAYBE, AT LEAST, HAVE SOME FINAL
19
RESOLUTION, REALLY INCREDIBLE BECAUSE WE HAVE MADE IT PLAIN
20
THAT WE WOULD SEEK PROCESS.
21
CHAMBERS CONFERENCES, AND YOUR HONOR SAID WE DIDN'T EVEN
22
HAVE TO SAY WHAT KIND OF PROCESS WE THOUGHT WAS APPROPRIATE
23
UNTIL WE GOT THEIR DECREE, AND WE HAVE DONE THAT.
24
25
YOUR HONOR KNOWS THAT FROM THE
YOUR HONOR SAID IN CHAMBERS NO DEFAULT SCHEDULE
WAS GOING TO BE ENTERED UNTIL THE DECREE WAS ON THE TABLE,
38
1
AND WE STATED OUR POSITION AND THE COURT COULD MAKE A
2
DECISION ON A REASONED BASIS.
3
BE ALL AND END ALL OF THE SCHEDULE.
SO THIS HEARING WAS NOT THE
4
IT'S ALSO REMARKABLE BECAUSE -- AND IT'S AMAZING
5
TO ME THAT I EVEN HAVE TO REMIND THE GOVERNMENT OF THIS --
6
DUE PROCESS MANDATES DUE PROCESS AND NOT A RUSH TO
7
IT DOES NOT SAY THAT DELAY IS ABHORRENT IN AND OF ITSELF.
8
THERE HAS TO BE TESTED ADJUDICATION, ADJUDICATION ON THE
9
BASIS OF EVIDENCE THAT IS ADDUCED AT TRIAL, TESTED BY
JUDGMENT.
10
11
CROSS-EXAMINATION AND CONSIDERED BY THE COURT.
AND OUR SUMMARY OBJECTIONS -- AND THAT'S ALL THEY
12
ARE -- SUMMARY OBJECTIONS, CERTAINLY ILLUSTRATE FOR THE
13
COURT THE MANY, MANY, MANY ISSUES THAT NEED TO BE THE
14
SUBJECT OF PROOF, ARGUMENT AND THE COURT'S OWN ANALYSIS AND
15
DELIBERATIONS BEFORE ANY JUDGMENT IS ENTERED IN THIS CASE.
16
ALL WE HAVE SO FAR ARE SOME DECLARATIONS WHICH ARE HEARSAY,
17
OF COURSE, UNTIL THE DEPONENTS ARE TESTED ON CROSS WITH
18
RESPECT TO THEM AND ARE BROUGHT FORWARD.
19
NOW, AS YOUR HONOR SAID, WE WOULD LIKE TO GO UP
ON
20
APPEAL AS SOON AS POSSIBLE AND, HAD THE EXPEDITING ACT
21
PERMITTED IT, WE CERTAINLY WOULD HAVE EMBRACED AN APPEAL
22
PRIOR TO THE DETERMINATION OF RELIEF, AND I SUSPECT THAT
23
GOVERNMENT MAY WELL HAVE DONE THE SAME.
24
SAID, THAT ISN'T POSSIBLE.
THE
BUT AS MR. BOIES
25
ONE THING I DO WANT TO MAKE CLEAR, HOWEVER, IS
39
1
THAT WHILE A FULL REMEDY IS REQUIRED IN ANY DECREE FOR
2
APPEAL UNDER THE EXPEDITING ACT, THE DETAILS OF
3
IMPLEMENTATION NEED NOT BE IN THE DECREE.
4
THERE IS ANY DISAGREEMENT BETWEEN THE PARTIES ABOUT THAT.
5
AND, OBVIOUSLY, ANY --
6
THE COURT:
I DON'T THINK
I DON'T KNOW OF ANY AUTHORITY THAT
7
SAYS I CANNOT PROCEED ON THE BASIS OF DECLARATIONS IN
8
FORMULATING A REMEDY EITHER.
9
PRELIMINARY
MR. WARDEN:
YOUR HONOR, THIS IS NOT A
10
INJUNCTION HEARING.
11
INJUNCTION AT THIS POINT FOLLOWING TRIAL.
12
ON PERMANENT JUDGMENT, FINAL JUDGMENT, MUST BE TRIAL
13
EVIDENCE, NOT HEARSAY DECLARATIONS.
14
WE'RE TALKING ABOUT A PERMANENT
AND THE EVIDENCE
NOW, WHILE WE'RE ON THE APPEAL POINT, I WANT TO
15
MAKE A COUPLE OF OTHER POINTS.
16
ANY DECREE THAT THE COURT MAY ENTER MAY BE STAYED WITHOUT
17
AFFECTING THE APPEALABILITY OF THE DECREE, JUST AS WITH ANY
18
OTHER FINAL JUDGMENT.
19
CLEAR.
20
ONE IS THAT ANY ASPECT OF
THAT, I THINK, SHOULD BE COMPLETELY
THE EXPEDITING ACT DOESN'T SPEAK ON THAT.
NOW, I ALSO WANT TO SAY, IN VIEW OF THE FACT THAT
21
WE HAVE BEEN ACCUSED OF SEEKING DELAY, THAT MICROSOFT HAS
22
THE KEENEST INTEREST OF ANYONE IN BOTH THE FRAMING OF A
23
PROPER DECREE, WHICH IS DIFFICULT HERE BECAUSE OF THE
24
EXTREMITY AND COMPLEXITY OF THE GOVERNMENT'S DEMANDS, BUT
25
ALSO IN GETTING THIS CASE FINALLY CONCLUDED, HOWEVER IT IS
40
1
CONCLUDED, BECAUSE MICROSOFT NEEDS TO KNOW THE RULES UNDER
2
WHICH IT MUST OPERATE AND NEEDS TO GET BACK TO BUSINESS.
3
NOW, I AM GOING TO TURN TO OUR MOTION TO
SUMMARILY
4
REJECT THE BREAKUP DEMAND.
AND LET ME SAY AT THE OUTSET
5
THAT THIS IS REALLY A EXTREME REMEDY.
6
DOUBT OF THAT.
7
DUPONT GENERAL MOTORS CASE -- IS PRESENTED TO THE COURT AS
8
JUSTIFICATION FOR A REMEDY OF DIVESTITURE OR DISSOLUTION IS
9
ABSOLUTELY ASTOUNDING BECAUSE, AS THE COURT KNOWS FULL
THERE CAN'T BE ANY
AND THE IDEA THAT THE DUPONT CASE -- THE
WELL,
10
THE VIOLATION OF LAW IN THAT CASE WAS THE HOLDING OF
11
MOTORS STOCK BY DUPONT.
12
OBVIOUSLY, THE DIVESTITURE OF THAT HOLDING WAS THE CURE FOR
13
THAT VIOLATION OF LAW.
GENERAL
14
THAT WAS THE VIOLATION OF LAW.
THERE HAS NEVER BEEN A CLAIM THAT THERE IS SOME
15
PART OF MICROSOFT, MUCH LESS A STOCK HOLDING IN ANOTHER
16
PUBLIC COMPANY, THAT IS THE VIOLATION OF LAW OR ANY
17
VIOLATION OF LAW AT ISSUE IN THIS CASE.
POSSIBLE
18
NOW, THE GOVERNMENT HAS AT LEAST FACED UP IN OPEN
19
COURT TO THE USE OF THE TERM "DIVESTITURE" OR
"DISSOLUTION,"
20
WHICH IS DIFFERENT FROM ITS PAPERS WHERE IT EUPHEMISTICALLY
21
REFERS TO WHAT'S GOING ON UNDER ITS DECREE AS A, QUOTE,
22
"CORPORATE REORGANIZATION," CLOSE QUOTE, SUGGESTING THAT,
23
YOU KNOW, THAT MIGHT BE AKIN TO COMBINING THE CHEVROLET AND
24
25
PONTIAC DIVISIONS UNDER ONE GENERAL MANAGER OR WHATEVER.
THE GOVERNMENT HAS FAILED TO IDENTIFY IN ITS
41
1
PAPERS OR ARGUMENT A SINGLE CASE IN WHICH A COURT HAS
2
ORDERED THE BREAKUP OF A UNITARY COMPANY SUCH AS MICROSOFT.
3
THEY HAVE ADVERTED TO A COUPLE OF CONSENT DECREES, BUT NO
4
LITIGATED DECREE.
5
IS PROPOSED HERE.
THERE IS ABSOLUTELY NO PRECEDENT FOR
WHAT
6
THE COURTS HAVE LONG UNDERSTOOD THAT SPLITTING UP
7
UNITARY COMPANIES IS AN ENORMOUSLY COMPLICATED AND
8
DESTRUCTIVE PROCESS AND ONE FOR WHICH COURTS -- THE COURTS,
9
NOR THE JUSTICE DEPARTMENT, HAVE ANY NATURAL VOCATION.
10
UNITED SHOE AND AT&T WERE BOTH CONSENT DECREES.
11
STANDARD OIL, WHICH THEY ALSO RELY ON IN THEIR PAPERS, WAS
12
NOT A UNITARY COMPANY, BUT A TRUST IN THE SENSE OF SENATOR
13
SHERMAN'S ANTITRUST ACT THAT HELD STOCK IN A VERY LARGE
14
DIFFERENT
15
NUMBER OF SEPARATE COMPANIES.
THAT IS AN ENTIRELY
SITUATION FROM MICROSOFT.
16
ALSO, WITH RESPECT TO AT&T, THE COURT SHOULD
17
KNOW -- AND I AM SURE DOES -- THAT AT&T AGREED TO THIS
18
DIVESTITURE DECREE IN ORDER TO FREE ITSELF OF RESTRICTIONS
19
THAT HAD PREVIOUSLY BEEN IMPOSED BY THE GOVERNMENT THAT
20
LIMITED AT&T TO THE TELECOMMUNICATIONS BUSINESS.
21
22
SHACKLES.
NOW, TO THE EXTENT THAT DECREE RESULTED IN MORE
INNOVATION, IT WAS BECAUSE AT&T WAS FREED OF THOSE
23
HISTORY HAS SHOWN -- AND THIS IS EVEN IN AN FTC STUDY --
24
THAT CORPORATE DISSOLUTIONS ARE MORE LIKELY TO HAVE
25
DISASTROUS THAN BENEFICIAL CONSEQUENCES AND MORE LIKELY TO
42
1
BE TO THE DETRIMENT OF CONSUMERS THAN TO THEIR BENEFIT.
2
THE GOVERNMENT HASN'T DISPUTED THAT WHEN UNITED
3
SHOE WAS FINALLY BROKEN UP AFTER THEY WENT AT THEM OVER AND
4
OVER AND OVER AGAIN, THE END RESULT WAS THE COLLAPSE OF THE
5
AMERICAN SHOE INDUSTRY.
6
THE COURT:
7
MR. WARDEN:
DO YOU THINK THE TWO WERE RELATED?
WELL, YOU KNOW, I AM NOT AN EXPERT
ON
8
THAT SUBJECT, BUT THOSE WHO HOLD THEMSELVES OUT TO BE HAVE
9
SO SUGGESTED IN LEARNED ARTICLES.
AND I DON'T KNOW WHETHER
10
THOSE ARTICLES HAVE AS AN UNDERPINNING A REGRESSION
11
OR NOT.
12
POST HOC ERGO PROPTER HOC.
ANALYSIS
13
BUT AT LEAST THEY HAVE SUGGESTED IT'S MORE THAN
NEXT, I HAVE A TOTALLY INDEPENDENT POINT.
THE
14
EVIDENCE AT TRIAL DID NOT ESTABLISH AND THE COURT DID NOT
15
FIND -- AND THIS POINT IS EXTREMELY IMPORTANT -- A CLEAR
16
CAUSAL LINK BETWEEN THE CONDUCT HELD TO BE ANTICOMPETITIVE
17
AND THE CONTINUATION OF MICROSOFT'S POSITION IN
18
INTEL-COMPATIBLE PC OPERATING SYSTEMS.
19
THE COURT FOUND THAT MICROSOFT MAY HAVE IMPEDED
20
CERTAIN RIVAL TECHNOLOGIES, NAVIGATOR AND JAVA, BUT THAT
21
THOSE TECHNOLOGIES MIGHT NOT HAVE MADE ANY DIFFERENCE TO
22
COMPETITION IN THE OS MARKET, EVEN IF LEFT UNIMPEDED.
23
NOW, THE AREEDA TREATISE EXPLAINS -- AND THIS IS
24
FULLY DISCUSSED IN OUR BRIEFS -- THE MERE EXISTENCE OF AN
25
EXCLUSIONARY ACT DOES NOT ITSELF JUSTIFY FULL FEASIBLE
43
1
RELIEF -- AND WE, OF COURSE, CONTROVERT EVEN FEASIBILITY
2
HERE, YOUR HONOR -- FULL FEASIBLE RELIEF AGAINST THE
3
MONOPOLIST TO CREATE MAXIMUM COMPETITION.
4
INSTEAD, THEY SAY, MORE EXTENSIVE EQUITABLE
5
RELIEF, PARTICULARLY REMEDIES SUCH AS DIVESTITURE, DESIGNED
6
TO ELIMINATE THE MONOPOLY ALTOGETHER, REQUIRE A CLEARER
7
INDICATION OF A SIGNIFICANT CAUSAL CONNECTION BETWEEN THE
8
CONDUCT AND CREATION OR MAINTENANCE OF THE MARKET POWER.
9
NOW, THERE IS NO SUCH FINDING HERE.
AND THE
10
GOVERNMENT'S ASSERTION, THEREFORE, THAT THIS RADICAL
11
STRUCTURAL RELIEF IS NECESSARY TO, QUOTE, "RESTORE
12
COMPETITION," CLOSE QUOTE, IS PREMISED ON A FALSE
13
ASSUMPTION.
14
THE GOVERNMENT HAS NEVER CONTENDED THAT MICROSOFT
15
OBTAINED MONOPOLY POWER UNLAWFULLY, AND GIVEN THE COURT'S
16
FINDING THAT THERE WAS NOT A DEMONSTRATED CAUSAL CONNECTION
17
BETWEEN THE CONDEMNED CONDUCT AND THE MAINTENANCE OF THE
18
MONOPOLY POSITION, THE CAUSAL CONNECTION THAT'S REQUIRED
19
A REMEDY MORE EXTREME THAN A CONDUCT INJUNCTION ADDRESSED
20
THE TYPE OF CONDUCT FOUND TO BE UNLAWFUL DOES NOT EXIST.
FOR
TO
21
NEXT --
22
THE COURT:
I AM A LITTLE MYSTIFIED AS TO HOW YOU
23
CHARACTERIZE IT AS THE ABSENCE OF A FINDING OF A CAUSAL
24
CONNECTION.
25
MR. WARDEN:
YOUR HONOR FOUND THAT --
44
1
THE COURT:
I SAID THAT THERE WAS INSUFFICIENT
2
EVIDENCE TO FIND THAT NETSCAPE OR JAVA WOULD, IN FACT, HAVE
3
SUPPLANTED OR AT LEAST REPLACED MICROSOFT AS THE DOMINANT
4
MARKET POWER.
5
THAT THE INCIPIENT COMPETITION THAT THEY REPRESENTED WAS
6
EXTINGUISHED BY MICROSOFT'S ANTICOMPETITIVE CONDUCT.
BUT THERE CERTAINLY WAS AN INTENT TO FIND
7
MR. WARDEN:
8
THE COURT:
9
RATHER THAN DEBATE -NOW, ARE YOU SUGGESTING THAT IN ORDER
TO FIND A CLEAR CAUSAL LINK, I MUST HAVE FOUND, FROM THE
10
EVIDENCE, THAT JAVA AND NETSCAPE WOULD HAVE BEEN ENTIRELY
11
SUCCESSFUL?
12
MR. WARDEN:
IN SUPPLANTING WINDOWS?
IS THAT
YOUR
13
QUESTION?
14
THE COURT:
15
MR. WARDEN:
YES, SIR.
YOUR HONOR, LET ME ANSWER THAT
16
QUESTION THIS WAY.
WE HAVE GOT TO GO BACK TO WHAT THE
17
THEORY OF THE CASE WAS AS THE GOVERNMENT ARTICULATED IT AND
18
TRIED IT.
19
NAVIGATOR WERE COMPETITORS -- POTENTIAL, INCIPIENT, OR
20
OTHERWISE -- IN THE INTEL-COMPATIBLE PC OPERATING SYSTEM
21
MARKET, THE MARKET THE GOVERNMENT DEFINED AND THE COURT
22
ACCEPTED, IN WHICH MARKET THE GOVERNMENT CLAIMED AND THE
23
COURT FOUND THAT MICROSOFT HAD MONOPOLY POWER.
THE THEORY OF THE CASE WAS NOT THAT JAVA AND
24
THE CLAIM WAS THAT THEY WERE POTENTIAL
25
FACILITATORS OF SUCH COMPETITION, NOT THAT THEY THEMSELVES
45
1
WERE PC OPERATING SYSTEMS INCIPIENTLY, POTENTIALLY, OR
2
OTHERWISE.
3
POTENTIAL TO BE CROSS-PLATFORM MIDDLEWARE FACILITATORS OF
4
COMPETITION.
5
THAT THEY WERE MIDDLEWARE.
THAT THEY HAD THE
AND LET ME JUST TAKE YOU THROUGH THIS.
I
INTENDED
6
TO ADDRESS IT ANYWAY AT THE CLOSE OF MY ARGUMENT.
7
RECALL I ADDRESSED IT AT THE CLOSE OF MY ARGUMENT ON
8
LIABILITY.
9
10
THE COURT:
MR. WARDEN:
YOU WILL
YES, SIR.
LET'S TAKE NAVIGATOR.
THE ENTIRE
11
CLAIM OF IMPACT IN THE PC OPERATING SYSTEM MARKET, FROM
12
WHATEVER HAPPENED TO OR WAS DONE TO -- RIGHTLY, WRONGLY OR
13
OTHERWISE -- NAVIGATOR, IS A CHAIN OF PURE SPECULATION.
14
FIRST FACT.
NAVIGATOR WAS NEVER A PLATFORM FOR
15
DESKTOP APPLICATIONS, PERIOD.
SO THE FIRST ASSUMPTION OR
16
SPECULATION THAT HAS TO BE MADE IS THAT IT WOULD HAVE
17
ONE, AND A RICH, FULL-FEATURED PLATFORM.
BECOME
18
19
20
THE SECOND ASSUMPTION THAT HAS TO BE MADE IS THAT
THAT PLATFORM WOULD BE TECHNICALLY ATTRACTIVE TO ISV'S.
THE THIRD ASSUMPTION THAT HAS TO BE MADE IS THAT
21
ISV'S, IN LARGE NUMBERS, WOULD CREATE APPLICATIONS THAT
22
RELIED ON THIS HYPOTHETICAL PLATFORM THAT NEVER CAME INTO
23
EXISTENCE, AND -- AND THIS IS AN IMPORTANT POINT, TOO, YOUR
24
HONOR -- WOULD CREATE APPLICATIONS THAT RELIED ON THE
25
CROSS-PLATFORM NAVIGATOR MIDDLEWARE THAT NEVER CAME INTO
46
1
EXISTENCE, ALONE, WITHOUT MAKING DIRECT CALLS TO OPERATING
2
SYSTEMS.
3
SYSTEMS, EVEN IF YOU'RE USING THE MIDDLEWARE, YOU ARE NOT A
4
CROSS-PLATFORM APPLICATION.
5
BECAUSE, IF YOU MAKE DIRECT CALLS TO OPERATING
THE FOURTH ITEM IN THIS CHAIN OF SPECULATION IS
6
THAT THIS HYPOTHETICAL PLATFORM AND THESE HYPOTHETICAL
7
CROSS-PLATFORM NAVIGATOR APPLICATIONS WOULD BECOME SO
WIDELY
8
APPLICATIONS
9
10
USED, DESPITE THE CHICKEN-AND-EGG NATURE OF THE
BARRIER TO ENTRY DESCRIBED BY THE GOVERNMENT, THAT THE
NAVIGATOR PLATFORM WOULD BECOME A COMMERCIAL SUCCESS.
11
AND THE LAST ITEM IN THIS CHAIN OF SPECULATION IS
12
THAT WHEN ALL OF THAT HAD HAPPENED, THE BUSINESS OF
13
PROVIDING AN ALTERNATIVE OPERATING SYSTEM, AND PROBABLY
14
A KERNEL, FOR INTEL-COMPATIBLE PC'S WOULD BE SO ATTRACTIVE
15
OR SUFFICIENTLY ATTRACTIVE THAT NEW ENTRANTS WOULD WANT TO
16
COME IN, WHICH I FIND EXTREMELY DOUBTFUL BECAUSE THE VALUE
17
WOULD HAVE BEEN SUCKED OUT OF THE WINDOWS LAYER AT THAT
18
POINT.
ONLY
19
NOW, EVERY LINK IN THIS CHAIN IS SPECULATIVE.
20
THIS IS ENTIRELY DIFFERENT THAN STANDARD OIL PUTTING ALL
21
THESE OIL COMPANIES IN A TRUST OR AT&T DEVELOPING A
22
MONOPOLY IN LONG DISTANCE THROUGH A SERIES OF LOCAL
NATIONAL
23
SERVICES.
GOVERNMENT-CONFERRED MONOPOLIES IN LOCAL TELEPHONE
24
THIS IS NOT A CASE IN WHICH THERE HAS BEEN A CLEAR SHOWING
25
OF A SIGNIFICANT CAUSAL CONNECTION BETWEEN THE CONDUCT THE
47
1
COURT FOUND WRONGFUL AND MICROSOFT'S CONTINUED MARKET
2
POSITION IN INTEL-COMPATIBLE PC OPERATING SYSTEMS.
3
IS NO EDEN OF COMPETITION FOR THE GOVERNMENT TO RESTORE.
SO
THERE
4
THE COURT:
AND WHAT YOU'RE SAYING IS THAT CASE
5
LAW ESTABLISHES THAT WITHOUT THIS "BUT FOR" PROOF, THERE IS
6
NO BASIS UPON WHICH TO DEVISE A REMEDY?
7
MR. WARDEN:
I DIDN'T SAY YOUR HONOR HAD TO FIND
8
THAT, BEYOND A REASONABLE DOUBT, MICROSOFT'S MARKET SHARE
9
WOULD NOW HAVE DECLINED TO 25 PERCENT OR SOME SUCH NUMBER.
10
BUT YOUR HONOR MUST FIND FROM THE EVIDENCE -- AND HAS NOT -
11
TO JUSTIFY THIS KIND OF RELIEF, AS OPPOSED TO A CONDUCT
12
INJUNCTION TO WHICH I WILL RETURN --
-
13
THE COURT:
14
MR. WARDEN:
OKAY.
-- TO JUSTIFY THIS KIND OF RELIEF,
OR
15
ANYTHING REMOTELY APPROACHING IT -- THE IP RELIEF THAT I
16
WILL TALK ABOUT LATER, TOO -- YOUR HONOR MUST FIND THAT THE
17
EVIDENCE ESTABLISHES A PROBABILITY THAT, BUT FOR THE ACTS
18
CONDEMNED --
19
20
21
THE COURT:
ALL OF THESE SO-CALLED SPECULATIVE
ASSUMPTIONS WOULD HAVE COME TO PASS; IS THAT CORRECT?
MR. WARDEN:
WELL, YOU HAVE TO FIND PROBABILITY
22
THAT THE WRONGFUL ACTS ACTUALLY KEPT THE MARKET FROM
23
BECOMING MORE COMPETITIVE.
24
MAINTENANCE OF THE MONOPOLY.
OTHERWISE, THERE IS NO ACTUAL
25
THE COURT:
IN THAT CONNECTION, WHAT CASE DO YOU
48
1
WANT ME TO LOOK AT, OR CASES?
2
CASES.
3
JUST TOLD ME.
4
DON'T GIVE ME A STRING OF
I WANT TO KNOW WHAT CASES YOU THINK SAY WHAT YOU'VE
MR. WARDEN:
I AM GOING TO GIVE YOU THE
FOLLOWING.
5
THERE ARE A NUMBER OF CASES -- AND I HAVE TO DO THIS
6
THERE IS NO CASE THAT DIRECTLY ADDRESSES THIS POINT.
BECAUSE
7
THE COURT:
8
MR. WARDEN:
9
10
NO, NO, NO.
YOUR HONOR, THERE ARE
PLENTY OF CASES WHICH SAY THAT DIVESTITURE IS AN EXTREME
REMEDY AND REQUIRES STRONG JUSTIFICATION.
11
THE COURT:
12
MR. WARDEN:
13
I DIDN'T THINK SO.
I HAVE READ THAT.
AND THERE IS NO CASE EMPLOYING IT IN
THE CONTEXT THAT WE'RE HERE DISCUSSING TODAY.
14
THE COURT:
15
MR. WARDEN:
OKAY.
NEXT, THERE IS THE AREEDA TREATISE
16
WHICH SAYS THE THINGS I HAVE SAID, ATTEMPTING TO HARMONIZE
17
AND EXPLAIN THE WHOLE BODY OF CASE LAW.
18
FOLLOWING POINT.
AND LET ME MAKE
THE
19
THE COURT:
UNFORTUNATELY, IF THE AREEDA TREATISE
20
IS INCONSISTENT WITH THE SUPREME COURT, I HAVE TO FOLLOW
21
SUPREME COURT.
THE
22
MR. WARDEN:
OH, I COULDN'T AGREE WITH YOU MORE
23
ABOUT THAT, BUT I THINK IT IS 100 PERCENT CONSISTENT WITH
24
THE SUPREME COURT.
25
THE COURT:
OKAY.
49
1
MR. WARDEN:
AND THE GOVERNMENT'S BRIEF ITSELF
2
SAYS THE REMEDY MUST BE REASONABLY RELATED TO THE WRONG
3
FOUND.
4
NOW, LET ME BACK UP, AND THIS IS GOING TO BE A
5
LITTLE MORE CONCEPTUAL THAN I NORMALLY HAVE BEEN IN
6
ARGUMENTS, BUT I THINK THIS IS A VERY IMPORTANT POINT.
7
IS A CIVIL ACTION IN EQUITY, SEEKING TO ESTABLISH LIABILITY
8
AND OBTAIN RELIEF.
9
TORT OR OTHERWISE -- AND THAT'S THE CLOSEST COMMON-LAW
THIS
NORMALLY, IN ANY CIVIL ACTION, BE IT
10
ANALOG TO THIS KIND OF ACTION -- CAUSATION -- THE FACT OF
11
"BUT FOR" CAUSATION MUST BE PROVEN BY AT LEAST A
12
PREPONDERANCE OF THE EVIDENCE BEFORE LIABILITY CAN BE
13
ESTABLISHED.
14
CONCLUSIONS OF LAW ARGUMENT.
15
NORMALLY A NECESSARY ELEMENT OF LIABILITY ITSELF BEFORE
16
RELIEF IS EVEN CONSIDERED.
THAT'S WHY I ARGUED THIS POINT AT THE
17
NOW, YOUR HONOR --
18
THE COURT:
19
CAUSATION OF INJURY IS
I WILL ACKNOWLEDGE ALL OF THAT.
THE
QUESTION IS "BUT FOR CAUSATION OF WHAT"?
20
MR. WARDEN:
21
THE COURT:
22
MR. WARDEN:
WELL, LET ME CONTINUE WITH MY POINT.
ALL RIGHT.
GO AHEAD.
YOUR HONOR HAS FOUND OR HAS
23
CONCLUDED -- AND THIS IS IN ACCORD WITH THE AREEDA
24
TREATISE -- AGAIN, NOT WITH SOME CONTROLLING SUPREME COURT
25
DECISION, BUT IT'S IN ACCORD WITH THE AREEDA TREATISE --
50
1
THE COURT:
2
MR. WARDEN:
ALL RIGHT.
-- THAT BUT FOR CAUSATION, IN THIS
3
CASE OF MAINTENANCE OF MONOPOLY POWER, NEED NOT BE PROVEN
4
ESTABLISH LIABILITY UNDER SHERMAN 2; THAT THE WRONGFUL
5
CONDUCT, IF WRONGFUL CONDUCT IS SHOWN, MAY BE SUFFICIENT.
6
NOW, THERE IS, AS I REPEAT, NO SUPREME COURT CASE THAT EVEN
7
SAYS THAT.
TO
8
THE COURT:
9
MR. WARDEN:
OKAY.
BUT WHAT AREEDA SAYS IN THAT
10
INSTANCE, AND WHAT IS CLEARLY NECESSARY AT THE REMEDY STAGE
11
FOR THE REMEDY TO BE, IN THE GOVERNMENT'S WORDS, REASONABLY
12
RELATED TO THE WRONG SHOWN, IS THAT THE REMEDY IN SUCH A
13
CASE, WHERE LIABILITY IS SO PREDICATED, BE LIMITED TO A
14
CONDUCT INJUNCTION GOING FORWARD INTO THE FUTURE, SAYING,
15
"THOU SHALT NOT DO THIS, THAT AND THE OTHER THING AGAIN.
16
THE COURT HAS FOUND THAT TO BE WRONGFUL.
17
DON'T DO THAT."
NOW, WE DON'T CONTEND THAT THAT INJUNCTION HAS TO
18
BE LIMITED TO THE VERY PRECISE SPECIFIC THINGS -- THAT IS,
19
DON'T MAKE DEALS WITH NETSCAPE, WHICH THE COURT FOUND WE
20
ATTEMPTED TO DO AND WHICH WE DON'T CONCEDE, BUT THAT'S WHAT
21
THE COURT FOUND.
22
THE KINDS OF CONDUCT FOUND WRONGFUL, BUT THEY HAVE TO BE
23
CONFINED, AND THEY HAVE TO BE DIRECTED TO WHAT THE COURT
24
HELD TO BE WRONGFUL.
25
DISCONNECTED FROM ANY FOUNDATION IN LIABILITY, CUT OFF,
THERE CAN BE GENERIC PROHIBITIONS AGAINST
HAS
OTHERWISE, THE REMEDY BECOMES
51
1
2
BOOM, JUST LIKE THAT.
AND -- I WILL GO ON TO ANOTHER POINT NOW -- IT
3
THEREFORE BECOMES PUNITIVE.
AND IT'S ABSOLUTELY CLEAR FROM
4
THE DUPONT CASE AND OTHERS OF THE SUPREME COURT THAT,
5
COURTS ARE NOT AUTHORIZED IN CIVIL PROCEEDINGS TO PUNISH
6
ANTITRUST VIOLATORS, AND RELIEF MUST NOT BE PUNITIVE.
7
IS, I THINK, NO DISPUTE ABOUT THAT.
8
HONOR, CAN ONLY BE SO CLASSIFIED.
QUOTE,
THERE
AND THIS RELIEF, YOUR
9
AND IF YOU WANT TO TALK ABOUT THE SUPREME COURT
10
AND WHAT THEY DID SAY THAT HAS SOMETHING TO DO WITH THIS,
11
UNITED SHOE MACHINERY, IN 1918, THE BEGINNING OF THE BATTLE
12
OF THE CENTURY, THE COURT SAID THAT DISSOLUTION AS A REMEDY
13
IS EXTREME, EVEN IN ITS MILDEST DEMANDS.
IN
14
IN NATIONAL LEAD, AS THE COURT KNOWS FROM OUR
15
BRIEF, THE SUPREME COURT SAID THAT STRUCTURAL REMEDIES ARE
16
NOT TO BE USED INDISCRIMINATELY WITHOUT REGARD TO THE
17
VIOLATION FOUND.
18
NOW, THOSE ADMONITIONS HAVE EVEN GREATER
19
APPLICATION HERE FOR REASONS I HAVE ALREADY MENTIONED AND
20
FOR THE ADDITIONAL REASON THAT THIS CASE HAD NOTHING TO DO
21
WITH COMPETITION IN BUSINESS PRODUCTIVITY SUITES, SUCH AS
22
OFFICE -- MICROSOFT OFFICE OR ANYONE'S OFFICE.
23
GOVERNMENT PRESENTED NO EVIDENCE AT TRIAL THAT THERE WOULD
24
BE MORE COMPETITION IN THE OS MARKET IF MICROSOFT OFFICE
THE
25
WERE OWNED BY AN INDEPENDENT COMPANY, MICROSOFT OFFICE FOR
52
1
WINDOWS, MICROSOFT OFFICE FOR THE MAC OR WHATEVER.
2
THERE IS NO PROOF OF ANY KIND THAT AN INDEPENDENT
3
APPLICATIONS COMPANY WOULD FIND IT PROFITABLE TO PORT
4
TO LINUX.
5
AS MR. BOIES TALKED ABOUT THE APPLICATIONS BARRIER TO
6
ENTRY -- THAT THE GOVERNMENT CONSISTENTLY MAINTAINED,
7
INCLUDING ITS ECONOMISTS -- ITS THEN ECONOMISTS -- THAT THE
8
MAC PROVIDED NO REAL COMPETITION TO A WINDOWS INTEL PC.
9
ENOUGH.
OFFICE
AND I REMIND THE COURT, AS WE'RE TALKING ABOUT -
-
NOT
NOT ENOUGH.
AND THE REASON WAS THE MAC OS HAD
ONLY
10
12,000 APPLICATIONS.
11
HONOR, IS MICROSOFT OFFICE FOR THE MAC, AND IT'S HAD IT FOR
12
YEARS.
13
KNOW, UNLOCKING THE WORLD FAILS ON THE RECORD MADE AT THIS
14
TRIAL.
15
AND ONE OF THOSE APPLICATIONS, YOUR
SO THIS IDEA THAT OFFICE IS SOMEHOW THE KEY TO, YOU
THERE HAS BEEN NO EVIDENCE PRESENTED AT TRIAL ON
16
THIS SUBJECT, AS I SAID.
AND IT IS WRONG TO CONSIDER ANY
17
REMEDY THAT IS NOT RELATED TO THE CASE THAT WAS TRIED AND
18
THE VIOLATIONS THAT WERE FOUND, MUCH LESS THE EXTREME
19
OF A CORPORATE BREAKUP.
REMEDY
20
SHERMAN
NOW, ANOTHER FACTOR THAT BEARS ON THE REQUEST FOR
21
THIS EXTREME AND CLEARLY PUNITIVE REMEDY.
MICROSOFT'S
22
INCLUSION OF INTERNET EXPLORER IN WINDOWS, WHICH WAS THE
23
CORE OF THIS CASE, WAS NOT CLEARLY PROSCRIBED BY THE
24
GRUDGINGLY
25
ACT UNDER EXISTING CASE LAW.
EVEN THE GOVERNMENT
ACKNOWLEDGES THAT WITH RESPECT TO THE DESIGN OF WINDOWS 98
53
1
AND SECTION 1, WHICH THEY SAY COULD BE DESCRIBED AS
2
INVOLVING UNSETTLED LAW.
3
NOW, YOUR HONOR HAS FOUND THAT THERE WAS A
4
VIOLATION OF SECTION 1 IN THE DESIGN OF WINDOWS 98.
BUT
5
YOUR HONOR ACKNOWLEDGED THAT THE COURT OF APPEALS AND A
6
NUMBER OF OTHER COURTS HAVE ARTICULATED A DIFFERENT
7
FOR TECHNOLOGICAL TYING AND THAT YOUR HONOR'S CONCLUSION,
8
QUOTE, "IS ARGUABLY AT VARIANCE WITH THE DECISION OF THE
9
COURT OF APPEALS IN A CLOSELY-RELATED CASE."
STANDARD
10
THE COURT:
11
MR. WARDEN:
THE LANGUAGE IS FAMILIAR.
NOW HERE, YOUR HONOR, WE ARE ARGUING
12
WITH WELL-SETTLED LAW.
13
WOULD LIKE, AT UNITED STATES V. UNITED STATES GYPSUM
14
COMPANY, 340 U.S. 76, AT PAGES 89 AND 9O, AND IT'S ONLY
15
ILLUSTRATIVE.
THEY ARE RELYING ON THIS CASE, TOO, AS YOUR
16
HONOR KNOWS.
IT'S ONLY ILLUSTRATIVE ON THIS POINT, AND THE
17
POINT IS THAT CONDUCT THAT REASONABLY COULD HAVE BEEN
18
THOUGHT PERMISSIBLE AT THE TIME IT OCCURRED CALLS FOR A
19
LESSER REMEDY THAN CONDUCT AS TO WHICH NO SUCH DOUBT
20
EXISTED.
21
COURT.
22
AND YOU CAN LOOK, IF YOUR HONOR
NOW, THAT IS SETTLED LAW, AND THAT IS SUPREME
THE COURT:
YOU'RE NOT SUGGESTING THAT THIS
REMEDY
23
THAT HAS BEEN PROPOSED IS THE MOST EXTREME REMEDY THAT
24
BE PROPOSED?
COULD
25
-
MR. WARDEN:
YOUR HONOR, I MEAN, MY IMAGINATION -
54
1
YOU KNOW, I WOULDN'T HAVE IMAGINED THIS REMEDY.
2
THE GOVERNMENT'S ACADEMIC THEORETICIANS OF INDUSTRIAL
3
ORGANIZATION COULD COME UP WITH 20 OTHERS.
4
WHETHER THEY WOULD BE MORE EXTREME, LESS EXTREME, OR WHAT.
5
MAYBE THEY WANT ATOMISTIC COMPETITION IN THIS BUSINESS.
6
DON'T KNOW.
7
I'M SURE
I DON'T KNOW
I
WHAT WE DO KNOW -- THEIR ECONOMISTS AND OUR
8
ECONOMISTS AND EVERY OUTSIDE OBSERVER AGREES -- IS THAT IN
9
BUSINESS WITH NETWORK EFFECTS, COMPETITION IS FOR THE WHOLE
A
10
MARKET, AND SOMEBODY IS GOING TO BE ON TOP AT THE END OF
11
EACH SEISMIC CHANGE, TO USE SOME ECONOMISTS' WORDS, AND
12
PARADIGM SHIFT, TO USE OTHER'S WORDS.
EACH
13
AND WHAT I SUBMIT MAKES THIS REMEDY SO EXTREME IS
14
THAT WHEN YOU COMBINE ALL FACETS OF IT, STRUCTURAL,
15
INTELLECTUAL PROPERTY, AND CONDUCT -- AND EVEN IF YOU
16
ONLY AT CONDUCT, IT WILL GO A VERY LONG WAY TO INSURING
17
MICROSOFT IS THE ONE COMPANY IN THE WORLD THAT WON'T WIN --
18
CAN'T WIN THE NEXT ROUND OF COMPETITION FOR THE MARKET.
LOOKED
THAT
WINDOWS
19
THAT LEADS ME, YOUR HONOR, TO ANOTHER POINT WHICH
20
DERIVES FROM THE NETWORK EFFECTS PRINCIPLE, AND THAT IS THE
21
EFFECT OF SUCH A BREAKUP ON THE PUBLIC INTEREST.
22
NOBODY CAN DENY THAT THE PUBLIC HAS REAPED
23
SUBSTANTIAL BENEFITS FROM MICROSOFT'S DEVELOPMENT OF
24
AND OTHER SOFTWARE PRODUCTS.
THE DISTRICT COURT IN ALCOA
25
CAUTIONED AGAINST TAMPERING UNNECESSARILY WITH ECONOMIC AND
55
1
INDUSTRIAL FORCES FROM WHICH THE PUBLIC HAS REAPED SUCH
2
BENEFITS.
3
HERE THE BENEFITS ARE EXTREME.
MICROSOFT, IN ITS
4
PRESENT FORM, HAS PLAYED A LEADING ROLE IN THE PERSONAL
5
COMPUTER REVOLUTION THAT HAS HELPED FUEL THIS COUNTRY'S
6
UNPRECEDENTED ECONOMIC GROWTH.
7
BUSINESSES IN THIS COUNTRY AND ABROAD HAVE BENEFITED FROM
8
THE COMMON PLATFORM PROVIDED BY WINDOWS -- NETWORK
9
BENEFITS -- ALLOWING PRODUCTS FROM THOUSANDS OF ISV'S AND
10
11
MILLIONS OF CONSUMERS AND
OEM'S TO WORK WELL TOGETHER.
NOW, AGAINST THOSE PROVEN BENEFITS TO THE ECONOMY
12
AND TO THE PUBLIC, THE GOVERNMENT'S SUBMISSION ON REMEDIES
13
OFFERS ONLY SPECULATION AS TO HOW THE SOFTWARE INDUSTRY AND
14
COMPETITION THEREIN MIGHT BE IMPROVED BY THE STRUCTURAL
15
RELIEF IT PROPOSES.
16
THE COURT IS THUS CONFRONTED WITH THE SITUATION
17
WHICH THE BENEFITS FROM THE EXISTING FORM OF ORGANIZATION
18
ARE SUBSTANTIAL AND KNOWN, AND THE BENEFITS OF BUSTING IT
19
ARE SPECULATIVE AND UNKNOWN, AND THEY MAY BE NEGATIVE.
IN
UP
20
AND YOUR HONOR WILL RECALL, AS WE SAID IN OUR
21
REPLY BRIEF, THAT IN 1995, THE GOVERNMENT ITSELF TOOK THIS
22
POSITION, IN OPPOSING THE REQUEST IN THE CONSENT DECREE
23
TUNNEY ACT HEARING, THAT THERE BE A DECREE JUST LIKE THE
24
THEY WANT TO IMPOSE NOW, CREATING A SEPARATE APPLICATIONS
ONE
25
WELL
COOPERATION.
AND THEY SAID THEN THAT SUCH RELIEF MIGHT
56
1
ADVANCE THE PRIVATE INTERESTS OF THE ANONYMOUS AMICI -- AND
2
WE CAN ALL GUESS WHO THEY ARE.
3
ABOUT AOL, NETSCAPE, IBM, ORACLE, NOVELL, AND SUN
4
MICROSYSTEMS, THE FIRST OF WHICH HAS ALWAYS BEEN A WARD OF
5
THE GOVERNMENT IN THIS CASE, AND NOW THEY HAVE UNDERTAKEN
6
REPRESENT THESE OTHER COMMERCIAL PIGMIES.
IT'S NOT TOO HARD.
HOW
TO
7
THE GOVERNMENT SAID THEN THAT A BREAKUP WOULD BE,
8
QUOTE, "DANGEROUS TO THE ECONOMY'S WELFARE," CLOSE QUOTE.
9
AND THE FACTORS THAT LED IT TO THAT CONCLUSION THEN ARE THE
10
SAME FACTORS IN THIS BUSINESS THAT EXIST TODAY.
11
NOW, THESE ARE THE REASONS -- AND WE HAVE
12
ELABORATED ON THEM IN OUR BRIEFS -- THAT WE SUBMIT SHOULD
13
LEAD THE COURT TO SUMMARILY REJECT THE BREAKUP PROPOSAL.
14
THE COURT:
15
MR. WARDEN:
16
NOW, I AM GOING TO GO ON TO PROCESS.
DOES YOUR HONOR WANT TO TAKE A BREAK AT THIS POINT?
17
18
ALL RIGHT.
THE COURT:
RECESS.
ALL RIGHT.
WHY DON'T WE TAKE A BRIEF
TEN MINUTES.
19
MR. WARDEN:
THANK YOU.
20
(RECESS WAS TAKEN.)
21
(AFTER RECESS.)
22
MR. WARDEN:
YOUR HONOR KNOWS WE HAVE PROPOSED
23
THREE SCHEDULES, DEPENDING ON WHAT RELIEF THE COURT IS
24
PREPARED TO CONSIDER ON A PLENARY BASIS.
25
THROUGH THOSE IN A MOMENT.
AND I WILL GO
57
1
FIRST, I WANT TO SAY THAT OUR PROPOSED FORM OF
2
JUDGMENT, WE BELIEVE, CONTRARY, OBVIOUSLY, TO WHAT THE
3
GOVERNMENT ARGUED THE MORNING, ADDRESSES THE VIOLATIONS
4
FOUND BY THE COURT IN THIS CASE.
5
AND I AM NOT GOING TO GO THROUGH IT.
IT IS
6
DISCUSSED IN THE BRIEF WE SUBMITTED WITH THE JUDGMENT, BUT
7
DO WANT TO SAY ONE THING.
8
THAT THE FIRST-WAVE AGREEMENTS AND SO FORTH COULD CONTINUE
9
UNDER OUR PROPOSED FORM OF JUDGMENT.
I
MR. BOIES SUGGESTED THIS MORNING
BUT PARAGRAPH 6 OF
OUR
10
PROPOSED FORM OF JUDGMENT INSURES THAT MICROSOFT DOES NOT
11
DISCRIMINATE AGAINST ISV'S IN TERMS OF PROVIDING TIMELY
12
ACCESS TO INFORMATION ON THE BASIS THAT WAS FOUND WRONGFUL
13
IN THE FIRST-WAVE AGREEMENTS AND SO ON.
14
DOES ADDRESS THAT ISSUE.
15
SO OUR JUDGMENT
AND, OF COURSE, WE HAVE PROVISIONS THERE, AS YOUR
16
HONOR KNOWS, THAT ARE ADDRESSED TO OUR RELATIONSHIPS WITH
17
OEM'S AND ANY ATTEMPT OR EFFORT TO COERCE OEM'S INTO
18
SHIPPING OUR PRODUCTS AT THE EXPENSE OF OTHER PEOPLE'S
19
PRODUCTS.
20
PARAGRAPH 8, WHICH IS ALMOST THE SAME AS ONE OF THE
21
GOVERNMENT'S PROPOSALS, THAT WOULD REQUIRE US TO KEEP AN
22
OPERATING SYSTEM -- WINDOWS OPERATING SYSTEM -- LICENSED TO
23
OEM'S AT THE SAME ROYALTY THAT IT HAD BEEN LICENSED FOR
24
THREE YEARS AFTER ITS SUCCESSOR CAME ON THE MARKET.
25
AND WE EVEN HAVE A PROPHYLACTIC PROVISION IN
SO IF THEY DON'T WANT WHATEVER NEW FEATURES OR
58
1
FUNCTIONALITY MAY BE INCORPORATED IN THE NEW WINDOWS, THEY
2
DON'T HAVE TO.
3
THEY CAN TAKE THE OLD ONE.
NOW, UNLESS THE COURT ENTERS OUR PROPOSED FORM OF
4
JUDGMENT AT THIS TIME, WE NEED TIME TO DEAL WITH WHATEVER
5
MAY REMAIN OR WHATEVER THE COURT INTENDS TO CONSIDER.
6
OUR FIRST PROPOSAL, AS THE COURT KNOWS, IS ADDRESSED TO THE
7
SITUATION IN WHICH BREAKUP, THE INTELLECTUAL PROPERTY
8
DEDICATION, AND THE CONDUCT PROVISIONS ALL REMAIN IN ISSUE.
9
AND THAT IS, OBVIOUSLY, THE LONGEST.
10
AND
IF BREAKUP IS RULED OUT, THAT WILL REMOVE A WHOLE
11
SEPARATE KIND OF EVIDENCE AND ARGUMENT THAT WOULD HAVE TO
12
INCLUDED IF IT REMAINS IN, AND WE CAN DEAL WITH A SHORTER
13
TIMEFRAME.
14
PROVISIONS, WHICH I WOULD CALL, IN FACT, CONFISCATORY
15
BECAUSE THEY BASICALLY REQUIRE THE PUBLIC DEDICATION OF
16
BILLIONS OF DOLLARS WORTH OF INTELLECTUAL PROPERTY, WE NEED
17
A LOT OF TIME, IN TERMS OF WHAT THE GOVERNMENT CONSIDERS A
18
LOT OF TIME AT LEAST, TO PREPARE OUR CASE ON THOSE
19
PROVISIONS.
BE
20
BUT GIVEN THE SEVERITY OF THESE DISCLOSURE
AT LEAST SEVERAL MONTHS.
AND I WANT TO ILLUSTRATE THAT BY JUST TALKING
21
ABOUT PARAGRAPH 3.B BRIEFLY.
3.B WOULD REQUIRE MICROSOFT
22
LET ANY SOFTWARE DEVELOPER, HARDWARE VENDOR -- A CATEGORY
23
INDUSTRY PARTICIPANT I DON'T RECALL ANY EVIDENCE REALLY
24
ABOUT -- OR COMPUTER MANUFACTURER, EXCEPT THAT INTEL NSP
TO
OF
25
STUFF -- OR COMPUTER MANUFACTURER -- AND THOSE CATEGORIES
59
1
INCLUDE ALL OF OUR FIERCEST COMPETITORS -- AND, YOUR HONOR,
2
A LOT OF COMPANIES ENGAGED IN SOFTWARE PIRACY AND
3
COUNTERFEITING -- TO STUDY, INTERROGATE AND INTERACT WITH
4
THE SOURCE CODE OF ALL MICROSOFT OPERATING SYSTEMS AND
5
MIDDLEWARE.
6
DEFINITION OF MIDDLEWARE.
7
PROVISION DESIGNED TO ASSURE EFFECTIVE INTEROPERATIONS.
AND THE GOVERNMENT INCLUDES OFFICE WITHIN ITS
8
THE COURT:
9
MR. WARDEN:
10
THE COURT:
11
MR. WARDEN:
12
THE COURT:
13
MR. WARDEN:
14
THE COURT:
15
MR. WARDEN:
16
THE COURT:
17
MR. WARDEN:
AND THEY SAY THIS IS ONLY A
WHAT ARE YOU ADDRESSING NOW?
3.B.
3.B?
YES, YOUR HONOR.
OKAY.
I BELIEVE THAT IS CORRECT.
TIMELY DISCLOSURE TO BE MADE OF
API'S?
YES, YOUR HONOR.
OKAY.
AND THE LANGUAGE TO WHICH I REFERRED
18
AT THIS POINT IS IN THE LAST PARAGRAPH OF 3.B BEFORE LITTLE
19
III.
20
ABOUT STUDY, INTERROGATE, AND INTERACT WITH RELEVANT AND
21
NECESSARY PORTIONS OF THE SOURCE CODE.
22
I AM SORRY.
AFTER LITTLE III.
THAT IS THE LANGUAGE
THAT IS ON PAGE 7.
IT'S A LITTLE HARD TO FIND ALMOST ANYTHING.
IT
IS
23
ALMOST LIKE THE TAX CODE.
24
THE COURT:
25
MR. WARDEN:
ALL RIGHT.
IT'S A LITTLE SHORTER.
THAT'S FOR SURE.
AND EVEN MORE
60
1
DRACONIAN.
2
NOW, THE GOVERNMENT SAYS THIS ONLY IS DESIGNED TO
3
INSURE INTEROPERATIONS.
BUT WHAT THAT TERM MEANS,
4
INTEROPERATION, IS NOT DEFINED.
5
VAGUE, AND AS A RESULT, MICROSOFT BE FORCED TO DISCLOSE
6
DETAILED INFORMATION ABOUT THE INTERNAL OPERATION OF SUCH
7
PRODUCTS AS WINDOWS 98, WINDOWS 2000, AND OFFICE, BASICALLY
8
TO ANYONE IN THE BUSINESS.
EFFECTIVE
IT IS VERY SUBJECTIVE,
VERY
9
NOW, THIS SWEEPING TYPE OF REMEDY IS JUST BEYOND
10
THE PALE IN TERMS OF A REQUEST TO A COURT OF EQUITY AND
11
WOULD BE IMPROPER EVEN IF THE REMEDY DIDN'T EXTEND, AS IT
12
DOES, TO PRODUCTS AND TECHNOLOGIES THAT WERE NO PART OF
13
CASE, LIKE WINDOWS 2000 AND OFFICE.
THIS
14
NOW, THERE IS NO WAY TO HEM IN USE OF SOURCE CODE
15
ONCE DISCLOSED.
YOU CAN'T DO THAT.
ONCE MICROSOFT'S
16
CODE HAS BEEN VIEWED BY COMPETITORS, THEY WILL BE ABLE TO
17
USE IT TO DEVELOP THEIR OWN PRODUCTS, USING MICROSOFT'S
18
VALUABLE TECHNIQUES.
19
MICROSOFT CONTINUE TO INNOVATE AND DEVELOP INTELLECTUAL
20
PROPERTY?
21
WHILE IT MIGHT HELP COMPETITORS, CERTAINLY WON'T HELP
22
CONSUMERS.
SOURCE
23
24
AND IF THIS HAPPENS, WHY WOULD
IT BECOMES DEDICATED TO THE PUBLIC.
AND THAT,
NOW, IN THAT SAME PARAGRAPH, THEY ASK FOR
DISCLOSURE IN A TIMELY MANNER OF ALL API'S, COMMUNICATIONS,
25
INTERFACES AND TECHNICAL INFORMATION USED BY A MICROSOFT
61
1
MIDDLEWARE PRODUCT TO INTEROPERATE WITH MICROSOFT OPERATING
2
SYSTEM SOFTWARE.
3
NOW, I CAN'T PARSE ALL OF THIS IN DETAIL THIS
4
MORNING, BUT THE DEFINITIONS OF THESE TERMS ARE SO BROAD
5
THE DEFINITION OF "OPERATING SYSTEM" IS SO NARROW THAT
6
MICROSOFT WOULD BE FORCED TO DISCLOSE A WHOLE LOT OF
7
PROPRIETARY INFORMATION ABOUT THE INTERNAL OPERATION OF
8
WINDOWS 98 AND WINDOWS 2000.
AND
9
AND YOUR HONOR WILL HAVE IN MIND, FOR EXAMPLE,
10
THAT THE GOVERNMENT DEEMS INTERNET EXPLORER TO BE
11
MIDDLEWARE.
12
INTERNET EXPLORER PROVIDES ABOUT TWENTY PERCENT OF THE
13
EXPOSED BY WINDOWS 98 AND HAS EXTENSIVE INTERNAL
14
INTERDEPENDENCIES WITH OTHER PARTS OF THE OPERATING SYSTEM.
AND FOR THE PURPOSES OF THIS DECREE, AN
API'S
15
SO IF THAT'S MIDDLEWARE, THE COMPETITORS WILL
16
CLAIM -- AND I AM SURE THE GOVERNMENT WILL AGREE -- THAT
17
EVERY INTERDEPENDENCY THAT EXISTS WITHIN WINDOWS 98, OR ANY
18
SUCCESSOR WINDOWS PRODUCT, WITH THAT, QUOTE, MIDDLEWARE,
19
TO BE TREATED AND DISCLOSED LIKE A PUBLISHED API, EVEN
20
THOUGH IT IS NOT A PUBLISHED API, AND IT'S PART OF THE
21
INTERNAL INTERDEPENDENCY OF THE OPERATING SYSTEM.
HAS
22
NOW, IN RESPONDING TO OUR PAPERS ON THIS POINT
23
ABOUT THIS PARAGRAPH, THE GOVERNMENT CHASTISED MICROSOFT
24
READING THE PARAGRAPH IN CONJUNCTION WITH THE GOVERNMENT'S
FOR
25
DEFINITION OF THE 14 DEFINED TERMS USED IN THE PARAGRAPH.
62
1
AND NOW I THINK I AM BACK TO A COMPARISON WITH THE TAX
2
AND THERE THEY ARE HIGHLIGHTED ON THE SCREEN, THE 14
3
TERMS.
CODE.
DEFINED
4
THERE IS NO WAY TO READ THE PARAGRAPH, EXCEPT BY
5
READING IT IN CONJUNCTION WITH THE DEFINITION OF THOSE 14
6
DEFINED TERMS.
7
DEFINITIONS.
8
AND THERE ARE A LOT OF PROBLEMS WITH THOSE
THE SERIOUS QUESTIONS ABOUT THE MEANING AND
EFFECT
9
OF PROVISIONS LIKE PARAGRAPH 3.B UNDERSCORE THE NEED FOR
10
DEVELOPMENT OF A FULL RECORD, AND WHATEVER THE SUBSTANTIVE
11
PROVISIONS OF A DECREE MAY BE, A DECREE THAT IS FAR MORE
12
CAREFULLY CRAFTED AND CONFINED THAN THE ONE THE GOVERNMENT
13
HAS PUT BEFORE THE COURT.
14
NOW, THAT WAS AN EXAMPLE OF THE MERITS AS THEY
15
RELATE TO OUR SECOND PROPOSED SCHEDULE, WHICH ASSUMES THAT
16
THE COURT DOES NOT RULE OUT SUMMARILY BOTH BREAKUP AND THE
17
INTELLECTUAL PROPERTY DEDICATION.
18
OUR THIRD PROPOSED SCHEDULE WAS ADDRESSED TO THE
19
SITUATION IN WHICH ONLY CONDUCT REMEDIES REMAIN.
20
OBVIOUSLY, AS OUR PROPOSED SCHEDULE SHOWS, THE PERIOD OF
21
DISCOVERY CAN BE MUCH LESS.
22
THE COURT IN SOME FASHION TO INSURE THAT IT PROCEEDS
23
EXPEDITIOUSLY.
24
THE COURT:
AND THEN,
DISCOVERY CAN BE CONFINED BY
WHAT DISCOVERY DO YOU CONTEMPLATE?
25
MR. WARDEN:
WELL, FIRST, WE'RE GOING TO TAKE THE
63
1
DEPOSITIONS OF EVERY ONE OF THE PEOPLE WHO HAS FILED A
2
DECLARATION IN SUPPORT OF THE GOVERNMENT'S PROPOSED DECREE.
3
WE WILL HAVE TRIAL WITNESSES UNDER ANY ONE OF
4
THESE SCENARIOS, AND I ASSUME THE GOVERNMENT WILL WANT TO
5
DEPOSE THEM.
6
DISCOVERY WITH THE GOVERNMENT'S DECLARANTS.
7
AND THERE WILL HAVE TO BE ASSOCIATED DOCUMENT
WE MAY WANT LIMITED THIRD-PARTY DISCOVERY, BUT IT
8
WOULD BE LIMITED, AS IT WAS IN THE REBUTTAL PHASE OF THE
9
TRIAL ON LIABILITY, BECAUSE A LOT OF THESE PROVISIONS --
10
WE WOULD WANT TO ESTABLISH THIS THROUGH SOME THIRD-PARTY
11
DISCOVERY -- WILL PLACE MICROSOFT IN A DISCRIMINATED-
12
CLASS OF ONE IN THE ENTIRE SOFTWARE INDUSTRY.
AND
AGAINST
13
THE DESIGN PROVISIONS THAT ARE IN THE CONDUCT --
14
INTRUSION
FORGETTING I.P. AND FORGETTING BREAKUP, THE DESIGN
15
THAT IS REFLECTED IN THE CONDUCT PROVISIONS OF THE
16
GOVERNMENT'S DECREE ARE EXTRAORDINARY, AND NO ONE ELSE IS
17
SUBJECT TO THIS.
18
TIME IN THIS BUSINESS THAT THE GOVERNMENT THINKS WE SHOULD
19
BE PROHIBITED FROM DOING IN TERMS OF MAKING DESIGN
20
DECISIONS.
21
AND PEOPLE DO THE KINDS OF THINGS ALL THE
AND, YOUR HONOR, I AM GOING TO RETURN FOR JUST
ONE
22
SECOND TO THE BREAKUP ARGUMENT.
AS WE POINT OUT IN OUR
23
PAPERS, OUR PRINCIPAL COMPETITORS, WHOM I EARLIER REFERRED
24
TO AS THE WARDS OF THE GOVERNMENT, ARE FAR MORE INTEGRATED
25
THAN WE ARE.
64
1
SUN HAS A TOTALLY CLOSED SYSTEM, FROM INTERNET
2
SERVERS, THROUGH DESKTOP, THROUGH BOX, THROUGH CHIP AND
3
MOTHERBOARD.
4
NOW, THAT'S INTEGRATION.
THE GENIUS THAT BILL GATES BROUGHT TO THIS
5
INDUSTRY WAS AN OPERATING SYSTEM THAT WASN'T CLOSED, LIKE
6
THE MAC OS IS AND LIKE SUN'S SOLARIS IS, BUT WAS OPEN TO
7
KINDS OF HARDWARE MANUFACTURERS SO THAT THEY WERE OUT THERE
8
BRINGING THE FEATURES THAT PEOPLE WANTED TO MARKET AS FAST
9
AS THEY COULD DO SO.
ALL
10
THAT IS THE SUCCESSFUL ASPECT HERE.
BUT LET ME
11
GET BACK TO OUR PROCEDURE HERE.
12
HAVE HAS PROVEN BENEFICIAL, AND I JUST WANT TO SAY THAT IT
13
CAN'T BE CONDEMNED IN OUR CASE WHEN OUR DEGREE OF
14
INTEGRATION IS FAR LESS THAN SUN OR IBM.
15
THE INTEGRATION THAT WE
FAR LESS.
NOW, YOUR HONOR, IT WILL BE TEDIOUS TO GO THROUGH
16
THE ILLUSTRATIONS THAT I WANT TO GO THROUGH HERE, SO I AM
17
GOING TO BE VERY SUMMARY ABOUT IT.
18
DISCUSS IT. AGAIN, THE TAX CODE, IN DETAIL, WOULD BE
19
TEDIOUS.
20
I'M GOING TO TALK AND JUST MENTION THREE PROVISIONS.
21
FIRST IS PARAGRAPH 3.A.III.4.
22
ANY OEM TO SUBSTITUTE NON-MIRCOSOFT MIDDLEWARE AS THE
23
DEFAULT PROGRAM IN PLACE OF ANY MICROSOFT MIDDLEWARE
24
PRODUCT, A DEFINED TERM.
25
IS PARAGRAPH 3.F.
I WOULD JUST LIKE TO
BUT IF YOU LOOK AT THE DESIGN INTRUSIONS -- AND
ITEM
THE
NOW, THAT, IN SUM, PERMITS
THAT'S THE FIRST.
THE SECOND
65
1
THE COURT:
2
MR. WARDEN:
"F" AS IN FOX-TROT?
YES, SIR.
AND THAT WOULD PRECLUDE
3
MICROSOFT FROM DISTRIBUTING NEW OPERATING SYSTEM FEATURES
4
THE INSTALL BASE OF WINDOWS USERS, UNLESS IT WANTED TO
5
INCLUDING SUCH NEW FEATURES IN A REQUIRED, IF YOU WILL,
6
INTACT VERSION OF ANY FUTURE OPERATING SYSTEM RELEASE.
TO
FORGO
7
AND I REMIND YOUR HONOR HERE THAT WHILE THE
8
GOVERNMENT SAYS THAT ONLY APPLIES TO MIDDLEWARE PRODUCTS
9
SEPARATELY DISTRIBUTED OR SOFTWARE PRODUCTS SEPARATELY
10
DISTRIBUTED, THAT INTERNET EXPLORER WAS NOTHING BUT AN
11
OPERATING SYSTEM UPGRADE, AND THE GOVERNMENT HAS
12
CONSISTENTLY MAINTAINED THAT THAT WAS A SEPARATEDLY
13
DISTRIBUTED MIDDLEWARE PRODUCT.
14
UPGRADE THAT WE PUT OUT, OTHER THAN THROUGH DOWNLOADING --
15
THEY SAY THEY HAVEN'T COVERED THAT -- WE PUT IT OUT TO
16
CORPORATE CUSTOMERS, FOR EXAMPLE, ON A DISK -- COULDN'T BE
17
MADE AN INTEGRAL PART OF THE NEXT WINDOWS OPERATING SYSTEM,
18
UNLESS WE ALSO CREATED A VERSION OF THE NEXT SYSTEM WITHOUT
19
THAT SO-CALLED SEPARATELY DISTRIBUTED PRODUCT.
20
SO ANY OPERATING SYSTEM
AND THEN WE HAVE PARAGRAPH 3.G.I OR 3.G.1, AND
21
THAT REQUIRES MICROSOFT TO DESIGN WINDOWS SO THAT BOTH
22
AND END-USERS CAN REMOVE ACCESS TO ANYTHING THAT THE
23
GOVERNMENT CALLS A MIDDLEWARE PRODUCT.
24
WHETHER THE SO-CALLED MIDDLEWARE PRODUCT IS ANYTHING THAT
OEM'S
IS
AND THAT'S SO
25
AT ALL CROSS-PLATFORM, WHICH IS THE ONLY KIND OF MIDDLEWARE
66
1
THAT CAN FACILITATE THE WAY THE GOVERNMENT SAYS, TO USE ITS
2
THEORY, ENTRY INTO THE OPERATING SYSTEM BUSINESS, OR NOT,
3
HOW SIGNIFICANT IT IS, OR NOT, OR WHETHER THERE IS ANY
4
SEPARATE DEMAND FOR IT, WHICH IS THE TEST THE COURT USED,
5
NOT.
OR
OR
6
NOW, THE NET RESULT OF THESE PROVISIONS IS TO
7
DESTROY THE INTEGRITY OF THE WINDOWS PLATFORM SO THAT
8
NEITHER ISV'S, NOR END-USERS, CAN RELY ON CRUCIAL
9
FUNCTIONALITY BEING PRESENT.
AND THERE I WANT TO
10
PARTICULARLY EMPHASIZE PARAGRAPH 3.F, WHICH ACTUALLY
11
AUTHORIZES THE REMOVAL OF CODE -- NOT THE DENIAL OF ACCESS
12
OR THE DISABLING OF ACCESS, OR THE HIDING OF ACCESS, BUT
13
REMOVAL OF CODE AND, THUS, THE DESTRUCTION OF THE UNITY OF
14
API'S EXPOSED BY THE WINDOWS PLATFORM.
THE
15
AND, LASTLY, BACK TO 3.G FOR JUST A MOMENT, IT
16
WOULD REQUIRE MICROSOFT TO REDESIGN IT'S EXISTING SYSTEMS
17
WITHIN SIX MONTHS TO REMOVE THE CROSS DEPENDENCIES THAT THE
18
GOVERNMENT LABELS "MIDDLEWARE PRODUCTS."
19
BE DONE EVEN IF ALL OF OUR WINDOWS PROGRAMMERS WERE
20
TO THE TASK.
AND THAT COULDN'T
ASSIGNED
21
NOW, THE GOVERNMENT SAYS ALL THESE FEARS ARE
22
EXAGGERATED, THEY DON'T INTEND THESE RESULTS, AND SO FORTH.
23
BUT THE GOVERNMENT DRAFTED THE PROVISIONS, AND AS THE
24
GOVERNMENT DRAFTED THEM, THEY WILL RESULT IN EXACTLY THE
25
EFFECTS I HAVE DESCRIBED.
AND THEY ILLUSTRATE A CENTRAL
67
1
FLAW OF THE ENTIRE PROPOSED DECREE, UNINTENDED
CONSEQUENCES,
2
HARM TO CONSUMERS AND OVERBREADTH.
3
SO GIVEN THESE PROBLEMS, EVEN IF WE WERE LIMITED
4
TO DEALING WITH PROPOSED CONDUCT REMEDIES, WE NEED TIME --
5
LIMITED TIME, BUT TIME.
6
THE THREE SCENARIOS TO ADOPT A MORE EXPEDITED SCHEDULE THAN
7
WE HAVE PROPOSED, WE SUBMIT THE COURT SHOULD LIMIT THE
8
GOVERNMENT'S DISCOVERY TO DEPOSITIONS OF EXPERT AND FACT
9
WITNESSES BECAUSE THEY CLAIM THEY DON'T NEED ANY MORE
AND WERE THE COURT IN ANY ONE OF
10
DISCOVERY AT ALL, AND WE SHOULDN'T HAVE TO DEAL
11
SIMULTANEOUSLY WITH EXTENSIVE DOCUMENT DEMANDS, AS WE HAVE
12
HAD TO DO FOREVER AND EVER IN THIS MATTER, WHILE WE'RE
13
TRYING TO GET READY FOR A PROMPT TRIAL.
14
YOUR HONOR, I THINK I HAVE ALMOST CONCLUDED.
I
15
WANT TO SAY THAT THE GOVERNMENT HAS ATTEMPTED TO DEFEND ITS
16
PROPOSALS AND THEIR EXTREMITY AT LEAST IN THE PRESS BY
17
SUGGESTING THAT MICROSOFT CAN'T BE TRUSTED BECAUSE IT
18
VIOLATED THE 1994 CONSENT DECREE.
19
MICROSOFT HAS COMPLIED FULLY WITH THAT DECREE,
AND
20
THERE IS NO BASIS TO SUGGEST OTHERWISE.
THE DECREE
21
THE USE OF CERTAIN TYPES OF OEM LICENSE AGREEMENTS PER
22
PROCESSOR.
ENJOINED
WE FOLLOWED EVERY ONE OF THOSE REQUIREMENTS.
23
AND THAT E-MAIL OF MR. GATES THAT WAS PUT UP ON
24
THE SCREEN HAD TO DO WITH THE MSN INVESTIGATION, NOT WITH
25
HUGE
THE CONSENT DECREE, AS TO WHICH THERE CAN BE NO DOUBT A
68
1
CHANGE IN OUR BUSINESS PRACTICES OCCURRED BECAUSE WE
2
PER-PROCESSOR LICENSING.
3
DROPPED BY THE GOVERNMENT.
4
THAT.
DROPPED
5
AND THE MSN INVESTIGATION WAS
SO MR. GATES WAS RIGHT ABOUT
THE COURT OF APPEALS HAS REJECTED THE CLAIM THAT
6
WE VIOLATED THE DECREE IN THE ONLY INSTANCE IN WHICH THE
7
GOVERNMENT HAS CLAIMED WE HAVE DONE SO.
8
THE GOVERNMENT ALSO SUGGESTS THAT WE HAVE NO
RIGHT
9
TO CONTINUE THE CLAIM THAT WE HAVEN'T VIOLATED THE LAW.
10
THEY CLAIM THAT EVEN IN THEIR REPLY PAPERS -- THAT THAT
11
JUSTIFIES EXTREME RELIEF.
AND
12
13
GOVERNMENT
THAT ISN'T THE WAY THINGS ARE DONE IN THIS
COUNTRY.
WE DON'T HAVE ANY DISAGREEMENT WITH THE
14
ABOUT OBEDIENCE TO THE LAW.
THE DISAGREEMENT IS WHETHER
15
MICROSOFT'S CONDUCT VIOLATED THE SHERMAN ACT, AS PROPERLY
16
INTERPRETED AND APPLIED TO THE FACTS, AND MICROSOFT IS
17
ENTITLED TO LITIGATE THAT DISAGREEMENT WITH THE GOVERNMENT
18
IN THIS COURT BY USING ITS FIRST AMENDMENT RIGHTS AND BY
19
PROCEEDING THROUGH THE FULL APPELLATE PROCESS.
20
A BASIS FOR CONDEMNATION OF A PARTY TO LITIGATION, MUCH
21
THE KIND OF DEMONIZATION THAT WE HAVE SEEN HERE.
THAT IS NOT
LESS
22
23
THANK YOU, YOUR HONOR.
QUESTIONS --
UNLESS YOU HAVE
24
THE COURT:
ALL RIGHT.
THANK YOU, MR. WARDEN.
WE
25
WILL RECESS FOR THE LUNCH TIME NOW, AND I WOULD LIKE TO
69
1
RECONVENE AT 2:00 O'CLOCK.
2
MR. WARDEN:
3
THE COURT:
4
MR. WARDEN:
5
THE COURT:
6
MAY I APPROACH, YOUR HONOR?
SURE.
THIS IS OFF THE RECORD.
THAT'S ALL RIGHT.
COME ON UP.
THIS
IS OFF THE RECORD.
7
(DISCUSSION AT THE BENCH OFF THE RECORD.)
8
(WHEREUPON, AT 12:15 P.M., THE ABOVE-ENTITLED
9
MATTER WAS ADJOURNED.)
10
11
12
CERTIFICATE OF REPORTER
THIS RECORD IS CERTIFIED BY THE UNDERSIGNED REPORTER
TO
13
BE THE OFFICIAL TRANSCRIPT OF THE PROCEEDINGS INDICATED.
14
______________________________
15
16
17
18
19
20
21
22
23
24
25
PHYLLIS MERANA