12090 Federal Register / Vol. 67, No. 52 / Monday, March 18, 2002 / Notices
DEPARTMENT OF JUSTICE ROM with the Clerk of the United States 5. ‘‘A Description Of The Procedures District Court for the District of Available For Modification Of Such Antitrust Division Columbia. Proposal’’ 6. ‘‘A Description And Evaluation Of United States v. Microsoft Corporation; Memorandum in Support of Entry of Alternatives To Such Proposal Actually Notice of Availability of Public Proposed Final Judgment Considered By The United States’’ Comments; Memorandum of the 7. Including Information Not Required By In the United States District Court for The Tunney Act Cannot Result In A United States in Support of Entry of the District of Columbia Noncompliant CIS Proposed Final Judgment; Response United States of America, Plaintiff, v. C. The United States Fully Complied With of the United States to Public All Tunney Act Requirements Regarding Comments on the Revised Proposed Microsoft Corporation, Defendant; Determinative Documents Final Judgment; Stipulation and Memorandum of the United States in D. The United States Fully Complied With Second Revised Proposed Final Support of Entry of the Proposed Final All Tunney Act Requirements Regarding Judgment; and United States’ Judgment. Publication of Summaries In Newspapers Memorandum Regarding Modifications [Civil Action No. 98–1232 (CKK)] E. The United States Has Fully Complied With The Tunney Act Requirement That Contained in Second Revised Next Court Deadline: March 6, 2002; It Respond To Public Comments Proposed Final Judgment Tunney Act Hearing. F. The United States Will Fully Comply Charles A. James, In United States v. Microsoft Corp., With the Tunney Act Requirement That Assistant Attorney General. It Publish the Comments and Response Civil Action No. 98–1232, pending in Deborah P. Majoras, G. The Second Revised Proposed Final the United States District Court for the Deputy Assistant Attorney General. Judgment Needs No Separate Round Of District of Columbia, the United States Phillip R. Malone, Public Comment And Response hereby publishes: (1) Memorandum of Renata B. Hesse, III. The Court Must Enter the Proposed the United States in Support of Entry of David Blake-Thomas, Decree if It Is Within the Reaches of the Paula L. Blizzard, Proposed Final Judgment; (2) Response Public Interest Kenneth W. Gaul, A. Whether The Proposed Decree Is Within of the United States to Public Comments Adam D. Hirsh, on the Revised Proposed Final The Reaches Of The Public Interest Is Jacqueline S. Kelley, Determined By The Test Of Microsoft I Judgment; (3) Stipulation and Second Steven J. Mintz, B. The Court’s Task In Entering A Consent Barbara Nelson, Revised Proposed Final Judgment; and Decree Differs From Adjudicating A David Seidman, (4) United States’ Memorandum Remedy David P. Wales, Regarding Modifications Contained in IV. Entry of the Revised Proposed Final Attorneys. Second Revised Proposed Final Judgment is in the Public Interest Judgment. U.S. Department of Justice, Antitrust A. The Revised Proposed Final Judgment The United States is concurrently Division, 601 D Street NW., Suite 1200, Satisfies The Goals Of An Antitrust Washington, DC 20530, (202) 514–8276. publishing in the Federal Register a Remedy And Properly Addresses All complete list of the names of all Philip S. Beck, Bases Of Liability Affirmed By The Court Special Trial Counsel. individuals or entities submitting public Of Appeals February 27, 2002. a. Stops The Unlawful Conduct comments; the number of pages of each b. Prevents Recurrence Of Unlawful comment; a unique tracking number Table of Contents Conduct assigned to each comment so that each Table of Contents c. Restores Competitive Conditions To The comment may be located on the Table of Authorities Market Department of Justice’s website; and an Background B. The Revised Proposed Final Judgment index to the comments organized by six Discussion Compares Favorably To The Initial Final categories based primarily on the level I. The Tunney Act Governs the Court’s Judgment of detail of the comment. Disposition of the Revised Proposed 1. The Revised Proposed Final Judgment In addition to the publication in the Final Judgment Relies On Conduct Restrictions, Rather II. The United States Has Complied With All Than Structural Relief Federal Register of the materials Tunney Act Procedural Prerequisites to 2. Remedying Tying Is No Longer An published herein, electronic copies of the Court’s Public Interest Determination Objective all comments are available on the A. Summary Of Compliance 3. The New Conduct Restrictions Compare Department of Justice’s website at B. The United States Fully Complied With Favorably To Those In The Initial Final www.usdoj.gov/atr/cases/ms- All Tunney Act Requirements Regarding Judgment comments.htm. Interested persons may The CIS a. Substantive Provisions Included In Both also request a copy of the one or more 1. ‘‘The Nature And Purpose Of The The Initial Final Judgment And The CD–ROMs containing the full text of the Proceeding’’ Revised Proposed Final Judgment comments by contacting the Department 2. ‘‘A Description Of The Practices Or b. The RPFJ Contains Provisions Not Events Giving Rise To The Alleged Included In The Initial Final Judgment of Justice in Washington, DC at Violation Of The Antitrust Laws’’ C. The Revised Proposed Final Judgment Antitrust Documents Group, 325 7th 3. ‘‘An Explanation Of The Proposal For A Creates Competitive Conditions Street NW., Ste. 215 North, Washington, Consent Judgment, Including An V. The Court Should Make its Public Interest DC 20530, Telephone: (202) 514–2481, Explanation Of Any Unusual Determination and Enter the Decree as Fax: (202) 514–3763. The United States Circumstances Giving Rise To Such Expeditiously as Possible will provide free of charge one copy of Proposal Or Any Provision Contained A. The Court Should Not Hold An this CD–ROM or set of CD–ROMs to Therein, Relief To Be Obtained Thereby, Evidentiary Hearing each individual person and five copies And The Anticipated Effects On B. The Court Should Not Delay Entry Of to each library or other institution that Competition Of Such Relief’’ The Decree Pending The Remedies 4. ‘‘The Remedies Available To Potential Hearing In New York v. Microsoft requests it. The United States will Private Plaintiffs Damaged By The 1. Linking This Case To The Remedies provide, at cost, additional copies above Alleged Violation In The Event That Hearing In New York Would Be Bad Law these limits to individuals or Such Proposal For The Consent And Bad Policy institutions upon request. The United Judgment Is Entered In Such 2. The Claimed Benefits Of Linkage Are States has filed the comments on CD– Proceeding’’ Illusory
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Conclusion Sullivan v. Stroop, 496 U.S. 478 (1990) Statutes and Rules Appendix A: Comparison of Court of United States v. AT&T, 552 F. Supp. 131 Sherman Act, 15 U.S.C. § 1 Appeals’ Findings on Liability to (D.D.C. 1982), aff’d mem. sub. nom. Sherman Act, 15 U.S.C. § 2 Provisions of the Revised Proposed Final Maryland v. United States, 460 U.S. 1001 Clayton Act, § 5(a), 15 U.S.C. § 16(a) Judgment (1983) Clayton Act, ch. 323, § 5, 38 Stat. 730, 731 Appendix B: United States v. Microsoft United States v. Alex. Brown & Sons, 963 F. (1914) Corp.—Newspaper Notice Supp. 235 (S.D.N.Y. 1997), aff’d sub nom. Tunney Act (Antitrust Procedures and Appendix C: Declaration of David S. Sibley United States v. Bleznak, 153 F.3d 16 (2d Penalties Act, § 2), 15 U.S.C. § 16(b)–(h) Cir. 1998) Table of Authorities 15 U.S.C. § 16(b) United States v. Alex. Brown & Sons, 169 15 U.S.C. § 16(c) Prior Decisions in This Case F.R.D. 532 (S.D.N.Y. 1996), aff’d sub nom. 15 U.S.C. § 16(d) United States v. Bleznak, 153 F.3d 16 (2d Microsoft Corp. v. United States, 122 S. Ct. 15 U.S.C. § 16(e) Cir. 1998) 350 (2001) (Denying Certiorari) 15 U.S.C. § 16(f) United States v. Armour & Co., 402 U.S. 673 Microsoft Corp. v. United States, 530 U.S. (1971) 15 U.S.C. § 12(a) 1301 (2000) (Declining to Accept Appeal) United States v. Automatic Data Processing, 15 U.S.C. § 18a(g) United States v. Microsoft Corp., 253 F.3d 34 Inc., 1996–1 Trade Cas. (CCH) ¶ 71,361 15 U.S.C. § 21(l) (D.C. Cir. 2001) (en banc) (per curiam) (D.D.C. 1996) Expediting Act, 15 U.S.C. § 29(b) (Appellate Decision) United States v. Bechtel Corp., 648 F.2d 660 28 U.S.C. § 455(a) United States v. Microsoft Corp., 2001 WL (9th Cir. 1981) Fed. R. Civ. P. 41(a)(1)(ii) 931170 (D.C. Cir. Aug. 17, 2001) (en banc) United States v. Blackstone Capital Partners (per curiam) (Denying Stay of Mandate) Legislative Materials II Merchant Banking Fund, 1999–1 Trade United States v. Microsoft Corp., 97 F. Supp. 119 Cong. Rec. 3452 (1973) Cas. (CCH) ¶ 72,484 (D.D.C. 1999) 2d 59 (D.D.C. 2000) (Initial Final Judgment) 119 Cong. Rec. 24,600 (1973) United States v. Borden Corp., 347 U.S. 514 United States v. Microsoft Corp., 87 F. Supp. 119 Cong. Rec. 24,604 (1973) (1954) 2d 30 (D.D.C. 2000) (Conclusions of Law) The Antitrust Procedures & Penalties Act: United States v. Central Contracting Co., 537 United States v. Microsoft Corp., 84 F. Supp. Hearings on S. 782 & S. 1088 Before the F. Supp. 571 (E.D. Va. 1982) 2d 9 (D.D.C. 1999) (Findings of Fact) Subcomm. on Antitrust & Monopoly of the United States v. City of Miami, 614 F.2d 1322 Senate Committee on the Judiciary, 93d Cases (5th Cir. 1980) Cong. (1973) United States v. E.I. du Pont de Nemours & Adams v. Bell, 711 F.2d 161 (D.C. Cir. 1983) Consent Decree Bills: Hearings on H.R. 9203, Co., 366 U.S. 316 (1961) American Can Co. v. Mansukhani, 814 F.2d H.R. 9947, and S. 782 Before the Subcomm. United States v. Enova Corp., 107 F. Supp. 421 (7th Cir. 1987) on Monopolies & Commercial Law of the 2d 10 (D.D.C. 2000) American Water Works Ass’n v. EPA, 40 F.3d House Comm. on the Judiciary, 93rd Cong. United States v. Figgie International Inc., 1266, 1274 (D.C. Cir. 1974) (1973) 1997–1 Trade Cas. (CCH) ¶ 71,766 (D.D.C. Andrx Pharms., Inc. v. Biovail Corp. Int’l, 256 H.R. Rep. No. 93–1463 (1974), reprinted in 1997) F.3d 799 (D.C. Cir. 2001), petition for 1974 U.S.C.C.A.N. 6535 United States v. Foodmaker, Inc., 1996–2 certiorari filed, 70 U.S.L.W. 3465 (Jan. 11, S. Rep. No. 93–298 (1973) 2002), (No. 01–1050) Trade Cas. (CCH) ¶ 71,555 (D.D.C. 1996) Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., United States v. Gillette Co., 406 F. Supp. Miscellaneous 429 U.S. 477 (1977) 713, 716 (D. Mass. 1975) 47 FR 21,214 (1982) Cascade Natural Gas Corp. v. El Paso Natural United States v. Grinnell Corp., 384 U.S. 563 59 FR 59,426 (1994) Gas Co., 386 U.S. 129 (1967) United States v. Input/Output, Inc., 1999–1 66 FR 59,452 (2001) Commissioner v. Lundy, 516 U.S. 235 (1996) Trade Cas. (CCH) ¶ 72,528 (D.D.C. 1999) 3 Phillip E. Areeda & Herbert Hovenkamp, Fifth & Walnut, Inc. v. Loew’s Inc., 176 F.2d United States v. Mahle GmbH, 1997–2 Trade Antitrust Law (rev. ed. 1996) 587 (2d Cir. 1949) Cas. (CCH) ¶ 71,868 (D.D.C. 1997) Maimon Schwarzschild, Public Law by Ford Motor Co. v. United States, 405 U.S. 562 United States v. Microsoft Corp., 56 F.3d Private Bargain: Title VII Consent Decrees (1972) 1448 (D.C. Cir. 1995) and the Fairness of Negotiated Institutional Gustafson v. Alloyd Co., 513 U.S. 561 (1995) United States v. National Lead Co., 332 U.S. Reform, 1984 Duke L.J. 887, 903 (1984) Hartford-Empire Co. v. United States, 323 319 (1947) Note, The Scope of Judicial Review of U.S. 386 (1945) United States v. Oregon State Medical Consent Decrees under the Antitrust Hyperlaw, Inc. v. United States, 1998 WL Society, 343 U.S. 326 (1952) Procedures and Penalties Act of 1974, 82 388807, 159 F.3d 636 (D.C. Cir. 1998) United States v. Paramount Pictures, Inc., Mich. L. Rev. 153 (1974) (unpublished table decision) 334 U.S. 131 (1948) Webster’s Third International Dictionary In re IBM Corp., 687 F.2d 591 (2d Cir. 1982) United States v. RCA, 46 F. Supp. 654 (D. (1981) International Salt Co. v. United States, 332 Del. 1942), appeal dismissed, 318 U.S. 796 U.S. 392 (1947) (1943) In the United States District Court for Janus Films, Inc. v. Miller, 801 F.2d 578 (2d United States v. Swift & Co., 286 U.S. 106 Cir. 1986) (1932) the District of Columbia Local No. 93, International Association of United States v. Loewen Group Inc., 1998–1 United States of America, Plaintiff, v. Firefighters v. City of Cleveland, 478 U.S. Trade Cas. (CCH) ¶ 72,151 (D.D.C. 1998) Microsoft Corporation, Defendant; 501 (1986) United States v. Titan Wheel International, Memorandum of the United States in Maryland v. United States, 460 U.S. 1001 Inc., 1996–1 Trade Cas. (CCH) ¶ 71,406 Support of Entry of the Proposed Final (1983) (D.D.C. 1996) Judgment. Massachusetts School of Law at Andover, United States v. Trump, 1988–1 Trade Cas. Inc. v. United States, 118 F.3d 776 (D.C. (CCH) ¶ 67,968 (D.D.C. 1988) [Civil Action No. 98–1232 (CKK)] Cir. 1997) United States v. United Artists Theatre Next Court Deadline: March 6, 2002, Parklane Hosiery Co. v. Shore, 439 U.S. 322 Circuit, Inc., 1971 Trade Cas. (CCH) Tunney Act Hearing. (1979) ¶ 73,751 (E.D.N.Y. 1971) The proposed final judgment, as Pennsylvania Department of Corrections v. United States v. United Shoe Machinery revised and modified, represents the Yeskey, 524 U.S. 206 (1998) Corp., 391 U.S. 244 culmination of six years of Rufo v. Inmates of Suffolk County Jail, 502 United States v. Western Elec. Co., 900 F.2d U.S. 367 (1992) 283 (D.C. Cir. 1990) investigation, litigation, appeals, and Sorenson v. Secretary of Treasury, 475 U.S. United States v. Western Elec. Co., 993 F.2d negotiation. It is a comprehensive 851, 860 (1986) 1572 (D.C. Cir. 1993) remedy that puts into place meaningful, South Dakota v. Yankton Sioux Tribe, 522 Utah Public Service Commission v. El Paso effective, and enforceable restrictions on U.S. 329 (1998) Natural Gas Co., 395 U.S. 464 (1969) Microsoft and, critically, comports with
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both the legal standards for relief in an violation of Section 1. Id. at 45–51. The independent software vendors (ISVs)) antitrust case and the decision by the district court rejected plaintiffs’ claim wrote enough applications for widely Court of Appeals in this case. Just as that Microsoft’s exclusive dealing used middleware, computer users no important, it provides relief effective contracts violated Section 1 of the longer would be reluctant to choose a now. Failure to enter the proposed final Sherman Act. Id. at 51–54. To remedy non-Windows operating system for fear judgment would mean that Microsoft’s the violations, the court ordered that it would run an insufficient array anticompetitive practices likely would Microsoft to break up into separate of applications. Microsoft, 253 F.3d at continue unabated for several more operating system and applications 53. Over time, this widely used years, an eternity in this ever-changing businesses. Initial Final Judgment, 97 F. middleware might have the potential to market. Accordingly, in the United Supp. 2d at 64–65. The Initial Final erode the ‘‘applications barrier to entry’’ States’ best judgment, entry of the Judgment also ordered transitional that protected Microsoft’s Windows proposed final judgment is in the public conduct restrictions until the structural monopoly. interest. relief became effective. Id. at 66–69. Microsoft’s anticompetitive acts Microsoft filed notices of appeal,4 and centered on two particular middleware Background the Court of Appeals, sua sponte, threats: Netscape’s Web browser 1. On May 18, 1998, the United States ordered that any proceedings before it (Navigator), and Sun Microsystem’s Java filed a civil complaint alleging that be heard en banc. Order, No. 00–5212 technologies. Microsoft set out to ensure Microsoft had engaged in (D.C. Cir., June 13, 2000). The district that its own Web browser, IE, gained anticompetitive conduct in violation of court certified the case for direct appeal dominant usage so that ISVs would Sections 1 and 2 of the Sherman Act, 15 to the Supreme Court pursuant to the continue to focus their efforts on the U.S.C. 1, 2. At Microsoft’s request, the Expediting Act of 1903, as amended, 15 Windows platform rather than the case was consolidated with a similar U.S.C. 29(b), and stayed its judgment Navigator platform. Microsoft took steps action brought by twenty 1 states and the pending completion of the appellate to constrict Netscape’s access to the District of Columbia.2 The United States process. Order (June 20, 2000). The distribution channels that led most and the States jointly presented the case Supreme Court declined to accept the efficiently to browser usage: pre- in a 78-day bench trial that began on appeal and remanded the case to the installation by computer manufacturers October 19, 1998, and ended on June 24, Court of Appeals. Microsoft Corp. v. (known as original equipment 1999. The court heard testimony from United States, 530 U.S. 1301 (2000). manufacturers (OEMs)), distribution by 26 witnesses and admitted depositions 2. After extensive briefing and two Internet access providers (IAPs), and the of 79 other witnesses and 2733 exhibits. days of oral argument, the en banc Court ISVs themselves. Through restrictions On November 5, 1999, the court entered of Appeals issued a unanimous and placed in its Windows licenses to 412 findings of fact. United States v. comprehensive decision affirming in OEMs, exclusive deals with IAPs and Microsoft Corp., 84 F. Supp. 2d 9 part, reversing in part, and remanding in ISVs, and a combination of inducements (D.D.C. 1999) (‘‘Findings of Fact’’). On part for proceedings before a different to—and threats of retaliation against— April 3, 2000, after the parties attempted district judge. United States v. Microsoft other third-parties, Microsoft sought to unsuccessfully to settle the suit through Corp., 253 F.3d 34 (D.C. Cir. 2001) (en impede the emergence of middleware as months-long mediation before Judge banc) (per curiam) (‘‘Microsoft’’). a potential threat to its operating system Richard Posner,3 the district court a. The Court of Appeals affirmed the monopoly. Id. at 58–74. entered its conclusions of law. 87 F. district court’s ruling that Microsoft Java technologies posed a middleware Supp. 2d 30 (D.D.C. 2000) maintained its operating system threat to Microsoft by enabling (‘‘Conclusions of Law’’). On June 7, monopoly, in violation of Section 2 of developers to write programs that could 2000, after further proceedings on the Sherman Act, by engaging in be ported to different operating systems remedy, the district court entered its specific acts that impeded the with relative ease. In May 1995, final judgment. 97 F. Supp. 2d 59 emergence of two nascent Netscape announced that it would (D.D.C. 2000) (‘‘Initial Final Judgment’’ ‘‘middleware’’ threats to that monopoly. include a Sun-compliant Windows Java (IFJ)). Id. at 50–80.5 ‘‘Middleware’’ is platform Virtual Machine (JVM), a key Plaintiffs never contended that software that runs on top of an operating component of Java technologies, with Microsoft unlawfully obtained its system but simultaneously exposes its every copy of Navigator, thereby monopoly in Intel-compatible personal own application programming interfaces creating the possibility that Sun’s Java computer (PC) operating systems. (APIs) so that applications can run on implementation would achieve the Plaintiffs alleged, and the district court the middleware itself. Id. at 53; Findings necessary ubiquity on Windows to pose ruled, that Microsoft successfully had of Fact, ¶ 28. An application written to a threat to the applications barrier to engaged in anticompetitive acts to rely exclusively on a middleware entry. Id. at 74. Thus, by limiting the protect and maintain that monopoly, in program’s APIs could run on all usage of Navigator, Microsoft violation of Section 2 of the Sherman operating systems on which that simultaneously would limit the Act. Conclusions of Law at 37–44. The middleware runs (i.e., would be ‘‘cross- distribution of Java. Microsoft, however, district court also ruled that Microsoft platform’’). The Court of Appeals found took additional steps directed had attempted to monopolize the that middleware posed a potential threat specifically to interfere with the Internet Web browser market, in to Microsoft’s operating system development, distribution, and use of violation of Section 2, and had tied its monopoly because if enough cross-platform Java. Those steps Web browser, Internet Explorer (IE), to applications developers (known as included: (1) pressuring third parties its Windows operating system, in not to support cross-platform Java (id. at 4 Plaintiffs did not cross-appeal the dismissal of 75); (2) seeking to extinguish the Java 1 One State later withdrew, and another settled in their Section 1 claim alleging exclusive dealing. threat through technological means that July 2001. 5 The Court of Appeals also rejected Microsoft’s maximized the difficulty with which 2 On February 1, 2002, this Court de-consolidated procedural challenges to the trail court proceedings, applications written in Java could be the cases. Order at 3 (Feb. 1, 2002). finding the district court’s actions ‘‘comfortably 3 At the time, Judge Posner was Chief Judge of the within the bounds of its broad discretion to conduct ported from Windows to other United States Court of Appeals for the Seventh trials as it sees fit.’’ Microsoft, 253 F.3d at 98, 100– platforms, and vice versa (id. at 74–75); Circuit. 01. and (3) other anticompetitive steps to
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discourage developers from creating and thus the Supreme Court had not position in the [operating system] Java applications compatible with non- factored into the per se rule as originally market but for its anticompetitive Microsoft JVMs (id. at 75–78). conceived.’’ Id. at 92–93. The court behavior.’’ Id. at 107 (quoting Findings In affirming liability for monopoly directed that on remand, plaintiffs of Fact, ¶ 411) (emphasis added). The maintenance, however, the Court of would be limited to proving that the court concluded that the remedy should Appeals upheld 12 of the 20 district anticompetitive effects from tying be ‘‘tailored to fit the wrong creating the court findings that particular acts outweigh the benefits in the tied occasion for the remedy.’’ Id. at 107. constituted bases for violations of product market, not just that those e. Finally, the Court of Appeals Section 2. See id. at 59–78. In particular, effects outweigh the benefits overall. Id. concluded that the district judge’s the court rejected the findings that at 95. In addition, plaintiffs would be contacts with the press violated the Microsoft had violated Section 2 by ‘‘precluded from arguing any theory of Code of Conduct for United States prohibiting OEMs from ‘‘automatically harm that depends on a precise Judges and warranted disqualification launching a substitute user interface definition of browsers or barriers to under 28 U.S.C. 455(a). Id. at 107–118. upon completion of the boot process’’ entry . . . other than what may be The court vacated the remedy on the (id. at 63); overriding the user’s choice implicit in Microsoft’s tying additional basis that the district judge’s of browser in certain circumstances (id. arrangement.’’ Id. misconduct infected the remedial phase. at 67); giving away its Internet Explorer d. In light of its determination that it Id. at 117. browser to IAPs and ISVs (id. at 67–68, had ‘‘drastically’’ (id. at 105, 107) 3. After the Court of Appeals rejected 71–72); offering IAPs a bounty for each altered the district court’s conclusions Microsoft’s petition for rehearing, customer the IAP signs up for service on liability, and its finding that an Microsoft filed a petition for a writ of using the IE browser (id. at 67–68); evidentiary hearing on remedy was certiorari based on the Court of Appeals’ developing and giving away the Internet necessary prior to the district court’s failure to vacate the Findings of Fact Explorer Access Kit (IEAK) (id. at 68); imposting a remedy (id. at 101–103), the and Conclusions of Law—and not just entering into exclusive agreements with Court of Appeals vacated the final the remedy—in light of the district Internet Content Providers (ICPs) (id. at judgment and remanded the case to the judge’s misconduct. Petition for a Writ 71); and creating a JVM that runs faster district court for further proceedings. Id. of Certiorari, No. 01–236 (Aug. 7, 2001) on Windows but lacks the cross- at 107. The court also offered guidance (‘‘Cert. Petition’’). Although Microsoft’s platform attributes that Sun’s (hence ‘‘to advance the ultimate resolution of petition was limited to the issue of Navigator’s) JVM possesses (id. at 74– this important controversy.’’ Id. at 105. judicial misconduct, it promised a 75). In addition, and importantly, the Though recognizing that, ‘‘[a]s a general future petition on several issues relating Court of Appeals expressly rejected the matter, a district court is afforded broad to liability when the case becomes district court’s conclusion that, ‘‘apart discretion to enter that relief it final—after the remand to the district from Microsoft’s specific acts, Microsoft calculates will best remedy the conduct court and another appeal to the D.C. was liable under § 2 based upon its it has found to be unlawful,’’ id., the Circuit. Id. at 15. On October 9, 2001, general ‘course of conduct.’’’ Id. at 78. Court of Appeals directed this Court to the Supreme Court denied Microsoft’s The court found that the district court ‘‘reconsider whether the use of the petition. Microsoft Corp. v. United had failed to ‘‘point to any series of acts, structural remedy of divestiture is States, 122 S. Ct. 350 (2001). each of which harms competition only appropriate with respect to Microsoft, Meanwhile, on the same day it filed slightly but the cumulative effect of which argues that it is a unitary its petition for certiorari, Microsoft which is significant enough to form an company.’’ Id. moved the Court of Appeals to stay its independent basis for liability.’’ Id. Critically, the Court of Appeals mandate pending disposition of the— b. The Court of Appeals also reversed admonished the district court on petition by the Supreme Court. The the district court’s determination that remand to bear in mind the role of Court of Appeals denied Microsoft’s Microsoft had attempted to monopolize causation when fashioning relief, motion, United States v. Microsoft the Web browser market in violation of directing this Court to ‘‘consider Corp., 2001 WL 931170 (D.C. Cir. Aug. Section 2. Id. at 80–84. The court found whether plaintiffs have established a 17, 2001) (en banc) (per curiam), and that plaintiffs had failed to define and sufficient causal connection between issued its mandate on August 24, 2001. prove a market for Web browsers, a Microsoft’s anticompetitive conduct and That same day, a random selection necessary element of the claim. Id. at its dominant position in the [operating assigned the case to this Court. 81–82. system] market.’’ Id. at 106. Absent 4. On September 6, 2001, plaintiffs c. The Court of Appeals vacated the ‘‘clear[]’’ indication of a ‘‘significant advised Microsoft that they did not district court’s judgment on the Section causal connection between the conduct intend to pursue the Section 1 tying 1 tying claim as well, and remanded and creation or maintenance of the claim on remand, and that they did not that claim to the district court for market power,’’ Microsoft’s unlawful intend to pursue on remand the reconsideration under the rule of behavior ‘‘should be remedied by ‘an restructuring of Microsoft into two reason. Id. at 84–97. In so holding, the injunction against continuation of that separate companies. As explained to the Court of Appeals held that the market conduct.’’’ Id. at 106 (quoting 3 Phillip Court in the Joint Status Report filed on for platform software presented unique E. Areeda & Herbert Hovenkamp, September 20, 2001, Plaintiffs’ goal was issues under tying law. The ‘‘nature of Antitrust Law ¶ 650a, at 67 (rev. ed. to achieve the expeditious imposition of the platform software market 1996) (‘‘Antitrust Law’’)) (emphasis relief that would effectively remedy affirmatively suggests that per se rules added by Court of Appeals). The court Microsoft’s illegal conduct. Joint Status might stunt valuable innovation’’ (1) emphasized that it had ‘‘found a causal Report at 21 (Sept. 20, 2001). because ‘‘the separate-products test is a connection between Microsoft’s 5. On September 28, 2001, this Court poor proxy for net efficiency from newly exclusionary conduct and its continuing ordered the parties to ‘‘concentrate all of integrated products; and (2) ‘‘because of position in the operating systems market their resources’’ on a new round of the pervasively innovative character of only through inference,’’ id. at 106–07, intense settlement negotiations and platform software markets, tying in such but that even the district court probable mediation. Order at 2–3 (Sept. markets may produce efficiencies that ‘‘expressly did not adopt the position 28, 2001). The Court emphasized the courts have not previously encountered that Microsoft would have lost its importance of these efforts in light of
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the passage of time—more than six years February 27, 2002. Joint Status Report at 0030600); ProComp’s Comments to the since plaintiffs’’ claims arose and more 7 (Feb. 7, 2002). Simultaneously with Proposed Final Judgment, at 1–2 (MTC than four years of litigation, id. at 2. The this Memorandum, the parties have # 0030608) (‘‘ProComp Comments’’); Court expressly directed plaintiffs to filed a Second Revised Proposed Final Memorandum of Points and Authorities ‘‘determine which portions of the Judgment (SRPFJ), which includes in Support of the California Plaintiffs’ former judgment remain appropriate in modifications to which the United Motion to Intervene at 18–21 (Jan. 23, light of the appellate court’s ruling and States, Microsoft, and the Settling States 2002)) (‘‘Cal. Plaintiffs’’ Br.’’)), that the which portions are unsupported have agreed. 8 This Memorandum is Tunney Act does not apply to some following the appellate court’s couched in terms of, and generally proposals for consent judgments narrowing of liability.’’ Tr. 9/28/01 at 8. refers to, the proposed decree before submitted by the United States for entry The Court also adopted a fast-track modification (i.e., the RPFJ), addressing in a civil proceeding brought by the discovery and evidentiary hearing the modifications of the SRPFJ only as United States under the antitrust laws, schedule in case the parties failed to required. However, the decree the Court including the RPFJ, because of the stage settle. 6 should enter is the modified version of at which they are proposed. It has been On November 2, 2001, following five the RPFJ—that is, the SRPFJ. variously suggested that the Act does weeks of intensive negotiation and not apply to proposals that arise after Discussion mediation as ordered by the Court, the the taking of testimony begins (id. at 10, United States and Microsoft agreed on I. The Tunney Act Governs the Court’s 18–19 n.9); after litigation to judgment terms of a proposed final judgment. Disposition of the Revised Proposed (id. at 11, 18), apparently whether or not Stipulation at 1 (Nov. 2, 2001). Further Final Judgment that judgment is vacated on appeal; and negotiations with several of the plaintiff By its express terms, the Tunney Act after litigation through judgment and States resulted in submission on applies to ‘‘[a]ny proposal for a consent appeal (id. at 18), again apparently November 6, 2001, by the United States, judgment submitted by the United without regard to the result on appeal. the Settling States, 7 and Microsoft of States for entry in any civil proceeding Because, then and now, most consent the Revised Proposed Final Judgment brought by or on behalf of the United judgments in government antitrust cases (RPFJ). Pursuant to the requirements of States under the antitrust laws,’’ 15 are entered before trial, Congress Section 2 of the Antitrust Procedures U.S.C. 16(b) (emphasis added), without undoubtedly focused on pre-trial and Penalties Act (‘‘Tunney Act’’), 15 regard to when the United States consent judgments when it enacted the U.S.C. 16(b)–(h), the United States filed submits it. Moreover, the Court is Tunney Act. But Congress knew that its Competitive Impact Statement (CIS) required to make its Tunney Act public consent judgments could be proposed at on November 15, 2001, and published interest determination ‘‘[b]efore entering later stages, see pages 15–16 below, and the RPFJ, CIS, and description of the any consent judgment proposed by the it did not exempt them from the Tunney procedures for submitting public United States under this section.’’ Id. Act. Even if Congress had failed to comments on the proposed decree in the § 16(e) (emphasis added). The Revised foresee later-arising proposals, in the Federal Register on November 28, 2001. Proposed Final Judgment on its face is face of an ‘‘unambiguous statutory text 66 FR 59,452 (2001). The public a proposal for a consent judgment [such a failure] is irrelevant,’’ comment period closed on January 28, submitted by the United States for entry Pennsylvania Department of Corrections 2002—with more than 30,000 comments in a civil proceeding brought by the v. Yeskey, 524 U.S. 206, 212 (1998), submitted—and the United States’’ United States under the antitrust laws. because application of an unambiguous response to those comments is being By the plain and unambiguous statutory statute ‘‘in situations not expressly filed concurrently with this Motion and language, the Tunney Act applies and anticipated by Congress’’ merely shows supporting Memorandum. Under the governs the Court’s consideration of the the statute’s breadth. Id. (citation and Tunney Act, this Court must now RPFJ. internal quotation marks omitted). determine whether the RPFJ is in the The Tunney Act applies even though The plain meaning of ‘‘[a]ny proposal ‘‘public interest.’’ 15 U.S.C. 16(e). the parties proposed the RPFJ after trial for a consent judgment’’ is sufficient to 6. On January 30, 2002, the Court and after the Court of Appeals affirmed support the conclusion that the Tunney ordered the parties to address ‘‘whether, Microsoft’s liability for monopoly Act applies here. But if one wants more in response to the comments received maintenance. These circumstances 9 support for reading ‘‘any’’ to mean by the Department of Justice in have led some to suggest, see AAI ‘‘any,’’ that support is readily at hand. accordance with 15 U.S.C. 16(b), the Tunney Act Comments, at 4–9 (MTC # First, nothing in the language of the United States and Microsoft are Tunney Act suggests that the Act considering any modifications of the 8 The United States also filed, simultaneously reaches only proposals for consent Proposed Final Judgment.’’ Order at 1 with this Memorandum, a Memorandum Regarding judgments in government civil antitrust (Jan. 30, 2002). Responding in a Joint Modifications Contained in Second Revised cases that are submitted at some Proposed Final Judgment. As explained briefly 10 Status Report filed on February 7, 2002, below, see Section II.G, page 34, the SRPFJ is a appropriate time. And the context of the parties stated that they were logical outgrowth of the RPFJ, its incremental the Tunney Act suggests a broad reading considering making modifications and modifications responding to the public comments, would submit any proposed and the overall result further advances the public 10 It has been suggested that the Tunney Act modifications to the Court on or before interest. provision permitting a court to consider, as part of 9 The United States has never before initiated a its public interest determination, ‘‘the public Tunney Act proceeding so late in a lawsuit benefit, if any, to be derived from a determination 6 Indeed, the evidentiary hearing in New York v. although the settlement in the AT&T case came of the issues at trial,’’ 15 U.S.C. 16(e)(2), limits the Microsoft Corp., No. 98–CV–1233 (CKK) (D.D.C), after the trial court had ‘‘already heard what reach of the Act to pre-trial settlements. See Cal. between the Non-Settling States and Microsoft is probably amounts to well over ninety percent of the Plaintiffs’ Br. at 18. But that subsection scheduled to begin on March 11, 2002. (Order at 2 parties’s evidence.’’ United States v. AT&T, 552 F. demonstrates only that a consent decree may be (Oct. 2, 2001). Supp. 131, 152 (D.D.C. 1982), aff’d mem. sub. nom. proposed prior to trial, not that the Act is limited 7 New York, Ohio, Illinois, Kentucky, Louisiana, Maryland v. United States, 460 U.S. 1001 (1983). to pre-trial proposals. Indeed, in this case, the Maryland, Michigan, North Carolina, and The AT&T court followed Tunney Act procedures alternative to entry of the RPFJ likely would be trial Wisconsin (the ‘‘Settling States’’)—each a party to without deciding that the Tunney Act applied to of outstanding remedy issues. Pursuant to the New York v. Microsoft Corp., No. 98–Cv–1233 what the parties characterized as the modification statute, the Court may properly consider ‘‘the (CKK) (D.D.C.)—have signed the Revised Proposed of a consent decree in one case and the dismissal public benefit, if any’’ of requiring determination of Final Judgment. of a different case. See id. at 144–45. those issues at trial.
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of the statute’s coverage—at the very words altogether redundant’’ ’) (quoting specifically noted in his testimony that least, a reading not limited to consent Gustafson v. Alloyd Co., 513 U.S. 561, ‘‘a consent decree . . . may come after judgments before testimony is taken.11 574 (1995)). Had Congress used the term trial.’’ The Antitrust Procedures & The term ‘‘Tunney Act’’ refers to ‘‘consent judgment’’ in Section 5(b) of Penalties Act: Hearings on S. 782 & S. Sections 5(b)–(h) of the Clayton Act. the Clayton Act to mean something 1088 Before the Subcomm. on Antitrust Section 5(a), originally enacted in 1914 different than its meaning in Section & Monopoly of the Senate Committee on as Section 5, gives prima facie evidence 5(a), it surely would have said so. See the Judiciary, 93d Cong. 117 (1973) effect to certain consent decrees, subject Commissioner v. Lundy, 516 U.S. 235, (‘‘Senate Hearings’’) (testimony of to the proviso that the section does not 250 (1996) (‘‘the normal rule of statutory Thomas E. Kauper). give that effect to ‘‘consent judgments or construction [is] that identical words Finally, a reading of the statutory decrees entered before any testimony used in different parts of the same act language that precludes its application has been taken.’’ 15 U.S.C. § 16(a). If are intended to have the same at this stage would lead to anomalous Congress in 1914 had understood the meaning’’) (quoting Sullivan v. Stroop, results. Nothing plausibly explains why words ‘‘consent judgments or decrees’’ 496 U.S. 478, 484 (1990), and Sorenson Congress would want a court to enter to refer only to ones entered before any v. Secretary of Treasury, 475 U.S. 851, consent judgments in the later stages of testimony had been taken, there would 860 (1986) (internal quotation marks government civil antitrust cases without have been no need to draw the omitted)). following Tunney Act procedures— distinction, and the proviso would have Second, Congress clearly was aware publication of the decree and CIS, a been surplusage.12 See South Dakota v. that consent judgments could arise public comment period, and so forth. Yankton Sioux Tribe, 522 U.S. 329, 347 relatively late in the course of an Nor is it plausible that Congress (1998) (‘‘the Court avoids interpreting antitrust case. Not only were there intended, sub silentio, to prohibit courts statutes in a way that ‘‘renders some examples ready at hand involving well- from entering consent judgments at known antitrust cases, see, e.g., Fifth & certain stages of the litigation. Courts 11 The United States has consistently maintained Walnut, Inc. v. Loew’s Inc., 176 F.2d have long entered consent judgments that Tunney Act procedures are not required with 587, 592–93 (2d Cir. 1949) (consent reached after the taking of evidence, respect to judgments addressing only claims for decrees with some defendants entered after determinations of liability, and civil penalties under the antitrust laws. The antitrust laws do not provide civil penalties for on remand, after Supreme Court even after affirmance of liability by the violation of their substantive, competition- affirmed liability in part and reversed in Supreme Court, as the Paramount regulating, provisions. There are civil penalties part in United States v. Paramount Pictures history just cited demonstrates. under the ‘‘antitrust laws’’ as defined in the Clayton Pictures, Inc., 334 U.S. 131 (1948)),13 Moreover, the Supreme Court has Act, see 15 U.S.C. 12(a) (defining ‘‘antitrust laws’’), only for failure to comply with provisions relating but the legislative history contained expressly acknowledged the authority of to premerger notification and waiting periods, id. prominent references to the possibility. the Attorney General to settle cases at § 18a(g), and for violation of certain orders issued Representative Hutchinson, then the any stage. See Cascade Natural Gas by certain federal agencies (not including the Department of Justice), id. 21(l). Courts in this ranking minority member of the House Corp. v. El Paso Natural Gas Co., 386 district have consistently entered agreed upon Judiciary Committee and of its U.S. 129, 136 (1967) (Court does ‘‘not settlements for civil penalties under 15 U.S.C. Monopolies and Commercial Law question the authority of the Attorney 18a(g) without employing Tunney Act procedures; subcommittee, inserted into the hearing General to settle suits after, as well as each such entered judgment states that its entry is in the public interest. See, e.g., United States v. record a statement plainly recognizing before, they reach here’’). Input/Output, Inc., 1999–1 Trade Cas. (CCH) that circumstances arising during We do not, of course, suggest that this ¶ 72,528 (D.D.C. 1999); United States v. Blackstone prosecution of a case might make Court approach its public interest Capital Partners II Merchant Banking Fund, 1999– settlement seem appropriate.14 And determination in this proceeding as if 1 Trade Cas. (CCH) ¶ 72,484 (D.D.C. 1999); United the RPFJ had been filed simultaneously States v. Loewen Group Inc., 1998–1 Trade Cas. Thomas Kauper, then Assistant (CCH) ¶ 72,151 (D.D.C. 1998); United States v. Attorney General-Antitrust Division, with the complaint. The trial record, Mahle GmbH, 1997–2 Trade Cas. (CCH ¶ 71,868 Findings of Fact, Conclusions of Law, (D.D.C. 1997); United States v. Figgie Int’l Inc., 13 See also Utah Pub. Serv. Comm’n v. El Paso and appellate decisions in this case all 1997–1 Trade Cas. (CCH) ¶ 71,766 (D.D.C. 1997); Natural Gas Co., 395 .S. 464, 467–68 (1969) exist, and the Tunney Act does not United States v. Foodmaker, Inc., 1996–2 Trade (Supreme Court refers to a decree it had rejected Cas. (CCH) ¶ 71,555 (D.D.C. 1996); United States v. (for failure to comply with its mandate) as a require the Court to ignore them. But as Titan Wheel Int’l, Inc., 1996–1 Trade Cas. (CCH) ‘‘consent decree’’ even though it had been agreed we discuss below, see pages 39–42, the ¶ 71,406 (D.D.C. 1996); United States v. Automatic to following a trial on the merits and a Supreme history of this case does not change the Data Processing, Inc., 1996–1 Trade Cas. (CCH) Court determination of liability). nature of the Court’s public interest ¶ 71,361 (D.D.C. 1996); United States v. Trump, 14 ‘‘[S]uppose that during the prosecution of a 1988–1 Trade Cas. (CCH) ¶ 67,968 (D.D.C. 1988). In case against an oil company the government determination; it changes only the each case, the United States noted the issue in a decided to settle for less relief than it could win on circumstances in and to which that motion for entry of judgment, explaining to the the merits because of the adverse impact full relief standard is applied. court that it believed Tunney Act procedures were might have on a recently intervening energy crisis.’’ not required. Consent Decree Bills: Hearings on H.R. 9203, H.R. II. The United States Has Complied 12 As enacted in 1914, the prima facie evidence 9947, and S. 782 Before the Subcomm. on With All Tunney Act Procedural provision made even clearer congressional Monopolies & Commercial Law of the House understanding that there could be consent Comm. on the Judiciary, 93rd Cong. 41 (1973) Prerequisites to the Court’s Public judgments or decrees entered after testimony had (‘‘House Hearings’’) (statement of Hon. Edward Interest Determination been taken. The text included this additional Hutchinson). With the filing today of the public proviso, rendered superfluous by the passage of Similarly, Miles Kirkpatrick, who had recently time: Provided further, This section shall not apply stepped down as chairman of the FTC, testified at comments and the government’s to consent judgments or decrees rendered in the same hearings about circumstances under responses, the United States has criminal proceedings or suits in equity, now which the government might file a proposed completed all of the steps required of it pending, in which the taking of testimony has been consent decree ‘‘with relief significantly different before the Court enters a proposed commenced but has not been concluded, provided from that originally claimed.’’ These circumstances such judgments or decrees are rendered before any included ‘‘the post complaint realization by the consent judgment under the Tunney further testimony is taken. Antitrust Division that there are certain aspects of Act, 15 U.S.C. 16(b)–(d), except for the Clayton Act, ch. 323, § 5, 38 Stat. 730, 731 (1914). its case that do not have the strengths that were publication of those comments and This language not only clearly contemplates initially believed to be present: that realization responses. We expect to publish as consent judgments or decrees entered after some could come . . . after the partial trial of the case testimony has been taken, but also gives prima facie itself.’’ Id. at 145 (statement of Miles W. required, in the manner described below evidence effect to some of them. Kirkpatrick) (emphasis added.) in Section II.F, and we will promptly
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notify the Court when we have done so. in formulating’’ the proposed judgment (d),23 simultaneously with the filing of The United States will then have (‘‘determinative documents’’), 15 U.S.C. this Memorandum. The United States complied completely with the 16(b), the United States was not believes that it will have completed all requirements of the Act.15 required to make copies of such Tunney Act procedural requirements 19 A. Summary Of Compliance documents available at the Court. The when it publishes the public comments United States furnished copies of the and its response to these comments in On November 6, 2001, the United CIS to those who requested them.20 the manner described below in Section States (together with the Settling States As required by 15 U.S.C. 16(c) and the II.F. The United States will notify the and Microsoft) submitted to the Court Court when publication occurs. the Revised Proposed Final Judgment. Court’s Order of November 8, 2001, the The United States filed its Competitive United States published in the B. The United States Fully Complied Impact Statement with the Court on Washington Post (November 16–22, With All Tunney Act Requirements November 15, 2001, and published the 2001), the San Jose Mercury News Regarding the CIS RPFJ and CIS in the Federal Register on (November 17–23, 2001), and the New November 28, 2001 (66 FR 59,452), as York Times (November 17–23, 2001) a The CIS filed by the United States in required by 15 U.S.C. 16(b); 16 see also notice complying with the requirements this case fully satisfies all Tunney Act Order at 2–3 (Nov. 8, 2001) (‘‘Nov. 8 of that statutory provision and the requirements. In enacting the Tunney Order’’). The CIS included each of the Order.21 Act, Congress sought, among other six required recitals, see 15 U.S.C. On November 28, 2001, the United things, ‘‘to encourage additional 16(b)(1)–(6),17 as well as other material. States published procedures for comment and response by providing Copies of the RPFJ and CIS were made submitting comments on the RPFJ. 66 more adequate notice [concerning a available to the public at the Court’s FR 59,452 (2001). The 60-day public proposed consent judgment] to the public,’’ S. Rep. No. 93–298, at 5 (1973) website.18 The United States also made comment period (see 15 U.S.C. 16(d)), (‘‘Senate Report’’); H.R. Rep. No. 93– them available at the Department of began the same day and ended on 1463, at 7 (1974) (‘‘House Report’’), Justice website. Because there were no January 28, 2002.22 During that period, reprinted in 1974 U.S.C.C.A.N. 6535, ‘‘materials and documents which the the United States received over 30,000 6538; the CIS is the primary means by United States considered determinative public comments. See Joint Status which Congress sought to do so. Report 3–4 (Feb. 7, 2002). The United Introducing his bill, Senator Tunney 15 Although the United States has fully complied States is filing those comments and its explained that the six items of with each Tunney Act requirement, even response to them, see 15 U.S.C. 16(b), substantial compliance that fulfills the purposes of information required in a CIS would the statute would suffice, for a court should ‘‘explain to the public[,] particularly 19 ‘‘decline to read the . . .’’ statute as making strict See supra note 18. those members of the public with a technical compliance with the [Tunney Act] a 20 See supra note 16. direct interest in the proceeding, the condition to final entry of the decree.’’ United 21 Section 16(c) provides: States v. Bechtel Corp., 648 F.2d 660, 664 (9th Cir. The United States shall also cause to be basic data about the decree to enable 1981). published, commencing at least 60 days prior to the such persons to understand what is 16 ‘‘Any proposal for a consent judgment effective date of the judgment described in happening and make informed submitted by the United States for entry in any civil subsection (b) of this section, for 7 days over a comments o[r] objections to the proceeding brought by or on behalf of the United period of 2 weeks in newspapers of general States under the antitrust laws shall be filed with circulation of the district in which the case has proposed decree during the 60-day the district court before which such proceeding is been filed, in the District of Columbia, and in such period.’’ 119 Cong. Rec. 3452 (1973) pending and published by the United States in the other districts as the court may direct— (remarks of Sen. Tunney) (‘‘Tunney Federal Register at least 60 days prior to the (i) A summary of the terms of the proposal for the 24 effective date of such judgment.’’ 15 U.S.C. 16(b). Remarks’’). The purpose could be consent judgment, ‘‘Simultaneously with the filing of such proposal, achieved, Senator Tunney suggested, (ii) A summary of the competitive impact unless otherwise instructed by the court, the United statement filed under subsection (b) of this section, without adding greatly to the States shall file with the district court, publish in government’s workload because the six the Federal Register, and thereafter furnish to any (iii) And a list of the materials and documents person upon request, a competitive impact under subsection (b) of this section which the prescribed items ‘‘do not require statement.’’ Id. United States shall make available for purposes of considerably more information than the meaningful public comment, and the place where 17 Section 16(b) requires that the CIS ‘‘recite’’: complaint, answer and consent decree such materials and documents are available for (1) The nature and purpose of the proceeding; public inspection. themselves would provide and, (2) A description of the practices or events giving 15 U.S.C. 16(c). The Court designated three therefore, would not be burdensome rise to the alleged violation of the antitrust laws; newspapers, including one of general circulation in requirements.’’ Senate Hearings at 3 (3) An explanation of the proposal for a consent the District of Columbia. Nov. 8 Order at 2. (statement of Sen. Tunney) (‘‘Tunney judgment, including an explanation of any unusual 22 Section 16(d) provides: circumstances giving rise to such proposal or any Statement’’). During the 60-day period as specified in provision contained therein, relief to be obtained subsection (b) of this section, and such additional thereby, and the anticipated effects on competition The CIS in this case succeeded time as the United States may request and the court of such relief; beyond all expectations in achieving the may grant, the United States shall receive and (4) The remedies available to potential private consider any written comments relating to the plaintiffs damaged by the alleged violation in the proposal for the consent judgment submitted under 23 ‘‘Any written comments relating to such event that such proposal for the consent judgment subsection (b) of this section. The Attorney General proposal and any responses by the United States is entered in such proceeding; or his designee shall establish procedures to carry thereto, shall also be filed with such district court (5) A description of the procedures available for out the provisions of this subsection, but such 60- and published by the United States in the Federal modification of such proposal; and day time period shall not be shortened except by Register within such sixty-day period.’’ 15 U.S.C. (6) A description and evaluation of alternatives to order of the district court upon a showing that (1) 16(b). such proposal actually considered by the United extraordinary circumstances require such ‘‘At the close of the period during which such States. shortening and (2) such shortening is not adverse comments may be received, the United States shall 15 U.S.C. 16(b). to the public interest. file with the district court and cause to be 18 See 15 U.S.C. 16(b) (materials ‘‘shall also be 15 U.S.C. 16(d). The United States treated as published in the Federal Register a response to made available to the public at the district court Tunney Act comments various communications such comments.’’ 15 U.S.C. 16(d). and in such other districts as the court may received between the first business day following 24 Senator Tunney also noted that the need to file subsequently direct’’). This Court did not direct that submission of the initial Proposed Final Judgment a CIS would help to focus the parties’ attention any materials be made available at any other district to the Court and the beginning of the statutory during settlement negotiations. Tunney Remarks, court. comment period. 119 Cong. Rec. at 3452.
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congressional goal.25 As noted above, purpose, we turn to whether its content disclosures in overall remedial strategy over 30,000 public comments were met the formal requirements of the and remedial impact). submitted, a number apparently beyond statute. In addressing that question, we Although, as commentors point out, the wildest imaginings of the Tunney proceed through the six recitals the e.g., Comments of the Progress & Act’s sponsor in 1973, see House statute specifies, and then address Freedom Foundation on the Revised Hearings at 45 (testimony of Sen. additional aspects of CIS content. As the Proposed Final Judgment and the Tunney) (predicting that ‘‘in the typical statute requires, the CIS ‘‘recite[s]’: Competitive Impact Statement, 16–17 case, you will have [no public (MTC # 0030606) (‘‘P&FF Comment’’), comments], but perhaps you will have 1. ‘‘The Nature and Purpose of the the 40-plus-page analysis offered in the 10 to 15 in a highly controversial case’’). Proceeding’’ CIS is less elaborated and detailed than Indeed, the number of comments Section I of the CIS, CIS at 2, might be required by Executive Order received on the RPFJ exceed the number describes the nature and purpose of the for a cost/benefit analysis of a major received in the AT&T case by more than proceeding, as the statute requires. 15 executive branch regulatory analysis, an order of magnitude, see United States U.S.C. 16(b)(1). We are aware of no that is irrelevant because the analysis v. AT&T, 552 F. Supp. 131, 135 (D.D.C. suggestion that this description is plainly satisfies the requirements of the 1982) (‘‘over six hundred comments’’), inadequate or otherwise fails to satisfy Tunney Act. The CIS meets the statutory aff’d mem. sub. nom. Maryland v. the statutory requirement. requirement and provides ‘‘the basic United States, 460 U.S. 1001 (1983); 47 data about the decree to enable FR 21,214, 21,214–24 (1982) (listing 2. ‘‘A Description of The Practices Or [members of the public] to understand name and address of each commentor Events Giving Rise to the Alleged what is happening and make informed on proposed AT&T decree, with length Violation Of The Antitrust Laws’’ comments o[r] objections to the of comment in pages).26 Section III of the CIS, CIS at 5–17, proposed decree.’’ Tunney Remarks, 119 Although many of the comments describes the practices giving rise to Cong. Rec. at 3452.29 There has been no received are unlikely to contribute new Microsoft’s antitrust violation.28 We are sign that any alleged inadequacy insights concerning the RPFJ,27 aware of no suggestion that this recital handicapped potential commentors. approximately 2,900—a number nearly is inadequate or otherwise fails to P&FF, for example, was able to reach its five times the total number of comments satisfy the statutory requirement. conclusion—with which we disagree— in AT&T—contain ‘‘a degree of detailed that the RPFJ is not an adequate remedy substance concerning the RPFJ.’’ Joint 3. ‘‘An Explanation of the Proposal for despite these alleged inadequacies of Status Report at 4 (Feb. 7, 2002). a Consent Judgment, Including An the CIS. The Court will have ample Although the Court has only just Explanation of Any Unusual information to conclude that entry of received the full set of comments, the Circumstances Giving Rise to Such the decree is in the public interest.30 United States provided the Court with Proposal or Any Provision Contained 4. ‘‘The Remedies Available to Potential an advance installment of 47 of the most Therein, Relief To Be Obtained Thereby, Private Plaintiffs Damaged by the extensive comments on February 14, and the Anticipated Effects on Alleged Violation in the Event That 2002. The Court therefore is aware Competition of Such Relief’’ Such Proposal for the Consent Judgment already of substantial evidence that the Section IV of the CIS, CIS 17–60, the Is Entered in Such Proceeding’’ public did not lack the raw material for bulk of the document, explains the formulating ‘‘informed comments o[r] proposed consent judgment, provision Section 6 of the CIS, CIS at 63, objections to the proposed decree’’ by provision, in considerable detail. identifies the remedies available to (Tunney Remarks, 119 Cong. Rec. at Subsection B, CIS 24–60, links the private plaintiffs, with concise reference 3452). underlying theory of violation in the to damage actions under the federal Having established that the CIS in this case (‘‘[c]ompetition was injured in this antitrust laws, which may provide some 31 case richly fulfilled the statutory case principally because Microsoft’s private plaintiffs with a remedy. The illegal conduct maintained the proposed judgment does not itself 25 We attribute this success not only to the CIS applications barrier to entry . . . by provide any remedy that can be invoked itself, but also to the Internet’s contribution to thwarting the success of middleware making the CIS, the RPFJ, the decisions of this 29 No Executive Order governs the content of a Court and the Court of Appeals, and a wealth of that would have assisted competing CIS, and the Tunney Act nowhere refers to cost/ other material readily available to the American operating systems’’), id. at 24, to the benefit analysis. We are also unaware of any public, far more available than mere publication in requirement that a court, before imposing a remedy the Federal Register and distribution of paper primary remedial approach adopted in a case litigated to final judgment or before copies by the United States and through this Court (‘‘the key to the proper remedy in this entering a consent judgment, either itself perform and other district courts would have accomplished. case is to end Microsoft’s restrictions on such an analysis or insist that the parties do so. See ABA Section of Antitrust Law, Report to the potentially threatening middleware 30 Council of the Section of Antitrust Law Re: For purposes of its public interest Proposed ‘‘Antitrust Procedures and Penalties Act,’’ [and] prevent it from hampering similar determination, the Court, of course, is not limited reprinted in Senate Hearings at 427,431 (citing ‘‘the nascent threats in the future’’ and to the information in the CIS, but instead has minimal attention which the average citizen thereby ‘‘restore the competitive available as well the trial record, the Court of devotes to the daily contents of the Federal Appeals’ decision, the public comments, and the Register’’). The United States posted the RPFJ and conditions created by similar United States’ response to public comments. And the CIS on the Department of Justice website; they middleware threats’’). Id. The remainder the Court can easily obtain additional information, also were (and continue to be) available to PACER of the subsection explains how whether by requesting it from the parties, or account holders at the Court’s website; and they particular provisions contribute to this through the flexible procedures specified in the therefore are instantly available at any hour of day Tunney Act, see 15 U.S.C. 16(f). or night to anyone in the world with an Internet remedial strategy, and therefore to the 31 The CIS does not address potential remedies connection. anticipated competitive effect of the available under state law or the laws of foreign 26 By contrast, the Department’s 1994 consent proposed judgment. See, e.g., id. at 33 countries. We do not believe that the Tunney Act decree with Microsoft generated only five public (explaining role of required interface plausibly can be read to require this. Indeed, comments. See 59 FR 59,426, 59,427 (1994). requiring that the United States in effect provide 27 As previously noted, Joint Status Report at 3 legal advice regarding the laws of 50 states, let (Feb. 7, 2002), over 1,000 comments were unrelated 28 Considerably more detail can be found in the alone over a hundred foreign jurisdictions, would to this case or the RPFJ, nearly 3,000 are form Findings of Fact, Conclusions of Law, and the Court be unreasonably burdensome, take us far outside letters, and nearly 20,000 contain an overall view of Appeals’ opinion, all readily available on the our area of expertise, and provide little or no benefit of the RPFJ but no particularized discussion of it. Internet. to anyone.
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by potential private plaintiffs who may 5. ‘‘A Description of the Procedures Cong. Rec. at 3452, and with his have been damaged by violations Available for Modification of Such understanding that the statutory alleged in this case, and so the CIS does Proposal’’ requirements would not be burdensome. not refer to any such remedy. The Section VII of the CIS, CIS at 63–65, See Tunney Statement, Senate Hearings description complies with the terms of notes that the United States may at 3. Indeed, the sheer volume and the statute, and there is no ground for withdraw its consent to the RPFJ prior comprehensiveness of the comments requiring more. to its entry and informs the public of received suggest that the level of detail was more than adequate to stimulate It has been suggested that the CIS procedures for submitting written comments regarding the RPFJ. That informed public comment about the should go into more details with respect proposed remedy and about the relative to private remedies and, specifically,32 describes the procedure available for modifying the proposal prior to entry of merits of alternative remedies. that it should address any impact the A commentor contends, in separate the judgment, as required. The section RPFJ might have on the collateral litigation, that the CIS is inadequate then describes, briefly, the procedure for estoppel effect of the findings of fact because it ‘‘failed to explain adequately modifying the judgment after entry. We and the conclusions of law in this case, how alternative remedies (those not are aware of no suggestion that this and on the prima facie evidence effect being pursued in the [R]PFJ) would have description is inadequate or otherwise of a final judgment under the Clayton affected competition in the fails to satisfy the statutory requirement. Act, see 15 U.S.C. 16(a). But nothing in marketplace.’’ AAI, Complaint ¶ 19. See the language of the Tunney Act requires 6. ‘‘A Description and Evaluation of also P&FF Comment, at 15 (criticizing the United States to offer, in the CIS or Alternatives To Such Proposal Actually CIS for failing to evaluate likely impacts elsewhere, its views about legal Considered by the United States’’ on competition of alternative remedies). The Tunney Act, however, does not questions that may arise in subsequent Section V of the CIS, CIS at 60–63, require any explanation of how litigation.33 The Tunney Act does not describes alternatives the United States alternative remedies would have direct the United States to discuss the considered and rejected,34 and indicates affected competition in the marketplace. effect of the proposed judgment on the reasons why they were rejected. It That is no accident. The version of private litigation; rather, it requires only explains why we viewed the RPFJ as a Senator Tunney’s bill reported out of superior alternative to continued a recital of the remedies available to the Senate Committee would indeed private plaintiffs. The evidentiary or litigation. See id. at 60–61. It describes have required that CIS recitations collateral estoppel effect of why, following remand, the United include ‘‘the anticipated effects on determinations this Court makes is a States decided not to continue to seek competition of such alternatives.’’ question to be addressed by the courts a break-up of Microsoft, a remedy that Senate Report at 9 (proposed 15 U.S.C. in which future litigants might seek to would have required further litigation 16(b)(6)). But on the Senate floor, use those determinations. See AT&T, and delay and would likely not have Senator Hruska offered an amendment 552 F. Supp. at 211 (declining to ‘‘enter been achieved. See id. at 61; see also to strike that requirement, stating: pages 63–65 below. The CIS explains any specific decision or finding There is no reason . . . to require the staff regarding’’ applicability of prima facie the reasons for differences between the interim conduct provisions of the Initial of the Antitrust Division . . . to make a evidence aspect of 16(a) because ‘‘the public prediction as to the competitive ultimate decision with respect to this Final Judgment (vacated by the Court of effects of various alternatives which it has issue must rest with the court in which Appeals) and the provisions of the RPFJ. considered. It is sufficient if the various such litigation may be brought’’); See id. at 61–62; see also pages 66–70 alternatives are disclosed to the court and to the public. Parklane Hosiery Co. v. Shore, 439 U.S. below. And it lists a number of other remedy proposals, the criteria used to 36 322, 331 (1979) (granting trial courts 119 Cong. Rec. 24,604 (1973). Senator evaluate them, and the results of that broad discretion to determine whether Tunney agreed with the amendment’s evaluation. Id. at 63. offensive collateral estoppel should be ‘‘basic intent,’’ and the Senate adopted To be sure, the description and the it by voice vote. Id. applied in matters before them). It is not evaluations of alternatives presented are a question for this Court or for the brief.35 But they are consistent with 7. Including Information Not Required United States to determine. The United Senator Tunney’s purpose of providing by the Tunney Act Cannot Result in a States does not seek to inject itself into ‘‘basic data about the decree to enable Noncompliant CIS private litigation by making public [members of the public with a direct Several commentors contend that the statements in other forums, and its interest] to understand what is CIS is inadequate because it contains views with respect to matters contested happening and make informed material beyond that required by the in such cases carry no determinative comments o[r] objections to the statute and the additional material is legal effect. proposed decree,’’ Tunney Remarks, 119 incorrect or insufficient. That some commentors wish that the CIS contained 32 This point was raised, for example, in a lawsuit 34 As the CIS makes clear, CIS at 63, it does not more or different material, even though filed by one commentor, the American Antitrust describe literally every remedial proposal not required by statute, provides no Institute, American Antitrust Institute v. Microsoft considered, no matter how fleetingly, and rejected. Corp., No. 02–CV–0138 (CKK) (D.D.C., filed Jan. 24, The statute does not impose such a requirement, basis for concluding that the CIS is 2002) (‘‘AAI’’), and in a Memorandum filed in this which would be unduly burdensome and serve no deficient. Thus, Section VIII, CIS at 65– Court and attached to a filed comment, Comments useful purpose. As Senator Tunney said, the CIS 68, provides a brief discussion of the of Relpromax Antitrust Inc., Ex. 11, at 3 (MTC # ought to provide ‘‘some of the alternatives that were standards courts apply in determining 00030631). considered by the Department.’’ Senate Hearings at whether entry of a proposed consent 33 The United States did, however, discuss related 108 (remarks of Sen. Tunney) (emphasis added). issues recently. See Memorandum of Plaintiff 35 The CIS does not document the evaluative judgment is in the public interest. United States in Response to the California process, as might be suitable in a technical report Plaintiffs’ Motion for Intervention, or in the or an article prepared for publication in a scholarly 36 Senator Hruska explained that ‘‘[t]hese Alternative, for Leave to File a Brief Amicus Curiae journal of economics. Instead, the CIS reports the anticipated effects quite clearly can be speculated in the Tunney Act Settlement Proceedings ‘‘result of evaluating,’’ Webster’s Third upon by the district court considering a proposed Currently Pending in this Court, at 4–8 (Feb. 11, International Dictionary 786 (1981) (defining consent judgment or by other interested parties.’’ 2002). ‘‘evaluation’’), together with evaluative criteria. 119 Cong. Rec. 24,604 (1973).
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Intended to provide general information negotiation process were disclosed as D. The United States Fully Complied to the public, cf. pages 35–46 below required by 15 U.S.C. 16(b).’’ Relpromax With All Tunney Act Requirements (more substantial discussion of legal Comment, Ex. 11, at 3. As noted above, Regarding Publication of Summaries in standard intended for the Court), another, in a separate lawsuit, Newspapers Section VIII has been the target of challenged our failure to provide a several commentors. E.g., Comments of definition of ‘‘determinative’’ in the CIS, As noted above, the United States Software & Information Industry implying that under the commentor’s published notices in three newspapers for the periods required by the Tunney Association on Proposed Final preferred definition, there were in fact Act and this Court’s Order of November Judgment, at 11 (MTC # 0030614) (‘‘SIIA determinative documents. See 8, 2001. The notice (the text of which Comments’’) (contending that legal Memorandum in Support of Motion for standard commentor finds in CIS is is attached as Appendix B) contained ‘‘a Preliminary Injunction and Expedited ‘‘simply the wrong standard of review summary of the terms of the proposal Hearing at 16–19 (Jan. 31, 2002), AAI. for the remedy in this case’’). The Court for the consent judgment’’ as required will determine the standard of review it There are no ‘‘determinative’’ by 16 U.S.C. 16(c)(i), and ‘‘a summary will apply and, as discussed below, see documents in this proceeding. The of the competitive impact statement’’ as pages 35–46, the appropriate standard of Court of Appeals addressed the required by 16 U.S.C. 16(c)(ii).38 review corresponds to the standard definition of ‘‘determinative Although required to do so by neither expressed in the CIS. But because there documents’’ in a recent Tunney Act statute nor Order, the notice also stated is no requirement that the CIS discuss case. See Mass. School of Law at where copies of the complaint, the RPFJ, the standard of review at all, any alleged Andover, Inc. v. United States, 118 F.3d and the CIS could be viewed and shortcomings of that discussion in the 776 (D.C. Cir. 1997) (‘‘MSL’’). The obtained and where comments could be CIS are no basis for finding that the CIS United States had argued that the statute sent. Because there were no fails to satisfy the statutory referred to documents ‘‘that determinative documents, the notice did requirements. individually had a significant impact on not list them. See 15 U.S.C. 16(c)(iii). Similarly, the CIS contains two the government’s formulation of relief— The United States complied with the sentences explaining that the United newspaper notice requirements of the States is not filing any determinative i.e., on its decision to propose or accept Tunney Act, and no commentor has documents in this case because there are a particular settlement.’’ Id. at 784 suggested otherwise. none within the meaning of the statute. (quoting brief of the United States). The CIS at 68. One commentor has alleged, court concluded that the statutory E. The United States Has Fully in a separate lawsuit, that the CIS is language ‘‘seems to point toward the Complied With the Tunney Act deficient because the disclosure in this government’s view . . . and confines Requirement That It Respond to Public discussion is inadequate, AAI § 16(b) at the most to documents that are Comments Complaint ¶ 27, and in particular either ‘smoking guns’ or the exculpatory because that discussion does not opposite.’’ Id. The court added that The Tunney Act requires that the include our ‘‘definition or ‘‘[t]he legislative history in fact supports United States respond to public interpretation’’ of the word the government’s still narrower comments and file its response with the ‘‘determinative,’’ id. ¶ 28. Because the reading.’’ Id. In this case, the United Court ‘‘[a]t the close of the period CIS is not required to discuss States did not consider any document to during which such comments may be determinative documents (and the be a ‘‘smoking gun or its exculpatory received.’’ 15 U.S.C. 16(d). The statutory statute does not require the United opposite’’ with a significant impact on language allows the United States States to provide an interpretation or our formulation of our decision ‘‘some additional time after the end of definition of the term ‘‘determinative’’), regarding the RPFJ, and so there were no [the comment period] to prepare and file this allegation provides no basis for determinative documents.37 responses,’’ United States v. Bechtel concluding that the CIS fails to comply Corp., 648 F.2d 660, 664 (9th Cir. 1981), with the statute. and this Court allowed 30 days. Nov. 8 Order at 3. The comment period closed C. The United States Fully Complied 37 In the separate lawsuit it filed, a commentor With All Tunney Act Requirements relies on the concept of determinative documents on January 28, 2002, and we are filing Regarding Determinative Documents applied in United States v. Central Contracting Co., our responses with the Court, 537 F. Supp. 571, 575 (E.D. Va. 1982), under which, concurrently with this Memorandum, The United States did not file any even if documents are individually not on February 27, 2002, thereby determinative documents with the determinative, they can be determinative ‘‘in the complying with the requirement. Court, see 15 U.S.C. 16(b), did not aggregate.’’ AAI Mem. at 17 n.10. We do not believe there are determinative documents in this case even otherwise make determinative 38 under Central Contracting. But in any event, The summary of the CIS included in the notice documents available to the public, and is brief, but sufficient to serve what we understand Central Contracting’s broad definition of did not list any determinative to be its purpose. The Senate Judiciary Committee documents in the required newspaper determinative documents has not been followed by added the newspaper provision to a bill that already any Tunney Act court, has been squarely notices, see id. § 16(c)(iii), for one included Federal Register publication of the CIS repudiated by one district court, United States v. and proposed decree. Senate Report at 1–2 simple reason: there are no such Alex. Brown & Sons, 169 F.R.D. 532, 541 (S.D.N.Y. (Amendment No. 5). It did so ‘‘to enhance the documents in this case. Moreover, 1996) (‘‘Central Contracting’s broad definition of degree of notice afforded the public,’’ since although not required to do so, we ‘determinative documents’ may conflict with ‘‘[p]ublication in the Federal Register alone was not stated as much in the CIS. See CIS at 68. Congress’ intent to maintain the viability of consent felt to be meaningful public notice.’’ Id. at 3. The Commentors have nevertheless, and decrees’’) (cited with approval in MSL, 118 F.3d at notice in this case was plainly sufficient to put the 785), aff’d sub nom. United States v. Bleznak, 153 public on notice of a proposed settlement of a major without any basis, questioned our antitrust case potentially of interest; of the F.3d 16 (2d Cir. 1998), and cannot be reconciled compliance. One commentor, without availability of additional information concerning with decisions of this Circuit and the Second further explanation, suggests we failed that settlement; and of the opportunity to comment Circuit. See MSL, 118 F.3d at 784; Bleznak, 153 on the proposed judgment. Whatever else may be to comply with the statute because ‘‘no F.3d at 20 (citing MSL and quoting ‘‘ ‘smoking gun’ true of United States v. Microsoft, it is surely true documents considered determinative in or exculpatory opposite’’ with approval). Central that the proposed settlement has been amply formulating the RPFJ throughout the Contracting is simply not good law in this regard. noticed by the public at large.
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F. The United States Will Fully Comply approximately six weeks after (decision to enter a consent decree With the Tunney Act Requirement That submission to the Federal Register. ‘‘involves a determination by the It Publish the Comments and Response chancellor that it is equitable and in the G. The Second Revised Proposed Final public interest’’), appeal dismissed, 318 Judgment Needs No Separate Round of In light of the Court’s Memorandum U.S. 796 (1943). That standard is now Public Comment and Response and Order of February 22, 2002, denying embodied in the Tunney Act, 15 U.S.C. as non-justiciable at that time the The Tunney Act does not require a 16(e) (‘‘the court shall determine that United States’ Motion for Leave of Court new round of publication and comment the entry of such judgment is in the to Adopt an Alternative Procedure for in light of the SRPFJ. The publication public interest’’ before entering it); see Comment Publication (‘‘Alternative and comment provisions of the Act AT&T, 552 F. Supp. at 149 n.74 (Tunney Procedure Motion’’), the United States serve ‘‘to enable the district court to Act ‘‘represents an endorsement of the will pursue two parallel approaches to make’’ its public interest determination. morningline of cases in which courts compliance with the remaining Hyperlaw, Inc. v. United States, 1998 examined proposed consent decrees to requirement of the Tunney Act, WL 388807, at *3, 159 F.3d 636 (D.C. determine whether they were in the publication of the public comments and Cir. 1998) (unpublished table decision). public interest’’); House Report at 11, our response thereto in the Federal Accordingly, a ‘‘court should treat 1974 U.S.C.C.A.N. at 6542 Register. Approach 1 will consist of the notice and comment under the Tunney (‘‘Preservation of antitrust precedent, steps set forth in our Alternative Act as analogous to agency rulemaking rather than innovation in the usage of Procedure Motion and the United notice and comment.’’ Id. (quotation the phrase, ‘public interest,’ is, States’ Supplement to Prior Motion for marks omitted). Applying that analogy, therefore, unambiguous’’). Leave of Court to Adopt an Alternative ‘‘there is no need for successive rounds The court of appeals in United States Procedure for Comment Publication of notice and comment on each v. Microsoft Corp., 56 F.3d 1448 (D.C. (‘‘Supplement’’), filed February 21, revision,’’ provided the final decree ‘‘is Cir. 1995) (‘‘Microsoft I’’), set forth the 2002, with one difference in timing. a ‘logical outgrowth’ of the proposed factors that a Tunney Act court’s public Even with the additional demands of decree. . . . Further notice and interest determination entails. That simultaneously pursuing Approach 2, comment should be required only if it inquiry differs fundamentally from the described below, the posting of the full ‘would provide the first opportunity for inquiry a court conducts in resolving, by text of the 32,329 public comments interested parties to offer comments that adjudicated judgment, a dispute described in the Alternative Publication could persuade the agency to modify its between the litigants before it. Motion 39 on the Department of Justice’s [proposal].’’’ Id. (quoting American Regardless of the stage at which the website will likely be accomplished by Water Works Ass’n v. EPA, 40 F.3d parties resolved their disputes and March 4, 2002. We estimate that all of 1266, 1274 (D.C. Cir. 1974)). reached a settlement in this case, the the other steps described in our The proposed decree as modified is a Court’s task is to determine whether it logical outgrowth of the RPFJ and so Alternative Procedure Motion and would be in the public interest to enter requires no further notice and comment. Supplement will be completed by that settlement as a judgment, not to As explained in the United States’ March 15, 2002. In the view of the devise its own remedy. United States, completion of these steps Memorandum Regarding Modifications will constitute full, and certainly no less Contained in Second Revised Proposed A. Whether the Proposed Decree Is than substantial,40 compliance with the Final Judgment, each of the Within the Reaches of the Public statutory requirement that comments be modifications clarifies decree language Interest Is Determined by the Test of published in the Federal Register, for in response to public comments on the Microsoft I the reasons set forth in our Alternative RPFJ. They thus are in fact a natural In determining whether the proposed Procedure Motion and Supplement.41 outgrowth of the notice and comment decree is in the public interest, 44 a process. Taken separately or together, Approach 2, which we will pursue in district court properly considers the modifications do not fundamentally whether ‘‘the remedies [are] so addition to and simultaneous with change the RPFJ. All contribute to the Approach 1, consists of publication in inconsonant with the allegations public interest. The purpose of the charged as to fall outside of the ‘reaches the Federal Register of the full text of notice and comment has thus been well the public comments. We will begin the of the public interest.’’’ Microsoft I, 56 satisfied, and further notice and F.3d at 1461. In Microsoft I, and again process of publication of the comments comment would merely delay the in their entirety by providing the full in MSL, 118 F.3d at 783, the D.C. Circuit court’s public interest determination explained that this inquiry entails text to the Federal Register no later than without sound reason.43 March 1, 2002; the Federal Register will consideration of four specific factors: then commence its process of preparing III. The Court Must Enter the Proposed The district court must examine the decree in light of the violations charged in the the text for publication.42 We estimate Decree if It Is Within the Reaches of the Public Interest complaint and should withhold approval that publication of the full text of the only [1] if any of the terms appear comments in the Federal Register, if Courts have long applied a public ambiguous, [2] if the enforcement mechanism ultimately necessary, will occur interest standard in determining is inadequate, [3] if third parties will be whether to enter an antitrust consent positively injured, or [4] if the decree 39 See Alternative Publication Motion at 6 decree. See, e.g., United States v. RCA, otherwise makes ‘‘a mockery of judicial (descriptions of comments to be published and of 46 F. Supp. 654, 655 (D. Del. 1942) power.’’ See [Microsoft I, 56 F.3d] at 1462. a small category of wholly unrelated or duplicate MSL, 118 F.3d at 783. comments that will not be published). 43 40 Entry of a decree following modification The inquiry with respect to the first See supra note 15. without a new round of notice and comment is 41 two factors, ambiguity and See Alternative Publication Motion at 2, 9–11; conventional in Tunney Act practice. For example, Supplemental at 2–3 & n.1. after notice and comment in AT&T, the court said 42 During approximately the first three to four it would enter the decree as in the public interest 44 The statute lists a number of factors a court weeks of this period before publication occurs, it if the parties agreed to a number of modifications, ‘‘may consider,’’ 15 U.S.C. 16(e) (emphasis added); would still be possible to terminate the remaining and the Court entered the modified decree without id. § 16(e)(1)–)2) (listing factors), but consideration publication process and save a significant portion a new round of notice and comment. AT&T, 552 F. of these factors is entirely discretionary. Senate of the total cost of full publication. Supp. at 225–26; see also MSL, 118 F.3d at 778. Report at 6.
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enforceability, is straightforward and standard that an antitrust remedy such a connection on remand). Absent governed by a reasonableness standard, should ‘‘pry open to competition a such a causal connection, the court not a search for perfection. As the Court market that has been closed by continued, only conduct relief is of Appeals explained, ‘‘the district judge defendants’ illegal restraints,’’ 56 F.3d at justified. 47 Id. at 106. Moreover, the who must preside over the 1460 (quoting Int’l Salt Co. v. United Court of Appeals vacated the district implementation of the decree is States, 332 U.S. 392, 401 (1947)), clearly court’s judgment of liability with certainly entitled to insist on that degree required that the scope of the respect to tying, id. at 84 (leaving open of precision concerning the resolution of appropriate remedy be related to the the possibility of further litigation on known issues as to make his task, in anticompetitive effects of the illegal remand using a more demanding resolving subsequent disputes, conduct. Although an antitrust conduct standard); reversed as to attempted reasonably manageable.’’ Microsoft I, 56 remedy is not limited to enjoining monopolization, id. at 80–84; and F.3d at 1461–62. Similarly, the Court’s precisely the conduct found to be limited the scope of the conduct found consideration of the ‘‘compliance unlawful, e.g., Hartford-Empire Co. v. to constitute illegal monopolization, id. mechanisms,’’ id. at 1462—see also 15 United States, 323 U.S. 386, 409 (1945); at 67 (overriding of user’s choice of U.S.C. 16(e)(1) (‘‘provisions for AT&T, 522 F. Supp. at 150 n.80, default browser), 71 (deals with ICPs), enforcement’’)—is addressed to real and nevertheless ‘‘the remedies must be of 75 (development and promotion of a foreseeable problems relating to ‘‘actual the ‘same type or class’’’ as the JVM), 78 (course of conduct considered compliance.’’ Microsoft I, 56 F.3d at violations, and the court is not at liberty separately). The remedy ultimately 1462. to enjoin ‘all future violations of the imposed on remand, the court directed, The third factor a Tunney Act court antitrust laws, however, unrelated to the ‘‘should be tailored to fit the wrong properly considers is whether a decree violations found by the court.’’’ creating the occasion for the remedy.’’ would inflict ‘‘positive injury’’ on third Microsoft I, 56 F.3d at 1460. 45 Id. at 107. parties, id. at 1461 n.9, 1462. In so This Court’s assessment of the In the absence of a settlement, doing, the Court must distinguish adequacy of the RPFJ also must take into therefore, the United States would face between positive injury and injury from account the risks and uncertainties of the prospect of extended litigation with a decree’s ‘‘mere failure to secure better further litigation that would be required respect to the numerous issues related remedies for a third party’’ for whatever before there could be an adjudicated to relief in this case. An appeal likely reason. MSL, 118 F.3d at 780. The Court final judgment, safe from further would follow the conclusion of the ‘‘should not reject an otherwise challenge on appeal, that would remedy proceedings in this Court. Microsoft also adequate remedy simply because a third the anticompetitive harm attributable to might choose to seek Supreme Court party claims it could be better treated.’’ conduct found to violate the Sherman review of the Court of Appeals’ decision Microsoft I, 56 F.3d at 1461 n.9. Act. The Court of Appeals explained in The heart of a district court’s public Microsoft I that it is ‘‘inappropriate for affirming its liability for monopoly interest determination, however, is the judge to measure the remedies in the maintenance. See Cert. Petition at 15 whether the proposed remedy decree as if they were fashioned after (listing issues for future petition). adequately meets the requirements for trial. Remedies which appear less than Despite the Findings of Fact and an antitrust remedy, AT&T, 552 F. vigorous may well reflect an underlying Conclusions of Law, and despite the Supp. at 153, or instead whether ‘‘the weakness in the government’s case, and Court of Appeals’ affirmance of a discrepancy between the remedy and for the district court to assume that the number of the holdings, including undisputed facts of antitrust violations allegations in the complaint have been liability for monopolization, the could be such as to render the decree ‘a formally made out is quite ultimate outcome of continued litigation mockery of judicial power,’’’ MSL, 118 unwarranted.’’ Id. at 1461. 46 is uncertain, and the path of litigated F.3d at 782 (quoting Microsoft I, 53 F.3d This case differs from Microsoft I in remedy proceedings would be both at 1462). The requirements of an that there have been both findings of risky and costly in terms of resources fact and conclusions of liability affirmed that might otherwise be devoted to other antitrust remedy are familiar. As the 48 Court of Appeals noted in remanding on appeal. But the difference is one of antitrust enforcement concerns. this case: degree, not kind. Although the Court of Appeals in this case affirmed the district 47 Among the goals of an antitrust decree are A remedies decree in an antitrust case court’s judgment of liability for ‘‘terminat[ing] the illegal monopoly’’ and must seek to ‘‘unfetter a market from monopolization, it emphasized that ‘‘deny[ing] to the defendant the fruits of its anticompetitive conduct, Ford Motor Co.[ v. statutory violation.’’ Microsoft, 253 F.3d at 103 United States], 405 U.S. [562, ] 577 [(1972)], neither it, nor the district court, had so (internal quotation omitted). But plaintiffs never to ‘‘terminate the illegal monopoly, deny to far found ‘‘a causal connection between alleged, and neither this Court nor the Court of the defendant the fruits of its statutory Microsoft’s exclusionary conduct and its Appeals found, that Microsoft acquired its monopoly unlawfully. See id. at 58 (Microsoft violation, and ensure that there remain no continuing position in the operating ‘‘violated § 2 by engaging in a variety of practices likely to result in monopolization systems market,’’ 253 F.3d at 106–07, exclusionary acts . . . to maintain its monopoly’’); in the future,’’ United States v. United Shoe sufficient to justify structural relief see also Microsoft I, 56 F.3d at 1452. Thus, whether, Mach. Corp., 391 U.S. 244, 250 . . . (1968); (although it did not rule out the and to what extent, Microsoft now has an ‘‘illegal see also United States v. Grinnell Corp., 384 monopoly’’ depends on whether its unlawful U.S. 563, 577 . . . (1966). possibility that this Court would find conduct increased or extended Microsoft’s monopoly—that is, whether the fruits of its 253 F.3d at 103. 45 Nor may relief in a civil antitrust case be statutory violations included increments to the As the Court of Appeals also punitive. See United States v. E.I. du Pont de magnitude or duration of its market power. Again, emphasized, however, the ‘‘ ‘[m]ere Nemours & Co., 366 U.S. 316, 326 (1961); United neither the district court nor the Court of Appeals States v. Oregon State Med. Soc’y, 343 U.S. 326, 333 found this direct causal connection between the existence of an exclusionary act does (1952); United States v. Nat’l Lead Co., 332 U.S. conduct and the continuance of the monopoly. not itself justify full feasible relief 319, 338 (1947). 48 See Note, The Scope of Judicial Review of against the monopolist to create 46 Congress intended that the statutory ‘‘public Consent Decrees under the Antitrust Procedures maximum competition.’’’ id. at 106 interest’’ concept encompass ‘‘compromises made and Penalities Act of 1974, 82 Mich. L. Rev. 153, for non-substantive reasons inherent in the process 175 n. 142 (1974) (‘‘The legislative history of the (quoting 3 Antitrust Law ¶ 650a, at 67). of settling cases through the consent decree [Tunney Act] should make the courts sensitive to Thus, in Microsoft I, the Court of procedure.’’ House Report at 12, 1974 U.S.C.C.A.N. the efficient allocation of the Department’s Appeals, while noting the familiar at 6542. Continued
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Thus, although the litigation risks the Indeed, if courts do not give appropriate achieve a prompt and certain resolution United States faces here are not deference to the United States’ views, of this case (see CIS at 2, 60–61), they identical to the litigation risks it faces Tunney Act proceedings will become have chosen the alternative means of when it negotiates a settlement prior to equivalent to the proceedings that lead terminating litigation ‘‘by agreement of trial, the teaching of Microsoft I remains to adjudicated judgments with the parties,’’ Janus Films, 801 F.2d at applicable. This Court’s evaluation of adjudicated remedies. 581, a choice that is clearly permissible the RPFJ is properly informed by the at this stage of the litigation. See B. The Court’s Task in Entering a public interest in a certain and timely Cascade Natural Gas Corp. v. El Paso Consent Decree Differs From remedy for Microsoft’s unlawful Natural Gas Co., 386 U.S. 129, 136 Adjudicating a Remedy conduct and must take account of the (1967) (government antitrust case in uncertainties and risks of further The fact of settlement here determines which the Supreme Court noted that it litigation, an inquiry that properly the Court’s role in this proceeding and did ‘‘not question the authority of the respects the realistic choices the United the inquiry it must make. Because the Attorney General to settle suits after, as States faced in deciding to settle the parties to this case have agreed to the well as before, they reach here’’); see case on the negotiated terms of the RPFJ. Revised Proposed Final Judgment, the also Fifth & Walnut, Inc. v. Loew’s Inc., Moreover, in making its Court now faces a task that differs 176 F.2d 587, 592–93 (2d Cir. 1949) determination, the Court properly fundamentally from the task the Court (consent decrees with some defendants accords significant weight to the United of Appeals envisioned when it entered on remand, while other States’ predictive judgments as to the remanded United States v. Microsoft defendants continued to litigate, after efficacy of remedial provisions. Indeed, Corp. 50 The Court of Appeals Supreme Court affirmed liability in part such deference is proper even outside anticipated the necessity of ‘‘a relief- and reversed in part in United States v. the consent decree context. See Ford specific evidentiary hearing,’’ providing Paramount Pictures, Inc., 334 U.S. 131 Motor Co. v. United States, 405 U.S. a basis for ‘‘judicial resolution’’ of (1948)).52 562, 575 (1972) (‘‘’once the Government factual issues in dispute between the In these circumstances, the parties has successfully borne the considerable United States and Microsoft—although themselves have resolved their burden of establishing a violation of it recognized that no such hearing differences, and the Court therefore does law, all doubts as to the remedy are to would be required if the parties did not not have the classic judicial task of be resolved in its favor’’’) (quoting dispute the facts. Microsoft, 253 F.3d at ‘‘[r]esolving contested disputes’’ of fact, United States v. E.I. du Pont de 101. Moreover, anticipating continued law, and remedy. Maimon Nemours & Co., 366 U.S. 316, 334 litigation between the parties over Schwarzschild, Public Law by Private (1961)). Similarly, it is proper to defer issues related to relief, the Court of Bargain: Title VII Consent Decrees and to the United States as representative of Appeals contemplated that this Court the Fairness of Negotiated Institutional the public interest when the parties are would exercise its ‘‘broad discretion to Reform, 1984 Duke L.J. 887, 903 (1984). requesting entry of an agreed-upon enter that relief it calculates will best Rather, the Court’s task is only to judgment. 49 remedy the conduct it has found to be determine whether to perform the As the Court of Appeals has unlawful,’’ id. at 105, in light of its ‘‘judicial act,’’ United States v. Swift & explained, the degree of deference the findings as to the causal connection trial court gives to ‘‘the government’s between that conduct and the in this case (No. 98–1232) that were affirmed by the predictions as to the effect of the maintenance of Microsoft’s market Court of Appeals. See United States v. Armour & proposed remedies’’ in a Tunney Act power, id. at 103–07. That is, the Court Co., 402 U.S. 673,681 (1971) (parties to a consent proceeding may vary with the extent of decree ‘‘waive their right to litigate the issues of Appeals envisioned that this lawsuit involved in the case’’) These abandonments are the court’s familiarity with the market would terminate in an ‘‘adjudicated conditional, because the United States has and other factors, Microsoft I, 56 F.3d at judgment,’’ with the wording of that expressly reserved the right to withdraw its consent 1461. But, as the Court of Appeals also judgment ‘‘determined by the judge, to the RPFJ prior to entry (Stipulation ¶1 (Nov. 6, emphasized, even a court that has 2001)), and the consent of both parties is contingent who may draft it, accept the draft upon the Court’s approval of the RPFJ (id.¶2). extensive relevant expertise should not proposed by the winning party, or adopt 52 In principle, the parties could have simply lightly reject the government’s portions of draft language proposed by agreed between themselves on a purely contractual predictions. For example, in the case of any of the parties,’’ Janus Films, Inc. v. version of the RPFJ and terminated the litigation, the AT&T decree—‘‘a decree the Miller, 801 F.2d 578, 581–82 (2d Cir. without the Court’s further action, by stipulation of oversight of which had been the dismissal, see Fed. R. Civ. P. 41(a)(1)(ii); Janus 1986), to achieve the result the Court Films, 801 F.2d at 582; Michigan Note, 83 Mich. L. business of a district judge for several views as appropriate—subject to review Rev. at 168n.98 (as an alternative to a consent years,’’ Microsoft I at 1460—the court of on appeal. decree, government could ‘‘settle the case by appeals instructed that the district judge The parties, however, have chosen to contract with the defendant’’); see also In re IBM should not reject an agreed-upon Corp., 687 F.2d 591, 600–03 (2d Cir. 1982) (Tunney forgo, at least conditionally, their rights Act does not apply to stipulations of dismissal). modification of the decree unless it had to continue litigating to an adjudicated That alternative was unacceptable to the United ‘‘’exceptional confidence that adverse judgment, as well as their rights to States, which insisted, for various reasons including antitrust consequences [would] result— further appellate review.51 In order to the availability of enforcement ‘‘by citation for perhaps akin to the confidence that contempt of court,’’ that the agreement carry ‘‘the legal force and character of a judgment entered after would justify a court in overturning the 50 Some of the States that are plaintiffs in New a trial.’’ Local No. 93, Int’l Ass’n of Firefighters v. predictive judgments of an York v. Microsoft Corp., No. 98–CV–1233, have City of Cleveland, 478 U.S. 501, 518 (1986); see administrative agency.’’’’ Id. (quoting settled with Microsoft on identical terms, while Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, United States v. Western Elec. Co., 993 others have not settled and continue to litigate. We 378 (1992) (consent decree ‘‘is an agreement that do not address here the nature of the task the Court the parties desire and expect will be reflected in, F.2d 1572, 1577 (D.C. Cir. 1993)). now faces in New York. and be enforceable as, a judicial decree that is 51 More particularly, each party has conditionally subject to the rules generally applicable to other resources in making their public interest abandoned the right to seek from the Court a judgments and decrees.’’). Cf. United States v. determinations.’’) remedy order to which the other has not agreed; United Artists Theatre Circuit, Inc., 1971 Trade Cas. 49 See, e.g., United States v. Paramount Pictures, each has abandoned the right to seek appellate (CCH) ¶73,751, at 91,183 (E.D.N.Y. 1971) (in case Inc., 334 U.S. 131, 177 (1948); United States v. review of the remedy order; and Microsoft has where government sought preliminary injunction, Borden Corp., 347 U.S. 514, 518 (1954); Bechtel, abandoned the right to seek Supreme Court review government advised the court ‘‘that it was its policy 648 F.2d at 666. of the liability determinations and factual findings not to accept stipulations unless ‘So Ordered’’’).
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Co., 286 U.S. 106, 115 (1932), of Report at 5 (‘‘the consent decree is of as a threat to the operating system entering the decree proposed by the crucial importance as an enforcement monopoly. The United States also was parties for entry as the Court’s decree. tool, since it permits the allocation of mindful of the risks associated with In cases involving only private resources elsewhere’’); 119 Cong. Rec. tampering too greatly with market interests, the decision to enter settling 24,600 (1973) (Statement of Sen. mechanisms or seeking to dictate some parties’ agreements as judgments Gurney) (Tunney Act ‘‘is designed to preferred view of how these markets requires little judicial attention. See enhance the value and effectiveness of should develop. While Microsoft’s United States v. City of Miami, 614 F.2d the consent decree as a tool of public violations must be redressed, the 1322, 1330 (5th Cir. 1980) (‘‘In what can policy’’). A consent decree, such as the purpose of an antitrust decree is to be termed ‘‘ordinary litigation,’’ that is, RPFJ, is the product of negotiation. The restore and preserve competition, not to lawsuits brought by one private party parties weigh the benefits of prompt and displace competition with a regulatory against another private party that will certain resolution of the case against the regime. not affect the rights of any other possibility that continued litigation The RPFJ meets the goals of public persons, settlement of the dispute is might improve their respective antitrust enforcement. First, it prohibits solely in the hands of the parties. . . . positions. Settlements potentially offer the conduct found by the court of [T]he court need not and should not get the public the benefits of more timely appeals to be unlawful. The RPFJ involved’’); Janus Films, 801 F.2d at 582 and certain relief, as well as significant contains specific affirmative (‘‘court normally has only a limited role savings in judicial and prosecutorial prohibitions addressing each of the 12 so long as the dispute affects only resources. But if courts refused to enter practices the court determined to be acts private interests’’). But in considering any consent decree that did not match of monopoly maintenance. This being a whether it ‘‘should enter a consent precisely the relief the court would have monopolization decree, the RPFJ then decree affecting the public interest,’’ imposed in the absence of a settlement, goes beyond the specific unlawful acts Adams v. Bell, 711 F.2d 161, 170 n.40 ‘‘defendants would have no incentive to to provide fencing-in relief to address (D.C. Cir. 1983) (en banc), ‘‘[t]he court consent to judgment and this element of other practices that Microsoft might use has a larger role.’’ Janus Films, 801 F.2d compromise would be destroyed. The to replicate the adverse effects of the at 582. Most fundamentally, the reason consent decree would thus as a practical offending conduct. For example, for that larger role is that a court of matter be eliminated as an antitrust although there was no finding that equity must avoid letting its decree enforcement tool, despite Congress’ Microsoft had priced its operating become ‘‘an instrument of wrong’’ to the directive that it be preserved.’’ AT&T, systems in an unlawful manner, the public. Swift, 286 U.S. at 115.53 552 F. Supp. at 151. RPFJ requires uniform pricing and terms The Court’s role in making a public Thus, even in the AT&T case, a case to the major OEM’s to prevent interest determination differs from its of unparalleled public importance in retaliatory discrimination against those role in formulating an adjudicated which the trial court had unusual who might promote competing judgment. Because the Court ‘‘is familiarity with both the evidence and middleware products. Finally, the RPFJ evaluating a settlement, it is not as free the legal arguments of the parties, see id. takes affirmative steps to restore to exercise its discretion in fashioning a at 152, the court determined to approve competition by creating favorable remedy,’’ AT&T, 552 F. Supp. at 151, as the parties’ settlement ‘‘[i]f the conditions under which competing it would be in a case litigated to an [proposed] decree meets the middleware products can be developed adjudicated judgment. The Court is not requirements for an antitrust remedy.’’ and deployed. Among other things, the ‘‘empowered to reject [the remedies Id. at 153. The court made clear that it RPFJ requires the documentation and sought] merely because [it] believe[s] intended to follow that standard disclosure of applications interfaces and other remedies [are] preferable.’’ whether or not the proposed decree communications protocols to facilitate Microsoft I, 56 F.3d at 1460. In this corresponded to the decree the court third-party development efforts and, in procedural setting, the Court’s ‘‘function itself would have imposed had the some instances, modifications of the is not to determine whether the parties pushed forward to an operating system to accommodate resulting array of rights and liabilities ‘is adjudicated judgment. See id. at 166 competing middleware. Again, these the one that will best serve society,’ but n.147 (noting that if the case ‘‘were to restorative provisions go beyond the only to confirm that the resulting proceed to final judgment and liability specific findings of unlawful behavior, settlement is ‘‘within the reaches of the were found, the Court might determine with the goal of creating a forward- public interest.’’ ’ ’’’ Id. (quoting United that [certain measures not part of the looking and comprehensive remedial States v. Western Elec. Co., 900 F.2d proposed decree] are appropriate scheme. Nothing in the RPFJ exempts 283, 309 (D.C. Cir. 1990) (emphasis in remedies, either as alternatives to the Microsoft from the mandates of the original), in turn quoting Bechtel, 648 divestiture of the Operating Companies antitrust laws; it continues to face F.2d at 666, in turn quoting United or in addition to such divestiture’’). antitrust exposure for conduct beyond that which has been litigated in this States v. Gillette Co., 406 F. Supp. 713, IV. Entry of the Revised Proposed Final case. 716 (D. Mass. 1975)). Judgment Is in the Public Interest This standard reflects not only the Many commentors, especially many proper role of a court of equity asked to The RPFJ is a sound and appropriate of Microsoft’s competitors, urge the lend its authority to the parties’ response to the violations found by the Court to withhold Tunney Act approval, agreement, but also the critical role that district court and affirmed by the court advocating their own views of the consent decrees play in effective public of appeals, recognizing, as it must, the public interest. Although many such antitrust enforcement. See Senate substantial narrowing of the case that commentors assert that alternatives to has taken place since its commencement the RPFJ might advance their own 53 Cf. United States v. Microsoft Corp., 56 F.3d in 1998. In fashioning appropriate relief, private strategic and financial interests, 1448, 1460 (D.C. Cir. 1995) (analogizing public the United States was bound to confine such proposals typically lack a interest determination to decision on decree its remedial proposals to the sole basis foundation in the court’s liability modification, where ‘‘a court should not reject an agreed-upon modification unless ‘it has exceptional of liability sustained by the Court of findings and likely would be harmful to confidence that adverse antitrust consequences will Appeals—i.e., specific acts by Microsoft both competition and consumers. The result’’’) (citation omitted). to impede the emergence of middleware most persistent complaint is that the
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fencing-in and restorative provisions are third party has demonstrated positive court and the Court of Appeals both not absolute prohibitions on injury that would flow from entry of the determined that they could not competitive activity by Microsoft or RPFJ. conclude that, absent Microsoft’s illegal absolute requirements that Microsoft A. The Revised Proposed Final actions, any middleware product or surrender its technology for the benefit Judgment Satisfies the Goals of an products would have succeeded in of competitors. Characterizing the Antitrust Remedy and Properly toppling the monopoly. RPFJ’s limitations as ‘‘loopholes,’’ these Addresses All Bases of Liability In fashioning the decree, the United commentors fail to recognize that the Affirmed by the Court of Appeals States began with the district court’s limitations merely permit Microsoft to interim conduct remedies of June 2000. compete through actions that are not The Revised Proposed Final Judgment prohibited by the antitrust laws, were provides stringent, effective, See Initial Final Judgment, 97 F. Supp. never at issue in this case, or were enforceable, and immediate relief that 2d at 66–69. As this Court recognized challenged under theories of liability fully comports with the purposes of (Tr. 9/28/01 at 8), however, those expressly rejected by the court of relief in antitrust cases and with remedies were based on a much wider appeals. Microsoft’s degree of liability as range of liability findings than were affirmed by the Court of Appeals. affirmed on appeal. See Microsoft, 253 Protecting competitors from legitimate Restoring competition is the ‘‘key to the F.3d at 105 (‘‘[t]his court has drastically competition from Microsoft is not a goal whole question of an antitrust remedy,’’ altered the District Court’s conclusions of public antitrust enforcement. The United States v. E.I. du Pont de on liability’’). Accordingly, the conduct goal of the decree is not to secure Nemours & Co., 366 U.S. 316, 326 restrictions of the Initial Final Judgment specific advantages for particular (1961). Competition was injured in this competitors or to dictate for consumers had to be tailored to the findings the case principally because Microsoft’s Court of Appeals upheld. At the same which products or technologies will illegal conduct contributed to the succeed. In fashioning the RPFJ, the time, however, because the interim applications barrier to entry into the conduct restrictions were designed to United States has taken pains to remedy personal computer operating system the violations without seeking to dictate apply only as a stop-gap until the market by impeding the emergence of district court’s structural remedy was market outcomes. We have had to middleware products that had the implemented (Initial Final Judgment, 97 balance certain competing interests, potential to assist competing operating F. Supp. 2d at 66), they had to be recognizing that provisions benefitting systems in gaining access to firms at one level in the chain of applications and other needed broadened to address more fully the distribution have potential effects on complements. Thus, the key to the remedial objectives of arresting the firms at other levels. In striking such proper remedy in this case is to end anticompetitive conduct, preventing its balances, the United States has Microsoft’s restrictions on potentially recurrence, and restoring competitive remained faithful to the axiom that the threatening middleware, prevent it from conditions in the marketplace. No U.S. antitrust laws protect competition hampering similar nascent threats in the longer merely a stop-gap, the conduct not competitors. E.g., Andrx Pharms., future, and restore competitive restrictions now must stand on their Inc. v. Biovail Corp. Int’l, 256 F.3d 799, conditions like those that existed prior own as full relief. 812 (D.C. Cir. 2001) (quoting Brunswick to the unlawful conduct. Moreover, in In addition, the remedies needed to be Corp. v. Pueblo Bowl-O-Mat, Inc., 429 fashioning relief, the United States, as updated to strengthen their long-term U.S. 477, 488 (1977), petition for the public enforcer of the federal effectiveness in the face of the rapid certiorari filed, 70 U.S.L.W. 3465 (Jan. antitrust laws, must take care that the technological innovation that continues 11, 2002), (No. 01–1050). On that basis, remedy not burden the economy or to characterize the computer industry. the United States has concluded that distort market outcomes through The Court of Appeals noted that the six further fencing-in or restorative relief unnecessarily regulatory or otherwise years that had elapsed between based upon hypothetical concerns about inappropriate restraints. The RPFJ Microsoft’s initial anticompetitive Microsoft’s behavior not only would be responds to these concerns; it imposes conduct and the appeal was an unnecessary and unwarranted, but also a series of requirements and carefully ‘‘eternity’’ in this market, Microsoft, 253 might be affirmatively harmful to crafted prohibitions on Microsoft’s F.3d at 49 (quoted by Order at 2 (Sept. competition. conduct that are designed to accomplish 28, 2001)), and the facts bear that out. Moreover, the RPFJ bears none of the the critical goals of an antitrust remedy When the complaint was filed in May infirmities that would justify the Court’s without damaging the economy. See 1998, Microsoft’s then-current operating withholding of approval. See MSL, 118 Sibley Decl. ¶¶ 86–90. system was Windows 95. Shortly F.3d at 783 (listing factors that would As instructed by the Court of Appeals thereafter, Microsoft revised and and this Court (see Tr. 9/28/01 at 8), the justify withholding approval); Microsoft updated the operating system with United States fashioned its relief by I, 56 F.3d at 1462 (same). The decree is Windows 98, which fully integrated focusing on the specific practices for comprehensive and complex, like the Internet Explorer into Windows. In which Microsoft’s liability was affirmed. computer industry itself, but its terms October 2001, just after the case was Significantly, and quite properly, the are carefully defined and not remanded to this Court, Microsoft ambiguous.54 The enforcement RPFJ does not seek to eliminate Microsoft’s operating system monopoly, introduced the latest generation of its mechanisms are creative and fully operating system, Windows XP. The adequate. See pages 60–62 below.55 No see Sibley Decl. ¶ 8, though many commentors suggest it should. There remedy crafted now must be relevant in the new world of Windows XP, and 54 For a response to commentors’ claims of was never any allegation—let alone any specific ambiguities, see Response of the United finding—in this case that Microsoft beyond. The RPFJ accomplishes these States To Public Comments on the Revised acquired its position in operating objectives by fundamentally changing— Proposed Final Judgment, passim, esp. § III systems unlawfully. Further, the district for the ultimate benefit of consumers— (Definitions) (‘‘Response’’). the way Microsoft deals with OEMs, 55 For a response to commentors’ claims of specific shortcomings of the enforcement (Enforcement); see also Declaration of David S. IAPs, ISVs, and others in the computer mechanisms of the RPFJ, see Response, § VIII Sibley (‘‘Sibley Decl.’’) (attached as Appendix C). industry.
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1. The RPFJ Stops the Unlawful Section III.C.1 prohibits Microsoft refrain from distributing, promoting, or Conduct, Prevents Its Recurrence and from preventing OEMs from installing using any product competing with Restores Competitive Conditions to the and displaying middleware on the Microsoft middleware. See Sibley Decl. Market desktop. Section III.C.2 prohibits ¶ 31. Microsoft from preventing OEMs from The Court of Appeals affirmed the Agreements With Internet Content distributing or promoting middleware district court’s ruling that Microsoft Providers, Independent Software by placing on the desktop shortcuts of unlawfully maintained its operating Vendors, and Apple system monopoly through various any size or shape, as long as they do not 8. Agreement with ISVs to make actions designed to protect the operating impair the functionality of the user Internet Explorer their default system from the potential threat posed interface. Section III.H.3 ensures that hypertext-based user interface (see 253 by middleware. However, the court Microsoft’s operating system does not automatically override the ‘‘default’’ F.3d at 71–72) reversed the district court’s finding that Section III.F.2 forbids Microsoft from Microsoft was liable based upon its settings to replace competing middleware products without first conditioning the grant of consideration general ‘‘course of conduct,’’ and on an ISV’s refraining from developing, limited liability to twelve specific seeking confirmation from the user. See Sibley Decl. ¶¶ 26, 27. using, distributing, or promoting anticompetitive acts out of twenty found software that competes with Microsoft’s violative by the district court. The RPFJ 4. Prohibiting use of ‘‘Active Desktop’’ to promote others’’ products (see 253 operating system or middleware. provides consumers with prompt, Section III.G.1 prohibits Microsoft from certain, and effective relief by stopping F.3d at 62) This specific conduct is no longer at entering into any agreement with an each of the specific acts found unlawful issue because Microsoft has IAP, ICP, ISV, or OEM that grants by the Court of Appeals, preventing discontinued the use of the Active consideration on the condition that such their recurrence, and restoring Desktop. Sections III.C.1 and III.C.2 entity distributes, promotes, uses, or competitive conditions in the market. nevertheless broadly restrict Microsoft supports any Microsoft middleware or a. Stops the Unlawful Conduct from preventing OEMs from promoting operating system exclusively or in a fixed percentage. See Sibley Decl. ¶ 32. Each of the twelve acts found rival products. See Sibley Decl. ¶ 28. 9. Threat to end support of Apple unlawful by the Court of Appeals is Binding Internet Explorer to Windows Computer’s Office product unless Apple listed below with a brief description of 5. Excluding Internet Explorer from bundled Internet Explorer with the the specific provisions of the RPFJ that the ‘‘Add/Remove’’ utility (see 253 F.3d Macintosh operating system and made effectively address the conduct. 56 at 65) Internet Explorer the default browser Agreements With Computer Section III.H.1 requires Microsoft to (see 253 F.3d at 73) Manufacturers (OEMs) allow end users and OEMs to enable or Sections III.F.1 and III.F.2, discussed above, prohibit Microsoft from 1. Prohibiting removal of desktop remove access to any Microsoft retaliating against ISVs and IHVs, icons, folders or Start menu entries (see middleware product. See Sibley Decl. including Apple, for supporting 253 F.3d at 61) ¶ 29. 6. Commingling code to prevent Section III.H.1 of the RPFJ prevents competing products and from offering removal of Internet Explorer (see 253 Microsoft from engaging in this conduct consideration to such entities for F.3d at 64–66) by allowing end users or computer refraining from supporting competing Section III.C.1 prohibits Microsoft manufacturers to enable or remove products. In addition, Section III.G.1 from preventing computer access to each middleware product by prohibits such exclusive arrangements. manufacturers from installing and displaying or removing icons, shortcuts, Sibley Decl. ¶ 33. displaying rival middleware products or menus in the Microsoft operating on the desktop. Efforts To Exclude Sun’s Java system in the same place they are Section III.H.1 requires Microsoft to 10. Contracts requiring ISVs to normally displayed. See Sibley Decl. allow end users and computer exclusively promote Microsoft’s Java ¶ 24. manufacturers to remove access to any product (see 253 F.3d at 75) 2. Prohibiting alteration of initial boot Microsoft middleware product. See Section III.F.2 forbids Microsoft from sequence (see 253 F.3d at 61) Sibley Decl. ¶ 30. conditioning the grant of consideration Section III.C.3 prohibits Microsoft on an ISV’s refraining from developing, from restricting OEMs from launching Agreements With Internet Access using, distributing, or promoting middleware automatically at the end of Providers (IAPs) software that competes with Microsoft’s the initial boot sequence or subsequent 7. Placement of IAP’s product on operating system or middleware. boot sequences. Section III.C.4 prohibits desktop in return for its agreement to Section III.G.1 prohibits Microsoft from Microsoft from restricting OEMs from exclusively promote Internet Explorer entering into any agreement with an offering users the option of launching a (or to limit shipments of Navigator) (see IAP, ICP, ISV, or OEM that grants non-Microsoft operating system before 253 F.3d at 68) consideration on the condition that such Windows starts up. Section III.C.5 Section III.G.1 prohibits Microsoft entity distribute, promote, use, or prohibits Microsoft from preventing from entering into any agreement with support any Microsoft middleware or OEMs from presenting their own an IAP, ICP, ISV, or OEM that grants operating system exclusively or in a Internet access offer in the initial boot consideration on the condition that such fixed percentage. See Sibley Decl. ¶ 34. sequence. See Sibley Decl. ¶ 25. entity distribute, promote, use, or 11. Deception of Java developers 3. Prohibiting addition of icons or support any Microsoft middleware or about Windows-specific nature of tools folders of different shape or size (see operating system exclusively or in a distributed to them (see 253 F.3d at 76) 253 F.3d at 62) fixed percentage. Section III.G.2 Section III.D addresses this conduct prohibits Microsoft from entering into by requiring Microsoft to disclose 56 For a fuller discussion of how the Court of Appeals addressed the twenty acts found by the any agreement with an IAP or ICP certain APIs required for competing district court to violate Section 2, see Appendix A granting placement in Windows to the middleware to interoperate with its (attached hereto), and Sibley Decl. ¶ 16 (Table One). IAP or ICP on the condition that it operating system. This makes the means
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by which middleware producers economic freedom to make decisions opportunity for ISVs, IAPs, ICPs, and interoperate with the operating system about distributing and supporting non- OEMs to develop new middleware more transparent, and thus hinders Microsoft middleware products without products that compete directly with Microsoft’s ability to disadvantage these fear of coercion or retaliation by Microsoft on a function-by-function competitors. See Sibley Decl. ¶ 35. Microsoft, by broadly prohibiting basis, assured that their products will 12. Coercion of Intel to stop assisting retaliation against a computer interoperate with the Windows Sun in improving its Java technology manufacturer that supports or operating system. (see 253 F.3d at 77) distributes alternative middleware or Section III.E requires Microsoft to Sections III.F.1 and III.F.2, discussed operating systems. Because the Court of license the communications protocols above, prohibit Microsoft from Appeals agreed with the district court’s that are necessary for software located retaliating against ISVs and IHVs, conclusion that OEMs are a crucial on a computer server to interoperate including Intel, for supporting channel of distribution for competing with the Windows operating system. competing products and from offering products (see 253 F.3d at 60–61), it is This means that ISVs will have full consideration to such entities for critical that OEMs are free to choose to access to, and be able to use, the refraining from supporting competing distribute and promote competing protocols that are necessary for software products. See Sibley Decl., ¶ 36. middleware products without located on a server computer to Thus, the RPFJ effectively stops each interference from Microsoft. Section interoperate with, and fully take of the specific acts found unlawful by III.B strengthens Section III.A further by advantage of, the functionality provided the Court of Appeals. See Sibley Decl. requiring Microsoft to provide uniform by the Windows operating system. The ¶ 40. licensing terms to the twenty largest and competitive significance of most non- b. Prevents Recurrence of Unlawful most competitively significant OEMs. Microsoft middleware, including the Conduct Windows license royalties and terms are browser and Java technologies—against inherently complex, making it easy for which much of Microsoft’s illegal In addition to stopping and Microsoft to use them to coerce OEM conduct was directed—was and will preventing the recurrence of the specific conduct. By eliminating the opportunity continue to be highly dependant on acts found unlawful by the Court of for Microsoft to use license terms as a content, data, and applications residing Appeals, the RPFJ guards against the club, the provision ensures that OEMs on servers and passing over networks broad range of potential strategies can make their own choices. Section (such as the Internet or corporate Microsoft might develop to impede the III.F prohibits Microsoft from retaliating networks) to that middleware running emergence of competing middleware against ISVs and IHVs or conditioning on personal computers. Section III.E products. See Sibley Decl. ¶¶ 41–51. consideration on a developer’s prevents Microsoft from incorporating Middleware Definition. The various refraining from developing, distributing, into Windows features or functionality definitions of middleware within the or writing to software that competes with which only its own servers can RPFJ (see ‘‘Microsoft Middleware’’ with Microsoft platform software. At the interoperate, and then refusing to make (Section VI.J), ‘‘Microsoft Middleware same time, it allows Microsoft to enter available information about those Product’’ (Section VI.K) ‘‘Non-Microsoft into lawful agreements with software features that non-Microsoft servers need Middleware’’ (Section VI.M), and ‘‘Non- developers that include provisions in order to have the same opportunities Microsoft Middleware Product’’ relating to Microsoft software, as long as to interoperate with the Windows (Section IV.N)) are broad. They cover the provisions are limited and operating system. Although plaintiffs not only the middleware products reasonably necessary to effectuate the presented limited evidence about addressed by the Court of Appeals— bona fide contractual relationship. servers at trial, and no server-related Internet browsers and Java—but also violations were alleged or found, the additional current middleware c. Restores Competitive Conditions to United States believed that the RPFJ’s products, such as email client software, the Market effectiveness would be undercut unless networked audio/video client software, The RPFJ restores competitive it addressed the rapidly growing server and instant messaging software, as well conditions to the market by requiring segment of the market. as future middleware products not yet Microsoft to, among other things: (1) Section III.I requires Microsoft to in existence. See Sibley Decl. ¶¶ 41–42. Disclose APIs and license offer the necessary related licenses of To ensure inclusion of future products, communications protocols that will give the intellectual property that are the definitions set forth an objective test ISVs the opportunity to match required to disclose and license under for products not yet existing; the Microsoft’s middleware and server the RPFJ. Section III.I ensures that definitions are qualified, however, in software functionality; and (2) allow Microsoft’s obligations to disclose the recognition that not all software that OEMs and end users to replace technical information in Sections III.D exposes APIs qualifies as competitively Microsoft middleware and preserve and III.E are meaningful. This Section significant ‘‘middleware.’’ ‘‘default’’ settings that will ensure that ensures that Microsoft cannot use its Consequently, third-party software that, Microsoft’s middleware does not intellectual property rights in such a like Web browsers or Java, has the override the selection of competing way that undermines the competitive potential to create a competitive threat middleware products. See Sibley Decl. value of its disclosure obligations, while to Microsoft’s operating system ¶ 52 & Table Two. at the same time permitting Microsoft to monopoly, will be covered in the future. APIs and Communications Protocols. take legitimate steps to prevent Non-Discrimination and Non- Section III.D of the RPFJ requires unauthorized use of its intellectual Retaliation. Sections III.A, III.B, and Microsoft to disclose all of the interfaces property. III.F impose broad prohibitions and and related technical information, Section III.J permits Microsoft to take obligations on Microsoft to ensure that including APIs, that Microsoft’s certain limited acts to address security- it cannot implement new forms of middleware uses to interoperate with related issues that may arise from the exclusionary behavior against the Windows operating system. This broad disclosures required in Sections middleware. See Sibley Decl. ¶¶ 41–42, includes APIs and other information III.D and III.E. Section III.J provides a 51. Section III.A of the RPFJ ensures that Microsoft has not previously narrow exception for disclosure of APIs that OEMs have contractual and disclosed. This Section creates the and other information for disclosures
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that would compromise system security. experts, with the means to hire its own more fully in the Response to See Sibley Decl. ¶ 65. staff and consultants, as needed. The Comments, many commentors seek Power to Replace Microsoft Technical Committee will facilitate remedies that preordain market Middleware and Preserve Defaults. enforcement by monitoring compliance outcomes, require extensive on-going Section III.H further ensures that OEMs with the RPFJ and reporting violations regulation, are vulnerable to will be able to offer and promote, and to the United States. Additionally, the manipulation by Microsoft’s rivals, or consumers will be able to use, Technical Committee is available to are simply crafted to weaken Microsoft competing middleware products. mediate compliance issues in a manner as a competitor.58 Such remedies would Section III.H.1 requires Microsoft to that will not supplant legal enforcement create inefficiencies in the market and allow end users and OEMs to enable or by the United States. This dispute likely result in harm to consumer remove access to each Microsoft resolution function reflects the welfare. See Sibley Decl. ¶¶ 19–21, 86– middleware product. Thus, all recognition that the market will benefit 88. middleware products will have equal from rapid, consensual resolution of B. The Revised Proposed Final opportunity for desktop placement. issues, whenever possible, more so than Judgment Compares Favorably to the Section III.H.2 requires Microsoft to litigation under the United States’ Initial Final Judgment allow end users, OEMs, and Non- contempt powers. Dispute resolution Microsoft Middleware Products to complements, but does not supplant, In the Joint Status Report filed designate non-Microsoft middleware to the other methods of enforcement. September 20, 2001, plaintiffs informed be invoked in place of the Microsoft Furthermore, should the United States the Court that their proposal for relief middleware. This will allow competing bring an enforcement action against would be modeled on the conduct programs to be launched automatically, Microsoft, it will not have to start from restrictions in the Initial Final as defaults, in numerous competitively scratch. Rather, it will have the Judgment. Joint Status Report at 2 (Sept. significant instances. Technical Committee’s work product, 20, 2001). A week later, the Court admonished plaintiffs to determine 2. The RPFJ Contains Stringent findings, and recommendations to help start any investigation. which relief was no longer appropriate Enforcement Mechanisms In order to fulfill these important given the Court of Appeals’ narrowing Sections IV, V, and VII of the RPFJ responsibilities, the Technical of the underlying liability. See Tr. 9/28/ contain some of the most stringent Committee will have complete access to 01 at 8. Although some commentors enforcement provisions ever contained Microsoft’s records, facilities, systems, have argued that any relief short of the in any modern consent decree. Sections equipment, and personnel. Initial Final Judgment is inadequate, IV and VII provide that the United Significantly, this includes access to that is contrary to the Court’s States’ full enforcement powers are Microsoft’s source code and related statements, as well as the Court of available to enforce the judgment. As materials, which will assist in resolving Appeals’ ruling. with any other decree, the United States or identifying any disputes relating to The RPFJ parallels the Initial Final will have prosecutorial access powers to Microsoft’s disclosure obligations. The Judgment in many ways, provides for monitor compliance, and authority to Technical Committee will also have the greater relief in some respects, and, in bring: (1) Both civil and criminal benefit of written reports and data, light of the Court of Appeals’ decision, contempt petitions; (2) petitions for which Microsoft must prepare. omits some provisions. A comparison of injunctive relief to halt or prevent Second, under Section V, the RPFJ is the two decrees highlights why the RPFJ violations; (3) motions for declaratory scheduled to terminate in five years, but is in the public interest. may be extended by two years if the judgment to clarify or interpret 1. The Revised Proposed Final Judgment Court finds that Microsoft has engaged particular provisions; and (4) motions to Relies on Conduct Restrictions, Rather in a pattern of wilful and systemic modify the Final Judgment, as Than Structural Relief appropriate. 57 Though not required by violations. The five-year duration the RPFJ, the United States has charged provides sufficient time for the remedies The most significant difference a core team of lawyers and economists to take effect in this evolving market between the Initial and Revised experienced in the software industry and to restore competitive conditions to Proposed Final Judgment is that the with enforcing the RPFJ. Section IV also the greatest extent possible. And, provides, as the United States typically because Microsoft will have an 58 For example, several commentors have urged that the RPFJ require Microsoft to distribute Sun- requires, that Microsoft maintain an incentive to get out from under the compatible Java products with each copy of the antitrust compliance program to help RPFJ’s restrictions and affirmative Windows operating system shipped by Microsoft. ensure compliance with the RPFJ. obligations as soon as possible, the E.g., SILA Comments, at 49–51; Comments of SBC Microsoft is required to appoint an prospect that it might face a two-year Communications, Inc. on the Proposed Final Judgment at 145 (MTC #00029411) (‘‘SBC internal compliance officer responsible extension will provide an extra Comment’’); ProComp Comment, Att. A, at 18–19 for supervising the review of Microsoft’s incentive to comply. (Declaration of Kenneth J. Arrow) (‘‘Arrow Decl.’’). activities to determine whether they 3. The RPFJ Fully Addresses the This remedy would go beyond restoring the comply with the RPFJ and for ensuring competitive conditions existing prior to Microsoft’s Unlawful Conduct While Avoiding an unlawful conduct—where Sun’s Java product that Microsoft undertakes internal Unnecessarily Regulatory Decree That competed for space on Windows—and instead notification and education Would Distort Market Outcomes preordain the market outcome by ensuring Java responsibilities as required. placement on the operating system. See Sibley Decl. But the enforcement provisions do not As discussed above, the United States ¶ 80. As another example, a commentor proposes carefully crafted the RPFJ to fully that Microsoft be required to offer, at a lower price, stop there; rather, they contain two a separate, ‘‘stripped down’’ version of Windows other, aggressive features. First, the RPFJ address the conduct found unlawful by that does not include Microsoft middleware establishes the Technical Committee, a the Court of Appeals. In doing so, the products. SBC Comment, at 48–49. However, full-time, on-site compliance team of United States was mindful not to determining the appropriate discount for each of implement an overly broad, the middleware products stripped out of Windows, software design and programming including an accounting for the shared costs unnecessarily regulatory decree that between multiple projects, would result in a highly 57 Of course, each Settling State also has authority would interfere with competitive regulatory pricing apparatus susceptible to further to enforce the RPFJ. conditions in the market. As discussed litigation. See Sibley Decl. ¶¶ 71–74.
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former required a break-up of Microsoft and then, assuming this Court actually the tying claim was a sound exercise of while the latter does not. See IFJ §§ 1– ordered structural relief anew, again in prosecutorial discretion. 2. Shortly after remand, plaintiffs the Court of Appeals—but also would The United States’ decision to informed Microsoft and this Court that, have permitted Microsoft to introduce a abandon the tying claim, coupled with in light of the Court of Appeals’ plethora of new evidence. Foregoing a the Court of Appeals’ decision to reject decision, we would no longer seek to structural remedy permitted plaintiffs to the attempted monopolization count, break up the company. Joint Status speed along the remand proceedings had a significant impact on the scope of Report 2 (Sept. 20, 2001). Thus, even if and obtain quicker relief and relief that relief the United States could obtain. the United States had not entered into was more likely to be affirmed on The tying and attempted a negotiated settlement and instead appeal. monopolization claims were the only litigated a remedy, we would not have two considered by the Court of Appeals 2. Remedying Tying Is No Longer an sought structural relief. Plaintiffs that asserted a direct anticompetitive Objective abandoned the effort to break up impact in the market for Web browsers. Microsoft for both legal and practical The Revised Proposed Final Judgment The remaining count, monopoly reasons. also departs significantly from the maintenance, asserted an First, although the Court of Appeals Initial Final Judgment by omitting a anticompetitive impact in the operating merely vacated—but did not reverse— prohibition on tying. See IFJ § 3.f (‘‘Ban system market. The only connection the Initial Final Judgment, it also made on Contractual Tying’’). The Court of that Web browsers had to this claim was clear that it viewed structural relief in Appeals vacated Microsoft’s liability on that they were one of the nascent this case skeptically, at best. The court the tying claim (Microsoft, 253 F.3d at middleware threats that Microsoft had questioned whether plaintiffs had 84–97), and soon thereafter plaintiffs impeded. Therefore, without a claim ‘‘established a sufficient causal informed Microsoft and this Court that, asserting a direct impact in the Web connection between Microsoft’s in light of the appellate court’s decision, browser market, the United States’ was anticompetitive conduct and its we would no longer pursue allegations entitled to relief that restored nascent dominant position in the [operating of tying. Joint Status Report 2 (Sept. 20, threats like those that Web browsers had system] market’’ to justify divestiture. 2001). Thus, even if the United States presented, not relief that addressed Microsoft, 253 F.3d at 106. The court had not entered into a negotiated some broader injury in the browser continued that ‘‘[a]bsent such causation, settlement and instead continued its market. the antitrust defendant’s unlawful litigation, we would not have pursued 3. The New Conduct Restrictions behavior should be remedied by ‘‘an the tying claim. As with structural Compare Favorably to Those in the injunction against continuation of that relief, plaintiffs abandoned the tying Initial Final Judgment conduct.’’ Id. (quoting 3 Antitrust Law ¶ claim for both legal and practical 650a, at 67). The court also suggested reasons. The Revised Proposed Final Judgment that the necessary causation might be The Court of Appeals vacated and is based on the interim conduct lacking, noting that even the district remanded, rather than reversed, the restrictions of the Initial Final Judgment court ‘‘expressly did not adopt the tying claim, but left clear instructions of June 7, 2000. on what it expected on remand. See position that Microsoft would have lost a. Substantive Provisions Included in Microsoft, 253 F.3d at 95–97. First, its position in the [operating system] Both the Initial Final Judgment and the plaintiffs would have to pursue the market but for its anticompetitive Revised Proposed Final Judgment behavior.’’ Id. at 107 (quoting Findings claim under the rule of reason—with its of Fact, ¶ 411) (emphasis added). rigorous proof requirements—rather Both decrees prohibit Microsoft from Moreover, the Court of Appeals than the per se rule, which obviates retaliating against OEMs that support accepted Microsoft’s argument that many difficult problems of proof. Id. at non-Microsoft products. Compare IFJ divestiture is usually reserved for 89–95. Second, plaintiffs would be § 3.a.i with RPFJ § III.A. Both decrees ‘‘dissolution of entities formed by required to show that Microsoft’s also require Microsoft to license its mergers and acquisitions,’’ and directed conduct ‘‘unreasonably restrained Windows operating system products to this Court to ‘‘reconsider’’ whether competition . . . in the tied good the 20 largest OEMs on uniform terms. ‘‘divestiture is appropriate with respect market,’’ but would be ‘‘precluded from Compare IFJ § 3.a.ii, with RPFJ § III.B. to Microsoft, which argues that it is a arguing any theory of harm that depends The Initial Final Judgment also afforded unitary company.’’ Id. at 105. And the on a precise definition of browsers or OEMs flexibility in product court emphasized that, when fashioning barriers to entry . . . other than what configuration, as does the Revised a new remedy, the district court should may be implicit in Microsoft’s tying Proposed Final Judgment. Compare IFJ bear in mind that the Court of Appeals arrangement.’’ Id. at 95. Plaintiffs § 3.a.iii, with RPFJ § III.C. The Initial had ‘‘drastically’’ altered the basis of considered these to be significant legal Final Judgment also barred Microsoft liability (id. at 105, 107) and that the hurdles. from prohibiting OEMs from new remedy should reflect the ‘‘limited Of course, pursuing the tying claim on automatically launching a substitute ground of liability’’ upheld on appeal. remand also would have raised many of user interface upon completion of the Id. at 107. the same practical difficulties as boot process (IFJ § 3.a.iii(3)), but the Second, if plaintiffs had pursued discussed with respect to pursuing Court of Appeals expressly rejected this structural relief on remand, Microsoft structural relief on remand. For basis for liability (Microsoft, 253 F.3d at would have been entitled to present example, continued pursuit of tying 63), so the Revised Proposed Final evidence challenging a ‘‘wide range of would have delayed the remand Judgment has no equivalent provision. plaintiffs’ factual representations, proceedings significantly, thereby And both decrees require Microsoft to including the feasibility of dividing further delaying any relief for provide OEMs and consumers the Microsoft, the likely impact on consumers. Also, Microsoft would have means to remove access to any consumers, and the effect of divestiture been entitled to introduce a whole host Microsoft middleware that comes with on shareholders.’’ Id. at 101. This not of new evidence relating to its claimed Windows so that rival middleware may only would have been time procompetitive justifications for its be substituted. Compare IFJ§ 3.g.i, with consuming—both in the district court actions. Thus, the decision to abandon RPFJ § III.H.
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Section 3.b of the Initial Final The RPFJ also significantly enhances Virtual Machine, Windows Media Judgment required Microsoft to disclose enforcement of the decree as compared Player, Windows Messenger and to ISVs and OEMs all Windows APIs to the Initial Final Judgment. As Outlook Express. (RPFJ § VI.K). This necessary for interoperation, including previously discussed (see page 60 significantly improves the clarity of the interoperation with servers; Sections above), the RPFJ establishes a Technical decree because the IFJ had not explicitly III.D and III.E of the RPFJ accomplish Committee—a full-time, on-site indicated which current Microsoft the same result. The Initial Final compliance team of computer experts, products constituted middleware. The Judgment also required Microsoft to complete with its own staff and the RPFJ’s middleware definitions were also establish a ‘‘secure facility’’ where ISVs, power to hire consultants—to monitor updated to account for the increased OEMs, and others could ‘‘study, compliance with the decree, report emphasis on downloading as a interrogate and interact’’ with the violations to the Department, and distribution mechanism in the market. Windows source code to help ensure attempt to resolve technical disputes C. The Revised Proposed Final interoperability. See IFJ § 3.b. The RPFJ under the disclosure provisions. RPFJ Judgment Creates Competitive omits this provision, but provides for §§ IV.B.8, IV.D.4. The Technical Conditions affirmative disclosure of interfaces and Committee will have complete access to protocols, and empowers the Technical Microsoft’s source code (RPFJ There can be no guarantee that Committee to ensure that those § IV.B.8.c), records, facilities, and consumers and industry participants disclosures are being made. See RPFJ personnel. Its dispute resolution will prefer rival middleware over § IV.B. This approach strikes the responsibilities (RPFJ § IV.D) reflect the Microsoft’s software, or that rival appropriate balance by ensuring that recognition that the market will benefit middleware will ever displace—or developers will have the access they from rapid, consensual resolution of facilitate the displacement of— need, while protecting Microsoft’s issues whenever possible, more so than Microsoft’s monopoly position, but the intellectual property from litigation under the Department’s RPFJ restores competitive conditions misappropriation. contempt powers. The dispute that foster such threats. Indeed, even the Both decrees also comprehensively resolution process complements, but district court, in its extensive findings of address Microsoft’s relations with ISVs does not supplant, ordinary methods of fact and conclusions of law, expressly and IHVs to ensure that developers can enforcement. Complainants may still disclaimed the conclusion that but for create or use rival software. Both bring their inquiries directly to the Microsoft’s anticompetitive acts, decrees accomplish this objective by Department, and need not go first to the Netscape’s browser and/or Sun’s Java broadly prohibiting Microsoft from Technical Committee (RPFJ § IV.D.1). technologies necessarily would have threatening or retaliating against ISVs or The Technical Committee represents an eroded Microsoft’s monopoly position. IHVs’ actual or contemplated action to innovation in consent decrees that the See Findings of Fact, ¶411; Microsoft, develop, use, distribute, promote, or United States believes will improve the 253 F.3d at 107. Thus, consistent with support software that competes with speed and quality of enforcing a decree the antitrust laws, the RPFJ refrains Microsoft middleware or operating in a field as technical and fast-paced as from picking winners and losers, and system software. Compare IFJ §§ 3.d, the computer industry. sticks to restoring the competitive 3.h, with RPFJ § III.F. Similarly, both The Revised Proposed Final Judgment conditions. Consumers benefit from decrees prohibit Microsoft from entering provides for extending the decree’s competition, and the goal of the into exclusive agreements with third duration in the event Microsoft is found antitrust laws is to protect it, not weight parties that would require them to to have engaged in a ‘‘pattern of willful it to a particular result. refrain from distributing, promoting, and systematic violations’’ of its terms. using, or supporting rival software. RPFJ § V.B. This potential threat is yet V. The Court Should Make Its Public Compare IFJ § 3.e, with RPFJ § III.G. another means to ensure that Microsoft Interest Determination and Enter the There are also similarities with will comply with all of the decree’s Decree as Expeditiously as Possible respect to enforcement of the two provisions, to the ultimate benefit of Time is of the essence. When the decrees. For example, both decrees consumers. Court five months ago ordered the require Microsoft to maintain an Finally, the United States updated the parties to ‘‘expend and concentrate all internal antitrust compliance program RPFJ in several key ways to improve the of their resources upon resolving these (compare IFJ § 4, with RPFJ § IV.C), and clarity of the decree and account for cases through a fair settlement for all both give plaintiffs access to Microsoft’s changes in the industry since the IFJ parties,’’ Order at 2 (Sept. 28, 2001), the source code, books, correspondence, was proposed. First, the RPFJ contains Court recognized: a new provision in Section III.H.3 that personnel, etc. and the right to require The claims by Plaintiffs of anticompetitive Microsoft to submit written reports prohibits Microsoft from designing conduct by Microsoft arose over six years under oath. Compare IFJ § 5, with RPFJ Windows to automatically alter an ago, and these cases have been litigated in § IV.A.2. OEMs middleware configurations on the the trial and appellate court for over four desktop without first seeking years. As the Court of Appeals has noted, the b. The RPFJ Contains Provisions Not confirmation from the user no sooner relevant time frame for this dispute spans Included in the Initial Final Judgment than 14 days after the consumer has first ‘‘an eternity in the computer industry.’’ Although the Initial Final Judgment booted the computer. This provision Order at 2 (Sept. 28, 2001). The public required Microsoft to disclose its APIs was included in response to Microsoft’s has waited long enough. The Court to facilitate interoperation (IFJ § 3.b), the inclusion of the Clean Desktop Wizard should make a determination that entry RPFJ goes further by requiring Microsoft product in Windows XP that ‘‘sweeps’’ of the proposed final judgment is in the to offer the necessary related licenses for the unused icons that the OEM has public interest, and then enter it as the intellectual property that Microsoft chosen to place on the desktop. Second, expeditiously as possible. must disclose. See RPFJ §§ III.I.1, III.I.4. the definition of middleware products This ensures that Microsoft cannot use in the RPFJ was updated by including A. The Court Should Not Hold an its intellectual property rights to the actual names of the current Evidentiary Hearing undermine the competitive value of its Microsoft middleware products— As the Court has recognized, the disclosure obligations. Internet Explorer, Microsoft’s Java Tunney Act does not require an
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evidentiary hearing as part of this Second, the most analogous not be frustrated absent a showing of proceeding,59 Tr. at 20 (Feb. 8, 2002), precedent, AT&T, does not support an very good cause. although the Court left open the evidentiary hearing. In that case, B. The Court Should Not Delay Entry of possibility that it will decide to hold considering the entry of a decree that the Decree Pending the Remedies one. Id. at 20–21. The question lies would massively restructure the entire Hearing in New York v. Microsoft within the Court’s sound discretion, telecommunications industry, Judge guided by the principle that ‘‘the trial Greene held two days of hearings, The remedies hearing in New York v. judge will adduce the necessary permitting some organizations to Microsoft Corp., No. 98–CV–1233, is information through the least ‘‘present[] oral argument’’ AT&T, 552 F. currently scheduled to begin on March complicated and least time-consuming Supp. at 147 n.65. But the court 11, 2002. Some commentors have means possible.’’ Senate Report at 6; ‘‘concluded that none of the issues suggested that the Court delay its public accord House Report at 8. before it require[d] an evidentiary interest determination in this case In our view, at the conclusion of the hearing. That being so, there [was] pending the results of that hearing, one- or two-day hearing the Court has obviously no need, nor indeed any evidently so that the record, and ordered, Order (Feb. 15, 2002); see Tr. occasion, for the presentation by a third perhaps the Court’s adjudicated 2/15/02 at 5, at which the Court is party of its own witnesses or for the judgment, in New York can be imported considering allowing oral argument by cross-examination of adverse into this Tunney Act proceeding. The third parties, id. at 9, the Court will witnesses.’’ Id. at 219. See also id. at 188 suggestion that the Court link the two have more than ample information on n.233 (rejecting contention that ‘‘the proceedings in this manner is legally which to base its public interest Court should not assess the propriety of flawed and ill-advised. Were the Court determination. The Court should not the restrictions without holding to follow the suggestion, it would hold an evidentiary hearing. evidentiary hearings with regard to the undermine the foundations of the First, the very length and size of this need therefor’’).61 Tunney Act, bring into question the case, to which some commentors point Third, it is clear that much of the authority of the Department of Justice to as justification for an evidentiary impetus behind the call for an settle lawsuits, threaten the viability of hearing, actually show that there is no evidentiary hearing comes from the consent decree as a tool of antitrust need for one. The Court already has commentors who want that hearing to enforcement, and risk serious damage to available to it a massive trial record— inquire into the Department of Justice’s federal/state cooperation in the including testimony and thousands of decision to enter into a settlement. The prosecution of antitrust cases. It would exhibits—plus tens of thousands of drive to challenge the propriety of be an unfortunate precedent for this comments (some including affidavits, prosecutorial decisions provides no Court to set. technical reports, and other evidentiary warrant for an evidentiary hearing, 1. Linking This Case to the Remedies presentations) submitted as part of the because ‘‘the district court is not Hearing in New York Would Be Bad Tunney Act process. This record empowered to review the actions or Law and Bad Policy contains extensive information about behavior of the Department of Justice; Linking this case to the remedies the competitive structure of the industry the court is only authorized to review hearing, and outcome, in New York and myriad other matters relevant to the the decree itself.’’ Microsoft I, 56 F.3d at would transform the nature of this public interest determination. Little if 1459. See also Maryland v. United proceeding in ways Congress did not anything more would be learned from States, 460 U.S. 1001, 1005–06 (1983) intend and the law does not live witnesses and cross-examination (Rehnquist, J., dissenting) countenance. The Tunney Act than is already known from the record, (considerations that led the Department establishes a complete framework for comments, and the United States’ of Justice to settle are not amenable to review and entry of a consent decree in responses to the comments.60 judicial review). Fourth, an evidentiary hearing would a civil antitrust suit brought by the 59 The various materials the Tunney Act does further complicate the Tunney Act United States, a framework that does not require, see 15 U.S.C. 16(b), together with any process and invite unwarranted delay in encompass separate litigation brought record created prior to settlement, will usually entering the RPFJ. Given the number of by other plaintiffs. The Court’s role in suffice. See United States v. Enova Corp., 107 F. this case is to determine whether the Supp. 2d 10, 17 (D.D.C. 2000) (‘‘Tunney Act commentors and persons interested in expressly allows the court to make its public participating in the Tunney Act process, judicial act of entering a proposed interest determination on the basis of the it could prove difficult to manage an decree arrived at by agreement of the competitive impact statement and response to evidentiary hearing equitably without parties is ‘‘within the reaches of the comments alone’’); Senate Hearings at 152–53 public interest.’’ Microsoft I, 56 F.3d at (testimony of Hon. J. Skelly Wright) (‘‘an causing substantial delay. The public experienced judge, who does have the facility of interest in achieving a prompt 1458 (quotation marks and emphasis getting to the point and getting others to get to the resolution of this case and rapid omitted). In contrast, the role of the point, can arrive at a public interest determination implementation of remedies 62 should Court in New York is that of judicially in most cases without using’’ additional tools); resolving disputes between the parties— Senate Report at 6 (‘‘[w]here the public interest can be meaningfully evaluated simply on the basis of appears in his declaration. Cf. American Can Co. v. according to the applicable evidentiary briefs and oral arguments, that is the approach that Mansukhani 814 F.2d 421, 425 (7th Cir. 1987) standard—and ultimately imposing an should be utilized’’). Even absent a settlement, no (defendants not entitled to a hearing on remedies adjudicated judgment. The Court’s evidentiary hearing on relief is required where there because they failed ‘‘to explain to the district court ability to play different roles in the two are ‘‘no disputed factual issues regarding the matter what new proof they would present to show’’ that of relief.’’ Microsoft, 253 F.3d at 101. the proposed remedy was unwarranted). cases is not in doubt. But the Tunney 60 For example, commentor ProComp submitted a 61 Judge Greene also denied all motions to Act does not provide for mixing those lengthy declaration from Professor Arrow, Arrow intervene prior to the court’s public interest roles. Decl., in opposition to the RPFJ, but fails to determination. AT&T, 552 F. Supp. at 146 & n.61. To the extent the Court delays this identify, in either its comments, ProComp 62 Although Microsoft has agreed to be bound by proceeding so as to rely on the New Comment, or its filed memorandum, ProComp’s much of the RPFJ pending its entry (Stipulation ¶ 2 Memorandum in Support of Its Motion for Limited (Nov. 6, 2001)), some important provisions become York record or result, the Court brings Intervention or Tunney Act Participation (Feb. 7, effective only after entry. See, e.g., RPFJ § IV.B 2002), anything specific that Professor Arrow would (Technical Committee must be created ‘‘[w]ithin 30 (Microsoft’s internal compliance program begins say at an evidentiary hearing beyond what already days of entry of this Final Judgment’’); id, § IV.C ‘‘within 30 days of entry’’).
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adversary litigation, with all that entails, The possibility of this linking comes an adjudicated judgment, perhaps into the Tunney Act process, which is about here only because the United devised by the Court itself, that the intended to be something quite States, 20 States, and the District of Court, in the exercise of its ‘‘broad different. The Tunney Act, intended ‘‘to Columbia joined forces in a cooperative discretion . . . [,] calculates will best encourage[] settlement by consent effort to challenge anticompetitive remedy the conduct it has found to be decrees as part of the legal policies conduct by a monopolist. This case and unlawful,’’ Microsoft, 253 F.3d at 105, expressed in the antitrust laws,’’ United New York were consolidated for all in light of the facts proven before it. The States v. Alex. Brown & Sons, 963 F. purposes, and the plaintiffs worked risk that its determination here would Supp. 235, 238–39 (S.D.N.Y. 1997) closely to bring the matter to a lead the Court to prejudge the result in (quoting House Report at 6, 1974 successful resolution.63 Last November, New York is therefore minuscule. U.S.C.C.A.N. at 6537), aff’d sub nom. the remaining plaintiffs reached a point Some also suggest that delay here United States v. Bleznak, 153 F.3d 16 where they could not all agree on the until a remedy is determined by (2d Cir. 1998), would become the next step; the United States and nine adjudication in New York will avoid the continuation of litigation by other States settled with Microsoft, while the risk of inconsistent remedies in the two means. other nine plaintiff States (including the cases. This risk, too, is small. Although Linking the two proceedings would District of Columbia) chose to continue it is quite possible that the remedy in also leave the United States with two litigating. If that fact means, as a result New York might impose on Microsoft equally improper alternatives. Either the of linkage between the remedy phase of requirements not imposed here, or not United States would have to participate, New York and this Tunney Act impose on Microsoft requirements that through intervention or other means, in proceeding, that the United States are imposed here, that possibility need litigation in New York (where it is too effectively has been prevented from not give rise to inconsistency. Only if late to participate in remedy-phase settling its own lawsuit, the United the two remedies actually conflict—for discovery), or if not, it would have to let States surely will view the prospect of example, one remedy requires Microsoft the outcome of its own case turn on a future such collaborative enforcement to do something the other prohibits, or litigation record to which it is a efforts in a less favorable light. Such a one remedy requires Microsoft to stranger. Each alternative effectively result would be exceedingly unfortunate provide access to a facility the other deprives the United States of its ability for the future of antitrust enforcement. takes away from Microsoft—is there a to resolve a case by consent decree. Finally, of course, linkage inevitably troubling inconsistency. There is no Each deprives the Department of Justice would delay entry of a final judgment, reason to expect such an inconsistency of its authority to settle cases, Supreme thereby further thwarting the public to arise, especially given that the Court Court precedent to the contrary interest in prompt resolution of this will be well aware of the specific terms notwithstanding, see Cascade Natural case. Cf. AT&T, 552 F. Supp. at 213 of the RPFJ when it eventually enters Gas Corp. v. El Paso Natural Gas Co., (deferring approval of the proposed judgment in New York. If an 386 U.S. 129, 136 (1967) (Court does decree ‘‘would be unfair to the parties inconsistency does arise, however, there ‘‘not question the authority of the and to the public;’’ delay ‘‘can only are ample means to deal with it. See, Attorney General to settle suits after, as multiply the costs of uncertainty that e.g., RPFJ § VII (Court retains well as before, they reach here’’), have plagued the industry far too long’’). jurisdiction to modify decree). because the case effectively continues in Finally, some have suggested that 2. The Claimed Benefits of Linkage Are full litigation despite the settlement delaying the proceedings here would Illusory agreed to by the parties. The only conserve judicial resources. But apart difference between the alternatives left Perhaps these costs of linkage would from study of the existing record, which to the government is that the first be acceptable if the gains to be had were is necessary for both cases, judicial continues to draw upon the resources a substantial. They are not. resources in the two proceedings will be settlement should have freed up for use Some argue that delaying this devoted primarily to the remedies trial in other antitrust enforcement as the proceeding until after the remedies in New York and to the review of the price of continued influence over the phase of New York will avoid the risk public comments and the United States’ outcome of the government’s own case, that the Court will prejudge that response in this matter. The Court could while the second provides a resource remedies phase by its determination not properly reduce the resources it savings, but at the cost of that very here. But that risk is trivial. What the devotes to these two tasks whatever the influence. two cases share is one defendant sequence of the two proceedings. Both the United States and antitrust (Microsoft), and a common record as of Moreover, the Tunney Act provides the defendants would have a substantially November 6, 2001. Two things Court broad latitude to streamline its reduced incentive to settle cases at all principally set them apart. One is their review process, 15 U.S.C. § 16(f). if Tunney Act proceedings could be different records from November 6 Linking that review to separate litigation linked to other litigation. Why settle, if forward. The other, more important, makes the Tunney Act review the entry of judgment in the ‘‘settled’’ distinction is that the Court faces two dependent on trials or hearings that are case could be delayed pending the radically different tasks and addresses far less flexible, which can only outcome of parallel litigation that two radically different questions in the complicate and delay the Tunney Act remains unsettled, and if the result in two proceedings. See pages 42–46, review. the ‘‘settled’’ litigation could depend on above. The Court’s task here is to what happens in the remaining determine whether entry of a negotiated litigation? That result may satisfy those settlement is in the public interest Conclusion who think government antitrust cases in according to a deferential standard of The proposed final judgment satisfies general, or at least this government review; its task in New York is to enter all of the requirements of an antitrust antitrust case in particular, should not remedy, complies with the decision of be settled, but it is inconsistent with the 63 Had the plaintiffs not embarked on this creative the court of appeals, and, most collaboration, it is highly unlikely that two cases Tunney Act policy favoring settlement against Microsoft would have gone forward, parallel importantly, is in the public interest. as a viable tool in the antitrust but separate, with each reaching more or less the Accordingly, the Court should enter the enforcement arsenal. same result at more or less the same time. decree as soon as possible.
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Dated: February 27, 2002. • Section III.C.4 prohibits Microsoft Binding of Internet Explorer to Windows Respectfully submitted, from restricting OEMs from ‘‘[o]ffering 5. Microsoft excluded IE from the Charles A. James, users the option of launching other Assistant Attorney General. ‘‘Add/Remove Programs’’ utility, Operating Systems . . . or a non- thereby ‘‘reduc[ing] the usage share of Deborah P. Majoras, Microsoft boot-loader or similar Deputy Assistant Attorney General. rival browsers not by making Phillip R. Malone, program. . . .’’ Microsoft’s own browser more attractive • Section III.C.5 prohibits Microsoft Renata B. Hesse, to consumers but, rather, by from restricting OEMs from David Blake-Thomas, discouraging OEMs from distributing ‘‘[p]resenting in the initial boot Paula L. Blizzard, rival products.’’ 253 F.3d at 65, 67. Kenneth W. Gaul, sequence its own IAP offer . . .’’ RPFJ Provisions: Adam D. Hirsh, 3. Microsoft prohibited OEMs from • Section III.H.1 requires Microsoft to Jacqueline S. Kelley, ‘‘adding icons or folders different in size ‘‘[a]llow end users (via a mechanism Steven J. Mintz, or shape from those supplied by readily accessible from the desktop or Barbara Nelson, Microsoft,’’ thereby preventing OEMs David Seidman, Start menu such as an Add/Remove from ‘‘promot[ing] rival browsers, which David P. Wales, icon) and OEMs (via standard keeps developers focused upon the APIs Attorneys. preinstallation kits) to enable or remove in Windows.’’ 253 F.3d at 62, 64. Philip S. Beck, access to each Microsoft Middleware Special Trial Counsel. RPFJ Provisions: U.S. Department of Justice, Antitrust • Section III.C.1 prohibits Microsoft Product . . .. The mechanism shall Division, 601 D Street, NW., Suite 1200, from restricting OEMs from offer the end user a separate and Washington, DC 20530, (202) 514–8276. ‘‘[i]nstalling, and displaying icons, unbiased choice with respect to shortcuts, or menu entries for, any Non- enabling or removing access . . . and Appendix A to Memorandum in altering default invocations . . . with Support of Entry of Proposed Judgment Microsoft Middleware . . . on the desktop or Start menu, or anywhere else regard to each such Microsoft Comparison of Court of Appeals’ in a Windows Operating System Middleware Product. . . .’’ Findings on Liability toProvisions of the Product where a list of icons, shortcuts, 6. Microsoft ‘‘’plac[ed] code specific Revised Proposed Final Judgment or menu entries for applications are to Web browsing in the same files as code that provided operating system I. Liability Findings Affirmed by the generally displayed ....’’ functions’’’ (253 F.3d at 65 (quoting Court of Appeals • Section III.C.2 prohibits Microsoft from restricting OEMs from Findings of Fact ¶ 161)), thus Agreements with Computer ‘‘[d]istributing or promoting Non- ‘‘deter[ring] OEMs from pre-installing Manufacturers (‘‘OEMs’’) Microsoft Middleware by installing and rival browsers, thereby reducing the 1. Microsoft prohibited OEMs from displaying on the desktop shortcuts of rivals’ usage share and, hence, removing any desktop icons, folders, or any size or shape ....’’ developers’ interest in rivals’ APIs as an ‘‘Start’’ menu entries, thereby • Section III.H.3 requires Microsoft to alternative to the API set exposed by ‘‘thwart[ing] the distribution of a rival ‘‘[e]nsure that a Windows Operating Microsoft’s operating system.’’ 253 F.3d browser by preventing OEMs from System Product does not (a) at 66. removing visible means of user access to automatically alter an OEM’s RPFJ Provisions: • IE.’’ United States v. Microsoft Corp., configuration of icons, shortcuts or Section III.C.1 prohibits Microsoft 253 F.3d 34, 61, 64 (D.C. Cir. 2001). menu entries . . . pursuant to Section from restricting OEMs from RPFJ Provisions: III.C of this Final Judgment without first ‘‘[i]nstalling, and displaying icons, • Section III.H.1 requires Microsoft to seeking confirmation from the user and shortcuts, or menu entries for, any Non- ‘‘[a]llow end users (via a mechanism (b) seek such confirmation . . . until 14 Microsoft Middleware . . . on the readily accessible from the desktop or days after the initial boot up of a new desktop or Start menu, or anywhere else Start menu such as an Add/Remove Personal Computer ....’’ in a Windows Operating System icon) and OEMs (via standard 4. Microsoft prohibited OEMs from Product where a list of icons, shortcuts, preinstallation kits) to enable or remove ‘‘using the ‘Active Desktop’ feature to or menu entries for applications are access to each Microsoft Middleware promote third-party brands,’’ thereby generally displayed ....’’ Product . . . The mechanism shall offer preventing OEMs from ‘‘promot[ing] • Section III.H.1 requires Microsoft to the end user a separate and unbiased rival browsers, which keeps developers ‘‘[a]llow end users (via a mechanism choice with respect to enabling or focused upon the APIs in Windows.’’ readily accessible from the desktop or removing access . . . and altering 253 F.3d at 62, 64. Start menu such as an Add/Remove default invocations . . . with regard to RPFJ Provisions: icon) and OEMs (via standard each such Microsoft Middleware • Section III.C.1 prohibits Microsoft preinstallation kits) to enable or remove Product ....’’ from restricting OEMs from access to each Microsoft Middleware 2. Microsoft prohibited OEMs from ‘‘[i]nstalling, and displaying icons, Product . . .. The mechanism shall ‘‘modifying the initial boot sequence shortcuts, or menu entries for, any Non- offer the end user a separate and . . ., thus prevent[ing] OEMs from using Microsoft Middleware . . . on the unbiased choice with respect to that process to promote the services of desktop or Start menu, or anywhere else enabling or removing access . . . and IAPs. . . .’’ 253 F.3d at 61–62, 64. in a Windows Operating System altering default invocations . . . with RPFJ Provisions: Product where a list of icons, shortcuts, regard to each such Microsoft • Section III.C.3 prohibits Microsoft or menu entries for applications are Middleware Product ....’’ from restricting OEMs from generally displayed ....’’ ‘‘[l]aunching automatically, at the • Section III.C.2 prohibits Microsoft Agreements With Internet Access conclusion of the initial boot sequence from restricting OEMs from Providers (‘‘IAPs’’) or subsequent boot sequences, or upon ‘‘[d]istributing or promoting Non- 7. Microsoft ‘‘agreed to provide easy connections to or disconnections from Microsoft Middleware by installing and access to IAPs’’ services from the the Internet, any Non-Microsoft displaying on the desktop shortcuts of Windows desktop in return for the IAPs’ Middleware ....’’ any size or shape ....’’ agreement to promote IE exclusively
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and to keep shipments of internet access business productivity applications uses, or supports, exclusively or in a software using Navigator under a needed by Apple, only when Apple fixed percentage, any Microsoft Platform specific percentage, typically 25%.’’ 253 agreed to make Internet Explorer the Software ....’’ F.3d at 68. Such agreements ensure default browser on Apple’s operating 11. Microsoft ‘‘deceived Java ‘‘that the ‘‘majority’’ of all IAP system and to refrain from positioning developers regarding the Windows- subscribers are offered IE either as the icons for non-Microsoft browsing specific nature’’ of Microsoft’s Java default browser or as the only browser. software on the desktop of new Apple software development tools. Thus, ....’’ Id. at 71. Macintosh computers or Mac OS ‘‘developers who relied upon RPFJ Provisions: upgrades. 253 F.3d at 73. ‘‘Microsoft’s Microsoft’s public commitment to • Section III.G.1 prohibits Microsoft exclusive contract with Apple has a cooperate with Sun and who used from entering into any agreement with substantial effect in restricting Microsoft’s tools to develop what ‘‘any IAP, ICP, ISV, IHV, or OEM that distribution of rival browsers ....’’ Id. Microsoft led them to believe were grants Consideration on the condition at 73–74. cross-platform applications ended up that such entity distributes, promotes, RPFJ Provisions: producing applications that would run • uses, or supports, exclusively or in a Section III.F.1 prohibits Microsoft only on the Windows operating fixed percentage, any Microsoft Platform from retaliating against any ISV or IHV system.’’ 253 F.3d at 76. Software ....’’ because of that ISV’s or IHV’s • RPFJ Provisions: Section III.G.2 prohibits Microsoft ‘‘developing, using, distributing. • Section III.D requires Microsoft to from entering into any agreement with promoting or supporting any software disclose to all ISVs ‘‘the APIs and ‘‘any IAP or ICP that grants placement that competes with Microsoft Platform related Documentation that are used by on the desktop or elsewhere in any Software or any software that runs on Microsoft Middleware to interoperate Windows Operating System Product to any software that competes with with a Windows Operating System that IAP or ICP on the condition that the Microsoft Platform Software.’’ • Product.’’ IAP or ICP refrain from distributing, Section III.F.2 prohibits Microsoft 12. Microsoft threatened Intel, which promoting or using any software that from ‘‘condition[ing] the grant of any was developing a high-performance competes with Microsoft Middleware.’’ Consideration on an ISV’s refraining cross-platform Windows-compatible from developing, using, distributing, or Agreements With Internet Content JVM, that if Intel ‘‘did not stop aiding promoting any software that competes Providers (‘‘ICPs’’), Independent Sun on the multimedia front, then with Microsoft Platform Software or any Software Vendors (‘‘ISVs’’) and Apple Microsoft would refuse to distribute software that runs on any software that 8. In dozens of ‘‘First Wave’’ Intel technologies bundled with competes with Microsoft Platform Windows.’’ 253 F.3d at 77. agreements, Microsoft ‘‘ ‘promised to Software ....’’ give preferential support, in the form of • RPFJ Provisions: Section III.G. 1. prohibits Microsoft • early Windows 98 and Windows NT from entering into any agreement with Section III.F.1 prohibits Microsoft betas, other technical information, and ‘‘any IAP, ICP, ISV, IHV, or OEM that from retaliating against any ISV because the right to use certain Microsoft seals grants Consideration on the condition of that ISV’s ‘‘developing, using, of approval, to important ISVs that agree that such entity distributes, promotes, distributing, promoting or supporting to certain conditions. One of these uses, or supports, exclusively or in a any software that competes with conditions is that the ISVs use Internet fixed percentage, any Microsoft Platform Microsoft Platform Software or any Explorer as the default browsing Software ....’’ software that runs on any software that software for any software they develop competes with Microsoft Platform with a hypertext-based user interface.‘‘ ’’ Efforts to Exclude Sun’s Java Software.’’ • 253 F.3d at 71–72 (quoting Findings of 10. In dozens of ‘‘First Wave’’ Section III.F.2 prohibits Microsoft Fact ¶339). In so doing, Microsoft kept agreements with ISVs, Microsoft from ‘‘condition[ing] the grant of any ‘‘rival browsers from gaining ‘‘conditioned receipt of Windows Consideration on an ISV’s refraining widespread distribution (and potentially technical information upon the ISVs’’ from developing, using, distributing, or attracting the attention of developers agreement to promote Microsoft’s JVM promoting any software that competes away from the APIs in Windows) [Java Virtual Machine] exclusively. with Microsoft Platform Software or any ....’’ Id. at 72. ...’’ 253 F.3d at 75. Such agreements software that runs on any software that RPFJ Provisions: ‘‘foreclosed a substantial portion of the competes with Microsoft Platform • Section III.F.2 prohibits Microsoft field for JVM distribution and . . ., in Software ....’’ from ‘‘condition[ing] the grant of any so doing, they protected Microsoft’s II. Liability Findings Rejected by the Consideration on an ISV’s refraining monopoly from a middleware threat Court of Appeals from developing, using, distributing, or ....’’ Id. at 76. promoting any software that competes RPFJ Provisions: 1. Microsoft prohibited OEMs from with Microsoft Platform Software or any • Section III.F.2 prohibits Microsoft ‘‘causing any user interface other than software that runs on any software that from ‘‘condition[ing] the grant of any the Windows desktop to launch competes with Microsoft Platform Consideration on an ISV’s refraining automatically.’’ 253 F.3d at 62. The Software ....’’ from developing, using, distributing, or court of appeals found that this • Section III.G.1 prohibits Microsoft promoting any software that competes restriction had an anticompetitive effect from entering into any agreement with with Microsoft Platform Software or any (id.), but does not violate Section 2 ‘‘any IAP, ICP, ISV, IHV, or OEM that software that runs on any software that because ‘‘a shell that automatically grants Consideration on the condition competes with Microsoft Platform prevents the Windows desktop from that such entity distributes, promotes, Software. . . .’’ ever being seen by the user is a drastic uses, or supports, exclusively or in a • Section III.G.1 prohibits Microsoft alteration of Microsoft’s copyrighted fixed percentage, any Microsoft Platform from entering into any agreement with work, and outweighs the marginal Software ....’’ ‘‘any IAP, ICP, ISV, IHV, or OEM that anticompetitive effect of prohibiting the 9. Microsoft agreed to continue grants Consideration on the condition OEMs from substituting a different development of Mac Office, a suite of that such entity distributes, promotes, interface automatically upon
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completion of the initial boot process.’’ antitrust laws simply by developing a conduct, prevent recurrence of similar Id. at 63. product that is incompatible with those conduct in the future and restore 2. Microsoft designed Windows 98 to of its rivals.’’ Id. at 75. competitive conditions in the personal ‘‘override the user’s choice of a default 8. The court of appeals reversed the computer operating system market by, browser in certain circumstances.’’ 253 district court’s finding that Microsoft among other things, prohibiting actions F.3d at 67. The court of appeals found was liable based on its ‘‘general ‘course by Microsoft to prevent computer that plaintiffs had failed to rebut of conduct’’’ apart from specific acts manufacturers and others from Microsoft’s proffered technical that violated Section 2. 253 F.3d at 78. developing, distributing or featuring justification that such overriding was Appendix B to Memorandum in middleware products that are threats to necessary in a ‘‘few’’ circumstances, Microsoft’s operating system monopoly; e.g., invoking the Windows 98 Help Support of Entry of Proposed Judgment creating the opportunity for system, Windows Update feature, or United States v. Microsoft Corp. — independent software vendors to accessing the Internet through ‘‘My NEWSPAPER NOTICE; Department of develop products that will be Computer’’ or ‘‘Windows Explorer.’’ Id. Justice, Antitrust Division 3. Microsoft offered Internet Explorer competitive with Microsoft’s Take notice that a revised proposed free of charge to IAPs and ISVs. The middleware products; requiring Final Judgment as to Microsoft court of appeals held that ‘‘the antitrust Microsoft to disclose interfaces in order Corporation has been filed in a civil laws do not condemn even a monopolist to ensure that competing middleware antitrust case, United States of America for offering its product at an attractive and server software can interoperate price, and we therefore have no warrant v. Microsoft Corporation, Civil No. 98– with Microsoft’s operating systems; to condemn Microsoft for offering . . . 1232. On May 18, 1998, the United ensuring full compliance with the IE . . . free of charge or even at a States filed a Complaint alleging that revised proposed Final Judgment; and negative price.’’ 253 F.3d at 68 (giving Microsoft, the world’s largest supplier of providing for swift resolution of IE to IAPs); see also id. at 75 (giving IE computer software for personal technical disputes. A Competitive computers, restrained competition in to ISVs). Impact Statement has been filed by the violation of Sections 1 and 2 of the 4. Microsoft offered ‘‘IAPs a bounty United States describing the Complaint, Sherman Act, 15 U.S.C. 1–2. Following for each customer the IAP signs up for the revised proposed Final Judgment, a 78-day trial in late 1998 and early service using the IE browser.’’ 253 F.3d the industry, and the remedies available at 67. The court of appeals held that 1999, the United States District Court for the District of Columbia found that to private litigants who may have been ‘‘the antitrust laws do not condemn injured by the alleged violation. Copies even a monopolist for offering its Microsoft had violated both Sections 1 and 2 of the Sherman Act. On appeal, of the Complaint, revised proposed product at an attractive price, and we Final Judgment and Competitive Impact therefore have no warrant to condemn the United States Court of Appeals for Statement are available for inspection at Microsoft for offering . . . IE . . . free the District of Columbia unanimously the Department of Justice in of charge or even at a negative price.’’ affirmed portions of the district court’s Washington, DC, at Antitrust Id. at 68. finding and conclusion that Microsoft 5. Microsoft developed the IE Access illegally maintained its operating system Documents Group, 325 7th Street NW., Kit (IEAK), a ‘‘software package that monopoly in violation of Section 2 of Ste. 215 North, Washington, DC 20530 allows an IAP to ‘create a distinctive the Sherman Act, but reversed and (please call 202–514–2481, for identity for its service in as little as a remanded other portions of the district appointments only), on the Department few hours by customizing the [IE] title court’s determinations. Specifically, the of Justice Web site at http:// bar, icon, start and search pages,’’’ and court of appeals reversed the district www.usdoj.gov/atr, and at the Office of offered the IEAK to IAPs for free. 253 court’s determination that Microsoft the Clerk of the United States District F.3d at 68 (quoting Findings of Fact ¶ violated Section 2 by illegally Court for the District of Columbia, 333 249). The court of appeals held that ‘‘the attempting to monopolize the Internet Constitution Avenue, NW., Washington, antitrust laws do not condemn even a browser market and remanded the DC 20001. monopolist for offering its product at an district court’s determination that Interested persons may address attractive price, and we therefore have Microsoft violated Section 1 of the comments to Renata Hesse, Trial no warrant to condemn Microsoft for Sherman Act by unlawfully tying its Attorney, Suite 1200, Antitrust Division, browser to its operating system. The offering . . . the IEAK . . . free of Department of Justice, 601 D Street, court of appeals also vacated the district charge or even at a negative price.’’ Id. NW., Washington, DC 20530; (facsimile) 6. Microsoft entered into exclusive court’s remedial order, including its 202–616–9937 or 202–307–1454; or (e- dealings with ICPs, which develop order that Microsoft be split into mail) [email protected] within 60 websites, in exchange for the ICPs’ separate operating systems and days of the date of publication of the agreement to distribute, promote, and applications businesses, and remanded rely on IE rather than Netscape’s the case to a new district court judge for revised proposed Final Judgment and Navigator browser. 253 F.3d at 71. The further proceedings. Following Competitive Impact Statement in the court of appeals found that ‘‘plaintiffs intensive mediation efforts, the United Federal Register. While comments may failed to demonstrate that Microsoft’s States and Microsoft subsequently also be sent by regular mail, in light of deals with the ICPs have a substantial reached the agreement embodied in the recent events affecting the delivery of all effect upon competition. . . .’’ Id. revised proposed Final Judgment, which types of mail to the Department of 7. Microsoft developed a JVM that would impose injunctive relief to enjoin Justice, including U.S. Postal Service ‘‘allows Java applications to run faster continuance and prevent recurrence of and other commercial delivery services, on Windows than does Sun’s JVM, . . . the violations of the Sherman Act by and current uncertainties concerning but a Java application designed to work Microsoft that were upheld by the court when the timely delivery of this mail with Microsoft’s JVM does not work of appeals. may resume, the Department strongly with Sun’s JVM and vice versa.’’ 253 The revised proposed Final Judgment, encourages, whenever possible, that F.3d at 74. The court of appeals held filed November 6, 2001, will stop comments be submitted via e-mail or that ‘‘a monopolist does not violate the recurrence of Microsoft’s unlawful facsimile.
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Appendix C to Memorandum in 3. I have been asked by the DOJ to Litigating States Proposed Final Support of Entry of Proposed Judgment review the terms of its proposed Judgment; (7) comments on the settlement with Microsoft and to settlement filed by third parties, In the United States District Court for provide an opinion as an independent including declarations submitted by the District of Columbia economist as to whether the antitrust other economists; and (8) public United States of America, Plaintiff, v. remedy embodied in the settlement is in documents and websites containing Microsoft Corporation, Defendant; the ‘‘public interest.’’ It is my relevant information. Declaration of David S. Sibley. understanding that key components of 5. My conclusions are summarized as the public interest standard of the follows: [Civil Action No. 98–1232 (CKK)] • Tunney Act are satisfied when the Any economic analysis of the SRPFJ Next Court Deadline: March 6, 2002; antitrust remedy is sufficient to (1) stop must have as its starting point a clear Tunney Act Hearing. the offending conduct, (2) prevent its delineation of the conduct found to be unlawful. The remedy presently under I. Qualifications and Introduction reoccurrence, and (3) restore competitive conditions.2 consideration must therefore focus 1. My name is David S. Sibley. I am 4. In conducting this analysis, I attention on and fully resolve the the John Michael Stuart Centennial examined the following documents: (1) appellate court finding that Microsoft Professor of Economics at the University the Revised Proposed Final Judgment,1 engaged in specific anticompetitive acts of Texas at Austin. I received the degree the Second Revised Proposed Final to maintain its operating system of B.A. in Economics from Stanford Judgment, including the accompanying monopoly. University in 1969 and a Ph.D. in • memorandum regarding modifications,2 In developing this remedy, it is Economics from Yale University in and the Competitive Impact Statement necessary to balance two broad factors: 1973. In addition to my current teaching of the DOJ; 3 (2) the Findings of Fact and (1) the need to impose constraints on responsibilities, I have taught graduate Conclusions of Law issued by Judge Microsoft’s current and future behavior level courses in economics at the Jackson; 4 (3) the decision issued by the so that the unlawful acts stop and do University of Pennsylvania and U.S. Court of Appeals for the D.C. not recur, and competitive conditions Princeton University. Prior to joining Circuit in June of 2001; 5 (4) the record are restored; and (2) the requirement the University of Texas, I was Head of from the U.S. Senate Judiciary that these constraints not be so intrusive the Economics Research Group at Bell Committee’s December 12, 2001, and complex that they themselves Communications Research. I have also hearing regarding the proposed distort market outcomes. served as a Member of the Technical • The SRPFJ achieves the right settlement, including the responses to Staff in economics at Bell Laboratories. balance. Broadly defined provisions follow-up questions posed to Assistant During the last thirty years, I have banning exclusivity, discrimination, and Attorney General Charles James; 6 (5) the carried out extensive research in the retaliation fundamentally alter the way DOJ’s written response to questions areas of industrial organization, Microsoft does business, and eliminate regarding the proposed settlement microeconomic theory, and regulation. the artificial entry barriers erected by raised by Senator Orrin Hatch; 7 (6) the My publications have appeared in a Microsoft that are the source of number of leading economic journals, May 18, 1998) (hereinafter ‘‘May 1998 Sibley competitive concern. At the same time, including the Journal of Economic Decl.’’). See also David S. Sibley, Michael J. Doane, the SRPFJ does not create market Theory, Review of Economic Studies, and Ashish Nayyar (2001), ‘‘Economic Issues in distortions, such as over-extensive Rand Journal of Economics, American U.S. v. Microsoft,’’ UWLA Law Review, regulation of Microsoft that may invite Economic Review, Econometrica, and Symposium: Cyber Rights, Protection, and Markets, 103–136. inefficient rent-seeking by Microsoft’s the International Economic Review, 2 My declaration does not address the compliance competitors, and make Microsoft a less among others. I am also the co-author and enforcement procedures contained in the efficient competitor. (with Steven J. Brown) of a leading proposed remedy. • Microsoft erected artificial entry textbook on monopoly pricing, The 1 Revised Proposed Final Judgment, United States barriers to slow or halt the natural Theory of Public Utility Pricing, which v. Microsoft Corp., Civ. Action No. 98–1232 (CKK) tendency of the marketplace to provide (D.D.C. Nov. 6, 2001). was first published by Cambridge 2 Second Revised Proposed Final Judgment, certain alternative technologies (known University Press in 1986. United States v. Microsoft Corp., Civ. Action No. as ‘‘middleware’’) that have the 2. I have consulted extensively for 98–1232 (CKK) (D.D.C. to be filed Feb. 27, 2002) potential to erode Microsoft’s operating various firms and agencies, both in the (hereinafter ‘‘SRPFJ’’); United States’ Memorandum system monopoly. The proposed decree Regarding Modifications Contained in Second United States and abroad, on antitrust Revised Proposed Final Judgment, United States v. aims to restore and enhance competitive and regulatory matters. In 1998, I was Microsoft Corp., Civ. Action No. 98–1232 (CKK) conditions by removing technical retained by the U.S. Department of (D.D.C. to be filed Feb. 27, 2002). barriers between Microsoft and rival Justice (‘‘DOJ’’) to examine the 3 Competitive Impact Statement, United States v. middleware suppliers. This is the competitive effects of contractual Microsoft Corp., Civ. Action No. 98–1232 (CKK) appropriate conduct to be remedied, not (D.D.C. No. 15, 2001) (hereinafter ‘‘CIS’’). restrictions in agreements between 4 See Findings of Fact, United States v. Microsoft the existence of the monopoly itself, or Microsoft Corporation (‘‘Microsoft’’) and Corp., 84 F. Supp.2d 9 (D.D.C. Nov. 5, 1999); barriers which arise naturally in personal computer original equipment Conclusions of Law, United States v. Microsoft software markets. manufacturers (‘‘PC manufacturers’’ or Corp., 87 F. Supp.2d 30 (D.D.C. Apr. 3, 2000). • The proposals of other ‘‘OEMs’’), Internet access providers 5 United States v. Microsoft Corp., 253 F.3d 34 commentators fail to strike the right (D.C. Cir. June 28, 2001). balance. In an attempt to eliminate all (‘‘IAPs’’), and Internet content providers 6 See United States Senate, Senate Committee on (‘‘ICPs’’). The declaration that I filed in the Judiciary Documents for the December 12 theoretical ways in which Microsoft May 1998 on behalf of the Antitrust Hearing on ‘‘The Microsoft Settlement: A Look to could harm competition, they propose a Division of the DOJ summarized my the Future’’; Office of the Assistant Attorney complex regulatory program that is 1 General, United States Department of Justice, likely to be slow-moving, litigious, and economic analysis. Appendix A Response to written follow-up questions posed to contains a copy of my curriculum vitae. Assistant Attorney General Charles James (Jan. 24, vulnerable to manipulation by 2002). 1 Declarations of David S. Sibley, United States v. 7 See Office of the Assistant Attorney General, Senator Hatch’s letter of November 29, 2001 (Dec. Microsoft Corp., Civ. Action No. 98–1232 (D.D.C. United States Department of Justice, Response to 11, 2001).
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Microsoft’s competitors, to say nothing slow or halt the adoption of alternative 11. Economies of scale and increasing of Microsoft itself. technologies (known as ‘‘middleware’’) returns to consumption give rise to a • In analyzing the SRPFJ, I have had that have the potential to erode phenomenon that lies at the heart of the benefit of reviewing a number of Microsoft’s OS monopoly. This is the antitrust analysis of network industries: thoughtful and probing comments on conduct to be remedied, not the monopoly tipping. 10 If a large set of the proposed decree. I found that most existence of the monopoly itself. users adopts a new network technology, of the potential problems raised by the 9. Second, there is widespread then that technology becomes more various commentators are, in fact, not agreement that the middleware threat to attractive to everyone else as a result of problems at all, but are met by the the Microsoft operating system posed by increasing returns in consumption. As SRPFJ upon careful analysis. My review the Netscape Web browser (i.e., more users join, the technology becomes of their criticisms reveals the potential Navigator) and the Java programming still more attractive until it becomes loopholes that are theoretical technology was a ‘‘nascent’’ one. 8 While dominant; in economic terminology, the possibilities are either unimportant, or there is no question that Microsoft’s market has ‘‘tipped’’ to the new rely on strategies that Microsoft would conduct was aimed at eliminating that technology. Because users invest time not have the incentive to undertake. threat, there is significant uncertainty and money in learning to use a given • In light of the above, in my opinion, regarding when Microsoft’s OS technology proficiently, for a newer the SRPFJ is in the public interest. monopoly would have been technology to succeed, it would have to 6. I have organized my declaration as substantially eroded (if at all). Thus, the offer a substantial improvement in follows: In Section II, I discuss the appropriate remedy in this case is to performance—i.e., enough of an specific anticompetitive acts that are the restore the potential threat that improvement at least to overcome the focus of this inquiry and provide an middleware provides, not to eliminate switching costs associated with the overview of the proposed remedy natural entry barriers that are not in change. In the normal course of markets embodied in the SRPFJ. This section themselves a cause for competitive and competition, such improvements do also reviews the characteristics of concern. This point has been overlooked in fact occur. One example is the software markets that are relevant to an by those critical of the proposed decree displacement of slide rules by pocket economic analysis of the proposed who argue the appropriate antitrust calculators. decree. Section III presents my analysis remedy in this case calls for the 12. The economic theory of network of the SRPFJ and discusses why, in my elimination of the applications barrier to effects describes well the performance opinion, the proposed decree meets the entry. of the OS market. As an operating public interest requirement of the system gains popularity, the incentive to Tunney Act. Section IV addresses the A. Characteristics of Software Markets develop software for that operating main suggestions for additional remedy 10. In many software markets, system grows since the number of provisions discussed by various including OS markets, there are potential customers for the application commentators. My conclusions are fundamental forces that may lead to one developer is larger. This, in turn, presented in Section V. firm being dominant at a given time and increases the value of the operating II. Microsoft’s Unlawful Conduct and that tend to create barriers to entry. system to end users (and likely its Proposed Remedy in the SRPFJ These forces have been widely market share), which is determined by discussed in the economics and the quality and variety of software 7. Any economic analysis of the computing literature. The first is the applications written for it. As the OS SRPFJ must have as its starting point a presence of scale economies. For gains market share, software developers clear delineation of the conduct found complex software such as an OS, the find it even more advantageous to to be unlawful. To be in the ‘‘public initial or ‘‘first-copy’’ costs to writing produce additional applications for that interest,’’ an antitrust remedy must stop software are often very large, whereas system. This feedback effect explains the offending conduct, prevent its the incremental cost of producing why the number of complementary recurrence, and restore competitive additional copies is small. Hence, software applications and the installed conditions. The remedy presently under average cost declines as the scale of base of these applications serve as consideration must therefore focus output rises. The second is increasing natural barriers to entry, and also why attention on and fully resolve the returns in consumption. The larger the alternative operating systems already in appellate court finding that Microsoft market share of a particular OS, the the market at a small scale are not engaged in specific anticompetitive acts more independent software vendors effective competitors. This feature of to maintain its monopoly position in the (‘‘ISVs’’) will tend to write applications software markets has become known as market for operating systems designed for that OS. The more this happens, the the applications barrier to entry.11 to run on Intel-compatible personal more attractive will customers find that computers (‘‘PCs’’). Service,’’ 5 Bell Journal of Economics and 8. To assess the remedial effectiveness OS, further increasing its market share, which leads to the development of more Management Science 16–37. See also Michael Katz of the SRPFJ, it is useful for two reasons and Carl Shapiro (1985), ‘‘Network Externalities, to review the characteristics of software new software applications, and so forth. Competition and Compatibility,’’ 75 American markets that gave rise to the Microsoft Thus, increasing returns in Economic Review 424–440; Michael Katz and Carl consumption induce a series of feedback Shapiro (1986), ‘‘Technology Adoption in the operating system (‘‘OS’’) monopoly. Presence of Network Externalities,’’ 94 Journal of effects, which tend to make a dominant Political Economic 822–841. First, as discussed below, certain 9 economic forces can lead naturally to OS more dominant over time. 10 See. e.g., Joseph Farrell and Garth Saloner dominance by a single firm, even apart (1986), ‘‘Installed Base and Compatibility: 8 United States v. Microsft Corp., 253 F.3d 34, 79 Innovation, Product Differentiation, and Predation,’’ from anticompetitive conduct. It was (D.C. Cir. June 28, 2001). 76 American Economic Review 940–955: Joseph alleged, and both the District Court and 9 Increasing returns to consumption is often Farrell and Garth Saloner (1985), ‘‘Standardization, the Court of Appeals agreed, that discussed as an important consequence of network Compatibility, and Innovation,’’ 16 Rand Journal of Microsoft’s conduct erected artificial effects. First formalized by Rohlfs, there is a Economics 70–83. network effect whenever the value to existing users 11 In my May 1998 Declaration, I argued that the entry barriers on top of those that occur of a network increases as the network expands with application barrier to entry occurs naturally in naturally in software markets. These new users. See Jeffrey H. Rohlfs (1974), ‘‘A Theory certain software markets and is not, by itself, a artificial entry barriers were added to of Interdependent Demands for Communications source of antitrust concern. By contrast, I stated
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13. Microsoft’s dominant market share because the browser could serve as a OEMs, IAPs, ICPs, and Independent was a predictable consequence of the software applications platform Software Vendors (‘‘ISVs’’) impeded the applications barrier to entry. At trial, it independent of the underlying OS.13 growth of the Netscape Web browser by was documented that Microsoft’s market Thus, a new entrant in the OS market adding artificial entry barriers to those share in each period from 1991 to 1997 would not have to create an installed that occur naturally. Such restrictions held consistently at about ninety base of software applications for its OS are therefore a source of competitive percent. Further, it was documented comparable in size and use to those of concern. that Microsoft’s OS dominance was Microsoft in order to succeed. Instead, 16. In challenging Microsoft’s stable, that it had hardly fluctuated in applications written to the browser commingling and contractual practices, the face of determined attempts at entry platform (perhaps using the Java the plaintiffs’ antitrust complaint by rival operating systems, and that it programming technology of Sun alleged the following: (1) Microsoft was forecast to remain stable in the Microsystems, Inc. (‘‘Sun’’)) would be engaged in a series of anticompetitive future.12 accessible to a user using any OS acts to maintain its OS monopoly; (2) B. The Middleware Threat to the supporting that browser. Application Microsoft attempted to monopolize the Microsoft OS developers would have the incentive to Web browser market; (3) Microsoft write to these browser APIs because 14. The above discussion suggests illegally tied IE to its operating system; their applications would then run on that, to enter with a product consumers and (4) Microsoft entered into unlawful Windows plus the operating systems would want installed on their PCs, OS exclusive dealing arrangements. The that were previously unprofitable for vendors would have to create or induce District Court sustained claims (1) others to create an extensive set of these ISVs to write applications. This through (3). The appellate court, software applications to go with it. would ultimately make it less important however, sustained only the monopoly Alternatively, the product would have for users to which operating systems maintenance claim, and with fewer to emulate the Windows applications were installed on their computers. As anticompetitive actions than the District programming interfaces (‘‘APIs’’) Bill Gates stated: ‘‘[t]hey [Netscape] are Court had found. 15 Thus, the focus of needed to run existing Windows pursuing a multi-platform strategy the SRPFJ is on remedying the twelve applications. APIs permit software where they move the key [APIs] into the specific anticompetitive actions the applications running on an OS to access client [browser] to commoditize the appellate court found Microsoft to have 14 the basic computing functions underlying operating system.’’ taken to maintain its OS monopoly. (See performed by that operating system, 15. As the evidence in this case Table One.) In addition, the SRPFJ such as opening a file, executing a print demonstrates, Microsoft engaged in includes measures designed to enhance command, drawing a box, etc. The specific anticompetitive actions the ability of rival middleware vendors Netscape Web browser was a new class intended to displace the Netscape to interoperate with the Microsoft OS. of software—called middleware—that browser with its own Web browser, As addressed in Sections III and IV itself exposed a broad range of APIs to Internet Explorer (‘‘IE’’). In particular, below, many critics of the proposed which software developers could write the commingling and contractual decree appear to have ignored the fact applications. This middleware product browser restrictions that Microsoft that the government’s case had been threatened Microsoft’s OS dominance insisted upon in its agreements with significantly narrowed.
TABLE ONE—SUMMARY OF FINDINGS OF ANTICOMPETITIVE ACTS
Anticompetitive findings of district court Appellate court
Agreements With OEMs
1. Prohibition on OEM removing desktop icons, folders, or Start Menu entries ...... Yes. 2. Prohibition on OEM altering initial boot sequence ...... Yes. 3. Prohibition on OEM allowing alternative user interface to launch automatically ...... No. 4. Prohibition on OEM adding icons or folders in different size or shape ...... Yes. 5. Prohibition on OEM using Active Desktop to promote others’ products ...... Yes.
Binding of IE to Windows
6. Excluding IE from the ‘‘Add/Remove’’ utility ...... Yes. 7. Designing Windows to override users’ choice of default browser other than IE ...... No. 8. Commingling code to eliminate OEM choice of removal of IE from Windows ...... Yes.
Agreements With IAPs
9. Licensing IE for free ...... No. 10. Payment for use of IE with IAP service signup ...... No. 11. Developing IE Access Kits and offering them for free ...... No. 12. Placement of IAP’s product on desktop in return for IE exclusivity (or limit to Navigator shipments) ...... Yes.
‘‘[t]he bundling and other contractual browser 12 Government Exhibit No. 1. 15 The appellate court reversed both the restrictions that Microsoft insists upon in its 13 See May 1998 Sibley Decl. at ¶¶ 18–19, 30, and attempted monopolization and tying claims agreements with OEMs, IAPs, and ICPs add 49–50. (remanding the tying claim for further hearing artificial entry barriers to those that occur naturally, 14 Government Exhibit No. 20, Email from Bill under the rule of reason standard) and vacated the and are therefore a source of competitive concern.’’ Gates to the Microsoft Executive Staff and Direct Final Judgment that called for a structural remedy See 1998 Sibley Decl. at ¶ 19. Reports (May 26, 1995). and interim conduct remedies.
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TABLE ONE—SUMMARY OF FINDINGS OF ANTICOMPETITIVE ACTS—Continued
Anticompetitive findings of district court Appellate court
Agreements With ICPs, ISVs, and Apple
13. Exclusive agreements with ICPs ...... No. 14. Agreements With ISVs to make IE the default hypertext interface ...... Yes. 15. Threat to end support of Office on MAC platform as ‘‘a club’’ to coerce Apple to use IE as default browser with MAC OS .. Yes.
Efforts To Contain and Subvert Java
16. Design of Java Virtual Machine (‘‘JVM’’) that was incompatible with Sun’s product ...... No. 17. Exclusive agreements to promote Microsoft’s JVM ...... Yes. 18. Deceived Java developers about Windows-specific nature in Microsoft Java ...... Yes. 19. Coerced Intel to stop aiding Sun by threats to support Advanced Micro Devices, Inc. (‘‘AMD’’) ...... Yes.
Course of Conduct
20. Apart from specific acts, Microsoft’s general course of conduct violated Section 2 of the Sherman Act ...... No.
C. Summary of SRPFJ Provisions ineffective. Moreover, the characteristics recurrence of that conduct consists of of middleware products today focus not provisions for non-discrimination and 17. Given the appellate court findings, on access to the Internet but on the non-retaliation. With regard to lost the SRPFJ focus is appropriately on range of offerings that access to the competition, the SRPFJ seeks to restore middleware. Each of the twelve Internet can provide. Thus, middleware the potential middleware threat. This is anticompetitive acts were directed is properly defined in the proposed to be accomplished primarily through toward eliminating the middleware decree to encompass present and future provisions requiring API disclosure and threat to the Microsoft OS. However, by middleware threats. In particular, the licensing of communication its nature, the proposed decree must be middleware is broadly defined in the protocols embedded in the OS. This will forward looking, and this requirement SRPFJ to capture almost any software enable independent software developers imposes challenges as to how that exposes a range of APIs. For middleware should be defined. As the to more effectively interoperate with example, as defined, middleware Windows and thus compete with the appellate court noted, ‘‘[s]ix years has captures Internet browsers, email client middleware functionality offered by passed since Microsoft engaged in the software, networked audio/video client Microsoft. Middleware developers are first conduct plaintiffs alleged to be software, and instant messaging anticompetitive. And as the record in software. also aided by (1) the requirement that this case indicates, six years seems like 18. As shown in Table Two, to stop Microsoft create and preserve default an eternity in the computer industry.’’ 16 the unlawful conduct found by the settings when Windows launches or The anticompetitive actions taken by appellate court, the SRPFJ targets invokes rival middleware in certain Microsoft targeted the middleware Microsoft’s business practices by cases, and (2) the requirement that threat posed by the Netscape Web broadly banning exclusive dealing, Microsoft create ‘‘add/delete’’ browser and Java.17 However, there is providing OEMs more control of the functionality that makes it easier for general agreement that Microsoft has desktop and initial boot sequences, and OEMs and users to replace end-user won the ‘‘browser war.’’ Relief focusing prohibiting retaliatory conduct by access to Microsoft Middleware only on this threat is thus likely to be Microsoft. The remedy for preventing functionality with rival middleware.
TABLE TWO—SUMMARY OF SRPFJ PROVISIONS
Section in Provision SRPFJ
Remedy To Stop Offending Conduct
Prohibits retaliatory conduct ...... III.A.1–3, III.F.1 Broadly bans exclusive dealing ...... II.F.2, III.G.1–2 Provides OEMs more control of desktop and initial boot sequence ...... III.C.1–6
Remedy To Prevent Recurrence
Non-discrimination and non-retaliation provisions ...... III.A.1–3,
Remedy To Restore Competitive Conditions
If Microsoft middleware products rely on an API, then that API must be disclosed ...... III.D, III.I Microsoft required to create and preserve default settings, such that certain of ...... III.H.2 Microsoft required to create add/delete functionality that makes it easier for OEMs ...... III.H.1 Microsoft required to license communications protocols embedded in the OS, but ...... III.E, III.I
17 See, e.g., May 1998 Sibley Decl. at ¶¶ 18–19. 16 United States v. Microsoft Corp., 253 F.3d 34, 6 (D.C. Cir. June 28, 2001).
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19. The difficult task is to create a outcomes or to weaken Microsoft as a anticompetitive and the linkage between balanced remedy that constrains legitimate competitor. Overly broad those acts and the provisions in the anticompetitive behavior by Microsoft remedies can create socially wasteful SRPFJ. Table Three identifies the twenty without limiting competition on the costs by eliminating efficiencies, and specific acts related to the monopoly merits. Thus, in developing an antitrust remedies designed to ‘‘manage’’ the maintenance claim that were found to remedy in this case, it is necessary to competitive process can indirectly be anticompetitive by the District Court balance two broad factors: (1) the need reduce consumer welfare. In particular, and the twelve claims upheld by the to impose constraints on Microsoft’s over-extensive government regulation of appellate court. The right-hand column current and future behavior so that the Microsoft may result in inefficient rent- of Table Three presents the provisions unlawful business practices stop and do seeking by Microsoft’s competitors,18 in the SRPFJ that I believe likely would not recur, and competitive conditions and make Microsoft a less efficient effectively prevent those acts from are restored and (2) the requirement that competitor. As discussed below, in my occurring. I begin my analysis by these constraints not be so intrusive and opinion, the SRPFJ achieves the right examining the acts of Microsoft found to complex that they themselves distort balance. be unlawful by the appellate court. market outcomes. 20. By focusing on Microsoft’s III. Economic Analysis of the SRPFJ in 24. Prohibition on OEM removing anticompetitive business practices, the Light of the Tunney Act Requirements desktop icons, shortcuts, or Start Menu provisions in the SRPFJ eliminate the 22. It is my understanding that key entries. If the SRPFJ had been in effect artificial barriers to entry erected by components of the public interest when Microsoft imposed this Microsoft that are the source of standard of the Tunney Act are satisfied requirement on OEMs, Microsoft would competitive concern. The provisions in when the antitrust remedy is sufficient have been in violation of Section the proposed decree aim to deter to (1) stop the offending conduct, (2) III.H.1.a of the proposed decree. This conduct that (1) seeks exclusivity or (2) prevent its recurrence, and (3) restore section of the SRPFJ specifically allows is backed by retaliatory threats. The competitive conditions. In this section, either end users or OEMs to enable or SRPFJ also aims to restore and enhance I examine the extent to which the SRPFJ remove access to each Middleware competitive conditions by removing satisfies this three-part test. In so doing, Product by displaying or removing technical barriers to competition I respond to many of the thoughtful icons, shortcuts, or menu entries between Microsoft and rival middleware comments on the proposed decree that anywhere in a Windows Operating suppliers. As discussed above, from an were submitted during the public System Product that a list of icons, economic standpoint, middleware is comment period recently concluded. shortcuts, or menu entries is normally important because it can expose APIs displayed. According to the SRPFJ, the and has the potential to become an A. Does the SRPFJ Stop the Offending mechanism that accomplishes this task applications platform distinct from the Conduct? must be readily accessible from the Windows OS. 23. To answer this question it is first desktop or the Start Menu entries, and 21. At the same time, the SRPFJ does necessary to review both the specific it must be available to OEMs using not attempt to preordain market acts of Microsoft that were held to be standard pre-installation kits.
TABLE THREE—PROVISIONS IN SRPFJ THAT ADDRESS ANTICOMPETITIVE ACTS
Anticompetitive findings of District Court Appellate Addressed in
Agreements With OEMs
1. Prohibition on OEM removing desktop icons, folders, or Start ...... Yes ...... III.H.1 2. Prohibition on OEM altering initial boot sequence...... Yes ...... III.C.3–5 3. Prohibition on OEM allowing alternative user interface to ...... No 4. Prohibition on OEM adding icons or folders in different size or ...... Yes ...... III.C.1–2 5. Prohibition on OEM using Active Desktop to promote others’ ...... Yes ...... III.C.1–2
Binding of IE to Windows
6. Excluding IE from the ‘‘Add/Remove’’ utility ...... Yes ...... III.H.1 7. Designing Windows to override users’ choice of default ...... No ...... III.H.2 8. Commingling code to eliminate OEM choice of removal of IE ...... Yes ...... III.C.1
Agreements with IAPs
9. Licensing IE for free ...... No 10. Payment for use of IE with IAP service signup ...... No 11. Developing IE Access Kits and offering them for free ...... No 12. Placement of IAP’s product on desktop in return for IE Exclusivity (or limit to Yes ...... III.G.1–2 Navigator shipments) .
Agreements With ICPs, ISVs, and Apple
13. Exclusive agreements with ICPs ...... No ...... III.G.1–2 14. Agreements with ISVs to make IE the default hypertext user ...... Yes ...... III.F.2 15. Threat to end support of Office on MAC platform as ‘‘a club’’ to coerce Apple Yes ...... III.F.1–2 III.G.1 to use IE as default browser with MAC OS .
18 Rent seeking involves the use of real resources to obtain favorable treatment or rules.
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TABLE THREE—PROVISIONS IN SRPFJ THAT ADDRESS ANTICOMPETITIVE ACTS—Continued
Anticompetitive findings of District Court Appellate Addressed in
Efforts To Contain and Subvert Java
16. Design of Java Virtual Machine (‘‘JVM’’) that was ...... No 17. Exclusive agreements to promote Microsoft’s JVM ...... Yes ...... III.F.2 18. Deceived Java developers about Windows-specific nature in ...... Yes ...... III.D 19. Coerced Intel to stop aiding Sun by threats to support AMD ...... Yes
Course of Conduct
20. Apart from specific acts, Microsoft’s general course of conduct violated Sec- No tion 2 of the Sherman Act .
25. Prohibition on OEM altering the icons, etc. without end-user actions, facilitate easy end-user access to initial boot sequence. This Microsoft and, in any case, it cannot even ask the middleware offered by Microsoft rivals. prohibition would have violated user to undertake such action for From the standpoint of most end-users, Sections III.C.3–5 of the proposed fourteen days after the initial boot. a software product, such as a browser, decree. These sections require that Based on my reading of the Competitive has been removed and is not present if OEMs be allowed to alter the initial boot Impact Statement (which serves as an there are no visible means to access it. sequence in certain ways to promote explanation of SRPFJ provisions) and on Accordingly, Section III.C.1 and III.H.1 rival middleware. Section III.C.3 allows conversations with personnel from the together enable the OEM or end user to OEMs to launch rival middleware in DOJ, the only existing Microsoft select another browser as the default place of a Microsoft Middleware technology to which this section refers browser, without IE being visible to the Product at the end of the initial boot is the Desktop Cleanup Wizard, which end user. I do not interpret the appellate sequence. Section III.C.4 allows OEMs currently exists only on Windows XP. court decision as requiring that code to offer machines that dual boot to two The Desktop Cleanup Wizard simply internal to Windows be removed different operating systems. Section asks the end user if he or she wants to without regard to the competitive III.C.5 allows OEMs to present Internet retain infrequently-used icons on the significance of its removal merely access offers which may promote rival desktop, whether or not these icons because it is also used in Web browsing. software. refer to rival software. The SRPFJ The appellate court stated that such 26. Prohibition on OEM adding icons requires that it treat Microsoft and Non- removal of code would be needed if or folders in different size or shape. Microsoft icons in an unbiased manner. such removal was required to permit Microsoft began to impose this 28. Prohibition on OEMs using Active OEMs to remove the means of access to restriction, which was intended to Desktop to promote others’ products. It Microsoft products, since their inability prevent OEMs from pre-installing is my understanding that this to do so resulted in the exclusion of Netscape Navigator, in its first Windows prohibition is no longer a relevant rival products. Thus, because the SRPFJ 95 contracts. Under the proposed concern because the Active Desktop is requires Microsoft to make it possible decree, the only restrictions that no longer significantly in use. Indeed, I for OEMs effectively to remove Microsoft would now be able to place note that the Microsoft pre-installation Microsoft Middleware Products by on the icons, shortcuts, and menu kit for Windows XP instructs the OEM removing access to them and to install entries placed by an OEM are those not to activate the Active Desktop. rival products, the actual removal of described in Section III.C.1–2. These However, should features similar to the code is not necessary. sections state that Microsoft can restrict Active Desktop exist in the future, Sections III.C.1–2 would prevent similar 31. Placement of an IAP’s product on the OEM from placing such icons, the desktop in return for IE exclusivity shortcuts, and menu entries in any list types of restrictions by providing OEMs more control and flexibility over the (or limit to Navigator shipments). This in Windows that is described in the offense would have been prevented by Windows documentation as being for desktop. 29. Exclusion of Internet Explorer Sections III.G.1 and III.G.2 of the particular types of functions. These from the ‘‘Add/Remove’’ utility. This proposed decree. With one exception, provisions would, however, apply also violation would clearly have been these sections prevent Microsoft from to Microsoft’s own placement of icons, prevented by Section III.H.1 of the entering into an agreement with any menu entries, and shortcuts and do not proposed decree. Section III.H.1 IAP, ICP, ISV, independent hardware restrict the OEM from choosing the size vendor (‘‘IHV’’), or OEM requiring either 19 requires Microsoft to allow the removal and shape of its shortcuts. of the means of access to Microsoft exclusivity for a Microsoft Middleware 27. I note that Section III.H.3 of the Middleware Products. product or that such software be SRPFJ is also relevant with regard to 30. Commingling of code to eliminate distributed in a fixed percentage, Microsoft’s prohibition against the OEM choice of removal of IE from irrespective of consumer choice. The addition of OEM-specified icons, Windows. This offense is addressed by exception is that fixed percentage shortcuts, and menu entries. This Sections III.H.1 and III.C.1 of the agreements that provide Microsoft section states that Microsoft cannot alter proposed decree. Section III.H.1 preferential status are permitted under an OEM’s desktop configuration of requires Microsoft to allow the removal the SRPFJ as long as it is commercially of the means of end-user access to feasible for the OEM, IAP, etc. to give 19 The size and shape of an icon is fixed and Microsoft Middleware Products, which equivalent treatment to rival cannot be changed by the OEM or Microsoft Section III.C.2 prohibits Microsoft from restricting the would include IE. Section III.C.1 allows middleware. When preferential status OEM’s selection of the size and shape of shortcuts, the OEM to install and display icons, for Microsoft necessarily excludes rival including shortcuts placed on the desktop. shortcuts, and menu entries that middleware, Section III.G.1 implies that
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preferential status from Microsoft Sun JVM. Section III.G.1 would also find these agreements to be unlawful, cannot extend to more than fifty percent block such a transaction since the ISVs Section III.G.1 of the proposed of the shipments of the OEM, IAP, etc. were being asked to promote the settlement prevents exclusive and Also, Microsoft cannot grant an IAP or Microsoft JVM exclusively. ‘‘fixed percentage’’ agreements for ICP placement on the desktop or any 35. Deception of Java developers Microsoft Middleware products with other favored place in Windows in regarding the Windows-specific nature ICPs. In addition, Section III.G.2 return for the IAP or ICP refraining from of Microsoft Java. To the extent that outlaws an exchange of placement of the distributing, promoting, or using any such deceit on the part of Microsoft ICP’s icon on the desktop for the ICP software that competes with Microsoft involved the disclosure of additional refraining from using, distributing, or Middleware. APIs developed by Microsoft for its JVM promoting middleware offered by 32. Agreements with ISVs to make IE that worked only on Windows, this Microsoft’s rivals. the default hypertext user interface. behavior would have been blocked by 40. Based on the above analysis, I Such exclusive agreements are ruled out the API disclosure requirement of conclude that the SRPFJ is likely to stop by Sections III.F.2, and III.G.1. Section Section III.D. However, I see nothing in effectively the Microsoft conduct found III.F.2 prevents Microsoft from the SRPFJ that speaks directly to the to be unlawful by the appellate court. rewarding ISVs for refraining from issue of deceit. The proposed decree also is likely to developing, promoting, or using 36. Coerced Intel to stop aiding Sun address two areas that were originally software that competes with Microsoft by threats of support to AMD. found to be unlawful by the District middleware and operating systems. Microsoft’s interaction with Intel in this Court but reversed on appeal. Provision III.G.1 prohibits Microsoft regard contained a threat. Section III.F.1 B. Does the SRPFJ Prevent Recurrence of from entering into agreements which forbids retaliation against an IHV, so the Offending Conduct? give Microsoft preferential status (e.g., that had the SRPFJ been available at the fixed percentage agreements) when an time, the threat of retaliation would 41. In addition to preventing the ISV or IHV is unable to offer an have been without force. Section III.F.2 recurrence of acts similar to those that equivalent status to a rival product. would have been invoked by the occurred in the past, the SRPFJ contains Fixed percentage agreements are Microsoft offer of consideration, which provisions to guard against future acts permissible, however, when it is essentially took the form of increased that differ substantially from those commercially feasible for the other party support for Intel’s microprocessors. listed in Table Three but would also be to the agreement to provide at least the Thus, this conduct would have been anticompetitive. The SRPFJ identifies same level of promotion to the rival prevented by the SRPFJ. non-Microsoft products whose middleware. 37. In addition to likely preventing distribution and usage cannot be 33. Threat to end support of Office on the anticompetitive acts upheld as impeded by Microsoft’s actions. MAC platform as ‘‘a club’’ to coerce illegal by the appellate court, the SRPFJ Covered products, such as Microsoft Apple to use IE as default browser with also provides at least partial protection Middleware Products, are described in MAC OS. For the purpose of the SRPFJ, with regard to two Microsoft behaviors terms of their general functionalities Apple is considered an ISV. One of the found to be unlawful by the District and not just with reference to specific historical incidents involving Microsoft Court but not upheld as such on appeal. products now commercially available. and Apple was that Microsoft (See Table One, items 7, and 13.) In this 42. In particular, ‘‘Microsoft threatened to end the support of Office regard, the SRPFJ addresses actions that Middleware Product’’ is broadly defined on the MAC platform if Apple go beyond the violations upheld by the in the decree to cover the functionality continued to promote Netscape’s Web appellate court. provided by Internet Explorer, browser. Section III.F.1 forbids 38. Designing Windows to override a Microsoft’s Java Virtual Machine, retaliation of the kind Microsoft user’s choice of default browser other Windows Media Player, Windows threatened. This restriction would have than IE. Section III.H provides partial Messenger, Outlook Express, as well as rendered the threat itself ineffective. protection against this act. To restore their successors. In addition, new and Microsoft also signed an agreement with this access would take positive action yet-undreamed-of products in the Apple which ported Office to the MAC by the end user and could not be general categories of Internet browsers, and made IE the default browser and initiated and completed by Microsoft email client software, networked client relegated Netscape’s browser to a folder. otherwise. Section III.H.2 allows end audio/video client software, and instant This agreement would have violated users and OEMs to select a Non- messaging software are also covered. Section III.F.2 because it represented Microsoft Middleware Product to be The SRPFJ also covers any new consideration in return for Apple’s launched automatically whenever the Microsoft Middleware distributed refraining from promoting the Netscape Microsoft Middleware would have been separately from a Windows Operating browser. Finally, because Apple could launched in a Top-Level Window and System Product that is similar to the not have made both IE and Navigator have displayed either all of the user functionality of a rival middleware the default browser on the MAC, the interface elements or the trademark of product and is either trademarked or agreement would have violated Section the Microsoft Middleware Product. 20 distributed by Microsoft as a major III.G.1. This requirement forces Microsoft to version of a Microsoft Middleware 34. Exclusive agreements to promote have default in some circumstances and Product. In this last category, the new Microsoft’s JVM. These agreements provides a ‘‘bright line’’ rule in a Microsoft Middleware Product need not between Microsoft and ISVs gave those situation where previously Microsoft even be something currently recognized ISVs advance information on new had complete discretion. as middleware. This definition is not Microsoft APIs in return for writing to 39. Exclusive agreements with ICPs. perfectly general, and it is possible to the Microsoft version of the Java Virtual Although the appellate court did not imagine future Microsoft products that Machine (‘‘JVM’’). Section III.F.2 would would not fall under this definition but have prevented Microsoft from offering 20 The term ‘‘Non-Microsoft Middleware Product’’ nevertheless would still compete with is used only in Section III.H of the SRPFJ, and my the ISV consideration, in the form of use of the term applies only in reference to that rival middleware. However, the advance information, in return for section of the proposed decree. Elsewhere, I use the middleware definition does appear promoting the Microsoft JVM over the term ‘‘rival middleware.’’ broad enough to capture the types of
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middleware threats most likely to many applications, and, in the past, (See Declaration of Joseph Stiglitz and emerge during the term of the proposed Microsoft has consistently supported Jason Furman, hereafter ‘‘Stiglitz and decree. Similarly, provisions in the applications that do not compete with Furman Decl.’’ at 31, and Declaration of proposed decree regarding non- its own applications. The Microsoft Kenneth J. Arrow, hereinafter ‘‘Arrow discrimination and non-retaliation (i.e., Software Developer’s Network and the Decl.,’’ at ¶ 41.) Regarding special Sections III.A, III.B, and III.F) are broad many developer seminars that Microsoft treatment, I note that if such treatment and go beyond the specific acts found to sponsors are evidence in support of this refers to non-monetary consideration of be unlawful by the appellate court. position. Second, if Microsoft were to some kind, this behavior would be ruled 43. During the effective period of the adopt this strategy, the strategy itself out by Section III.A.1 of the proposed decree, the Technical Committee and would impose a cost on Microsoft in decree. This section of the SRPFJ other compliance and enforcement that the company would have to refrain prohibits Microsoft from retaliating measures set out in the SRPFJ should from developing its own version of the against or withholding newly developed work to prevent a recurrence of the threatening software. This would forms of non-monetary compensation offending acts. However, before encourage other, non-Microsoft from an OEM because the OEM is reaching a conclusion about the SRPFJ’s developers to produce another version developing, promoting, or using compliance with this part of the Tunney of the competing product and end-users software that competes with Microsoft Act’s requirements, there remains the to use the non-Microsoft middleware Platform Software. issue of possible ‘‘loopholes’’ and product. Also, there remains the issue of 49. I also consider the possibility that ‘‘overly-broad exclusions,’’ which was exactly how Microsoft would retaliate special treatment might take the form of commented upon in many thoughtful and against whom. monetary discounts on other Microsoft submissions provided during the public 46. Previously, Microsoft has products, such as Microsoft Office. I comment period just concluded. I will retaliated against OEMs by charging will assume that the alleged discuss below those comments uncooperative OEMs a higher price for discrimination takes the form of pertaining to provisions in the SRPFJ Windows. However, this form of requiring the OEM to establish the that are intended to prevent recurrence retaliation is ruled out by Section III.B, Microsoft Middleware Product as the of acts such as those described at trial, which requires that OEMs pay royalties default on all of its computers. This in the general areas of retaliation and pursuant to uniform license agreements action violates Section III.A.1 and exclusive dealing. (Potential loopholes that can be viewed by other OEMs and III.A.3 because linking the price of in the general area of disclosure of APIs by the plaintiffs for monitoring Office to an OEM’s promotion of rival and other technical interfaces are purposes. If retaliation were to take the middleware would represent an discussed in Section III.C of this form of manipulation of other types of alteration in Microsoft’s commercial document.) consideration (e.g., MDA discounts), relationship with that OEM in 44. Claimed Loopholes. The SRPFJ such action would make it impossible connection with that OEM’s promotion contains various provisions (Sections for Microsoft to comply with Section of rival middleware, and the III.A and III.F) that protect parties from III.B.3.a of the proposed decree, which withholding of such a discount would retaliation by Microsoft in those cases states that such discounts must be occur because it was known to involving a middleware product that offered to all covered OEMs, including Microsoft that the OEM was exercising competes with a Microsoft Middleware OEMs that cooperate with Microsoft. options provided for by Section III.H Product and operating system. These 47. Based on Microsoft’s past (e.g., making rival middleware the provisions do not address explicitly the practices, Microsoft might withhold default). Furthermore, this would be a possibility that Microsoft may have a APIs, documentation, or access to case of preferential treatment within the competitive concern involving rival communications and security protocols. meaning of Section III.G. Since only one middleware that has no counterpart at Such behavior is likely to be an middleware product in a given category present among Microsoft’s suite of ineffective means of retaliation or can by definition be the default on a middleware products. In this situation, control. There are thousands of given computer, the OEM could not Microsoft might retaliate against an published APIs, and the very existence represent that it was commercially OEM, ISV, or IHV that supported the of a Non-Microsoft Middleware Product feasible for it to give greater or equal product in question, perhaps to prevent that prompts retaliation implies such a distribution to the Non-Microsoft it from ever becoming a serious threat to product was built around published Middleware Product. its OS monopoly. However, there are APIs and technologies, in addition to 50. The third loophole cited in the several reasons why this is unlikely to whatever its developer may have comments pertains to Section III.A and occur. invented and embodied in the product. the process that governs how Microsoft 45. First, this action would be blocked Attempting to manipulate these APIs must proceed if it wants to terminate by Section III.A.1, which forbids would invariably harm products that are dealings with an OEM. In the past, Microsoft from retaliating against an complementary to the Microsoft OS and Microsoft has had the ability to cancel OEM supporting, or contemplating enhance its value. For all these reasons, an OEM’s Windows license without supporting, any rival software that I believe that Microsoft’s incentives prior notice. The SRPFJ adds constraints competes with Microsoft Platform would be not to retaliate against an ISV to Microsoft’s ability to terminate an Software whether or not Microsoft has regarding a product without a Microsoft OEM. The SRPFJ requires that Microsoft a counterpart to the rival software. counterpart. In my opinion, reliance on provide any one of the top twenty OEMs Section III.F.1 contains similar incentives will be superior, in this (defined by volume) written notice of its protection for ISVs and IHVs. While it instance, to detailed regulation. intent to cancel, in which it must is not possible at first glance to rule out 48. A second possible loophole is that specify the deficiency prompting the the occurrence of such an event, further Microsoft could provide special cancellation, as well as a 30-day analysis suggests that such an event is treatment or discriminatory prices on opportunity to cure the deficiency. unlikely to occur. This is because as other (non-middleware) products as Because Microsoft must provide a discussed in Section II above, rewards or retaliation, presumably for a reason in the written notice and an Microsoft’s strength is derived from third party’s favoring or impeding a opportunity for a cure, it obviously having an operating system that runs Non-Microsoft Middleware product. cannot terminate an OEM for conduct
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authorized under the SRPFJ. Again, Windows and compete with Microsoft protocols between other types of Microsoft does not have to do this products. Microsoft has many more Microsoft products. The basis for the currently. Because Microsoft cannot APIs that it does not publish or client-server focus is that there is now terminate an OEM’s license for conduct otherwise make available to ISVs. a growing number of applications that consistent with the SRPFJ, the Potentially, some of these unpublished run on servers, rather than on the presumption is that, if an OEM is APIs give Microsoft products desktop. I discussed this factor in my terminated, the cause must be related to capabilities or features that rival May 1998 Declaration. 22 It represents a a normal commercial dispute. Viewed products cannot easily duplicate. When strong source of competition to in this light, I do not agree with Stiglitz these APIs are used by Microsoft Microsoft in the business computing and Furman when they allege that Middleware Products, the SRPFJ obliges segment and may yet make a serious Section III.A provides Microsoft Microsoft to disclose them to ISVs, attack on the applications barrier to ‘‘substantial leverage’’ to force an OEM IHVs, IAPs, ICPs, and OEMs meeting entry in the desktop PC market. to distort its choice among competing certain requirements. The same Therefore, it is important that rival middleware products. (See Stiglitz and obligation applies to certain types of middleware be able to operate with Furman Decl. at 31–32.) I do not believe communications protocols and security Microsoft server operating systems. It is that detailed regulation would achieve a features developed by Microsoft that are equally important that a non-Microsoft better outcome. used in connection with its Window server be able to operate with Windows 51. This discussion has summarized Operating System products. The as efficiently as would a Microsoft the major comments on the SRPFJ sections of the SRPFJ dealing with server. Communications protocols are Sections III.A, III.B, and III.F as they technical disclosure are III.D, III.E, III.I, essential for that purpose and are just as relate to retaliation and discrimination. and III.J. necessary to rival middleware On balance, I conclude that these 54. The API disclosure provisions of developers as is access to Windows provisions are likely to fulfill the the SRPFJ have attracted perhaps more APIs. By contrast, I have not yet seen an Tunney Act requirement that the SRPFJ comments than any others in the argument that clearly articulates why prevent a recurrence of the offending proposed decree. Criticisms of these the applications barrier to entry would conduct. provisions generally follow two lines of be threatened by the disclosure by argument: (1) The proposed decree C. Will the SRPFJ Restore Competitive Microsoft of communications between provides too much latitude, enabling Conditions? other types of Microsoft software. Microsoft to delay the release of APIs 57. Under Section III.E, starting nine 52. As discussed above, the SRPFJ’s until a Microsoft product has a decisive months after the submission of the focus is on restoring the competitive first-mover advantage over the SRPFJ to the Court, Microsoft shall threat provided by middleware (see competition; and (2) Microsoft could make available to qualifying third Table Two). This is accomplished by evade the intent of the proposed decree parties any communications protocol providing middleware developers the and avoid releasing this information at implemented in a Windows Operating means to create competitive products all. I will first describe the relevant System Product (on or after the date of through: (1) provisions for API sections of the SRPFJ dealing with the SRPFJ submission), installed on a client disclosure; (2) provisions that require API disclosure provisions and then and used to interoperate or Microsoft to create and preserve default evaluate their likely effectiveness. communicate with a Microsoft server settings, such that Microsoft’s integrated operating system product. This will 1. API Disclosure and Communications middleware functions will not be able to have both of the effects discussed above. Protocol Provisions over-ride the selection of third-party It will enable rival middleware to middleware; (3) the creation of ‘‘add/ 55. Section III.D of the proposed communicate with a Microsoft server delete’’ functionality that make it easier decree specifies the main process for and also will allow a non-Microsoft for OEMs and end-users to replace releasing the APIs and the server operating system to communicate Microsoft middleware functionality documentation used by Microsoft effectively with a Windows operating with independently developed Middleware to interoperate with system. To protect Microsoft intellectual middleware; and (4) requirements for Windows. Starting with the release of property rights, Microsoft may charge Microsoft to license communications Service Pack 1 for Windows XP or for the use of these protocols as long as protocols embedded in the OS while twelve months after the submission of it does so on ‘‘reasonable and non- maintaining Microsoft’s ability to the SRPFJ to the Court (whichever is discriminatory terms.’’ (See SRPFJ at deploy proprietary technology provided earlier), Microsoft must disclose APIs Section III.E.) Section III.E also separately. These provisions are and documentation used in association references Section III.I, which says that discussed more fully below. with Microsoft Middleware. Going Microsoft must offer to license any 53. The SRPFJ requires Microsoft to forward, there are to be disclosures intellectual property that it owns and release certain types of technical occurring in a ‘‘Timely Manner’’ that is needed to allow ISVs, IHVs, IAPs, information to rival middleware whenever there is a new version of a ICPs, or OEMs to exercise their rights suppliers. This information is to be Windows operating system product or a under the SRPFJ. The SRPFJ also states provided in order to enable rival new major version of Microsoft that all terms governing payment must software developers to configure their Middleware. 21 be reasonable and non-discriminatory. products so that they are able to use the 56. Section III.E pertains to the use of 58. Section III.J can be viewed as same Windows capabilities that Microsoft’s client-server ‘‘carving out’’ exceptions to Section III.D Microsoft Middleware uses. To better communications protocols. It does not and III.E. Section III.J.1 states that evaluate these provisions, recall from apply to the use of communications Microsoft cannot be required to disclose above that Microsoft has published portions of APIs, documentation, or thousands of APIs, which are used by 21 The term ‘‘Timely Manner,’’ which governs the portions of communications protocols if software developers to allow their release date of APIs pursuant to Section III.D, disclosure would ‘‘compromise the means the time Microsoft first releases a beta products to run on Windows. Microsoft version of a Windows Operating System Product, security of a particular installation or rivals (e.g., RealNetworks) use those either through the MSDN or with a distribution of APIs to build products to run on 150,000 or more copies. 22 See May 1998 Sibley Decl. at ¶ 19.
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group of installations’’ in the general used by that product need not be a great deal of time, money and areas of anti-piracy, anti-virus, software disclosed. (See Stiglitz and Furman resources for most middleware licensing, digital rights, encryption, or Decl. at 29–30, and Comment of Rebecca companies to reach.’’ (See Comments of authentication systems, ‘‘including, M. Henderson (hereinafter ‘‘Henderson RealNetworks, at 13, and Comments of without limitation, keys, authorization Comment’’) at 5–6, and 9, and SBC at 40–41.) The comments of tokens or enforcement criteria.’’ (See Comments of Software Information RealNetworks also note that the above SRPFJ at Section III.J.1.) Section III.J.2 Industry Association at 26.) In theory, definition of ‘‘Non-Microsoft similarly allows Microsoft to condition this feature of the SRPFJ could allow Middleware Product’’ does not state the licensing of any API, Microsoft to avoid disclosing APIs on whether new versions are to be counted documentation, or communications new products and major new versions of separately. My understanding is that the protocol relating to anti-piracy, anti- current products. word ‘‘product’’ refers for this purpose virus, license enforcement mechanisms, 61. In my opinion, this concern has to an aggregation of versions. Thus, if in authentication/authorization security, or little practical significance. If Microsoft the course of a single year, version 1 of third party IP protection. Microsoft may were to follow such a strategy as a a product had 200,000 copies require that a licensee: (a) have no matter of broad policy to deter distributed, version 2 had 300,000 history of software piracy, competition, it would come at a high copies distributed, and version 3 had counterfeiting, etc.; (b) have a price. First, none of the installed base of 500,000 copies distributed, it is my ‘‘reasonable business need’’ for the API, Windows users would have the new understanding that the product would documentation, or communications product, which alone would impose a qualify. Furthermore, the term protocol for a planned or shipped large cost on Microsoft, if the product’s ‘‘distributed’’ should not be confused product; (c) meets ‘‘reasonable, objective use were at all competitively significant, with ‘‘sold.’’ Under my reading of the standards’’ established by Microsoft for as was the case in 1995 with the proposed decree, mass mailings of CDs certifying the authenticity and viability browser. Second, since competing (i.e., so-called ‘‘carpet-bombing’’) would of its business; and (d) agrees to have a providers would continue to innovate, constitute distribution for this purpose, third party verify that its product as RealNetworks has done, at some as would ‘‘downloads.’’ While one complies with the technical point Microsoft would face the danger million distributed copies might have specifications for whatever Microsoft (since most users tend not to replace been significant in the early stages of the APIs or interfaces it may use. their operating system readily) that the Internet, the recent explosive growth in 59. Before evaluating these sections of Windows user’s best option becomes the Internet and its use suggests that this the SRPFJ, one observation is in order. obtaining the relevant piece of requirement can be easily met by most, The API disclosure required under middleware from Microsoft’s if not all, middleware vendors.23 Section III.D is triggered by the competition. Had Microsoft refrained 63. It has been argued that the existence of Microsoft Middleware, from any separate distribution of IE in requirement that the million copy meaning that a version of a Microsoft 1995, the effect would have been to threshold must have been reached in the Middleware Product is distributed apart solidify Netscape’s hold on the browser previous year is a further impediment, from the operating system. Thus, if market. Third, this problem is leading to the result that the Microsoft bundles a piece of substantive only if the bundled ‘‘entrepreneur will begin to gain some of middleware with the operating system Microsoft product uses an API that is the settlement rights only a year after not published. Even then, there are and does not distribute this middleware the widespread distribution of her in some other way (e.g., by download), thousands of published APIs to which product. She will be entitled to then Microsoft need not disclose the competing ISVs can and do write. information about how this new product APIs used by that piece of middleware. RealNetworks, for example, has always can interact with Windows only after There is a current example of this written to these publicly available APIs, Microsoft has imitated the situation: Windows Media Player unless it could persuade Microsoft to innovation.’’ 24 However, based on my version 8.0 is available only with produce or reveal a particular reading of the SRPFJ, this concern is Windows XP. Therefore, Microsoft proprietary API. Based on the comments misplaced. The million copy under the SRPFJ does not have to submitted by RealNetworks in this requirement only comes into play in disclose the APIs applicable to proceeding, its main API concern is not Section III.H, which is the only section Windows Media Player version 8.0. over unpublished APIs that only However, as discussed below, it would Windows Media Player 8.0 may use (if in which the term ‘‘Non-Microsoft be impractical for Microsoft to affect any), but about the Secure Audio Path Middleware Product’’ is used. This competition in this way. API, sometimes called SAP. This API is section is solely concerned with the used by a previous version of Windows ability of the end user or OEM to have 2. Comments Regarding API Disclosure Media Player that was distributed a Non-Microsoft Middleware Product and Communications Protocol separately from the operating system, so launch automatically or be featured on Provisions Microsoft will have to disclose SAP the desktop. That is, it has nothing to do 60. This group of decree provisions under the SRPFJ. For these reasons, I do with the API disclosure requirement. attracted a large number of thoughtful not believe that the ability of Microsoft Furthermore, it is my understanding comments. Rather than address all of to withhold API disclosure by a that, once a particular Non-Microsoft the commentators, I will discuss the bundling-only strategy is likely to lead Middleware Product meets the million major comments which tend to recur in to significant competitive harm. the various submissions. As noted 62. The definition of ‘‘Non-Microsoft 23 It is worth noting that, even in 1995, within one year of the introduction of the Mosaic browser (the above, a potential loophole in the SRPFJ Middleware Product’’ has also been first browser with a graphical user interface) there is that Microsoft’s disclosure obligations criticized because of the requirement were some two million users. See Gina Smith, only begin when it distributes a piece of that the middleware product have had ‘‘Inside Silcon Valley: A High Tech Top 10 middleware separately from the at least one million copies distributed in Computers & Technology,’’ San Francisco Chronicle (Jan. 1, 1995). operating system. If Microsoft chooses the previous year. For example, 24 See Timothy F. Brensnahan, ‘‘A Remedy that to bundle this product and does not RealNetworks objected to this as ‘‘a Falls Short of Restoring Competition’’ ANTITRUST, create a redistributable version, the APIs huge number of copies . . . that will take at 69 (Fall 2001) (hereinafter ‘‘Bresnahan Article’’).
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copy requirement and Microsoft has If Microsoft were to release a tentative communications (e.g., in Section III.E) created a default setting, an OEM will be new API at the alpha testing stage and would reduce Microsoft’s monopoly able to set as the default a competing were to change the API at a later date, power. I do not see a need to extend product by another vendor, even if that even a Microsoft disclaimer could leave Section III.E to cover non-desktop competing product has not yet met the Microsoft open to charges that it was products, as proposed by the litigating one million copy requirement. Thus, changing APIs throughout the testing states. The Microsoft operating system when RealNetworks asks, ‘‘Must process in order to deceive and monopoly has always been centered on [middleware distributors] accumulate manipulate. Indeed, the disclaimer the desktop. This is why Section III.E one million distributions . . . before would almost indemnify Microsoft for focuses on facilitating server-based they are protected?’’, it betrays a such manipulation. Its precise reasons applications, which provide indirect misunderstanding of this section of the for changing the API would then lead to competition to Microsoft. There is no 25 proposed decree. litigation. For these reasons, it is unclear evidence that Microsoft has monopoly 64. The proposed release schedule for that preliminary, earlier disclosure is an power in operating systems for APIs and documentation has also obvious improvement to the provisions handheld computers, set-top boxes, etc. attracted criticism. (See, e.g., Bresnahan currently embodied in the SRPFJ. Indeed, the operating system sold for Article at 69; and Stiglitz and Furman Indeed, it would probably extend use in these areas, Windows CE, has Decl. at 30.) The requirement in Section regulation into the testing process, been characterized by poor performance III.D is that, once the initial disclosure which seems likely to reduce and distort since its inception and has been out- for Windows XP has taken place, innovation in APIs. Microsoft must disclose new APIs no 65. Other features of the proposed API performed by Palm OS, Blackberry, and later than the date of the last major beta disclosure process that have drawn other such competing operating release, if the disclosures are triggered comment include the limitations systems. Similarly, Microsoft is not by new Microsoft middleware, or in a contained in Section III.J. For example, dominant in the server market, and it ‘‘Timely Manner,’’ if the disclosure is Professor Bresnahan states that the currently faces competition from servers triggered by a new Windows operating settlement ‘‘overbroadly exempts the by Linux and others. I present data system product.26 Whether this is too most competitively important protocols confirming these claims in Section IV long a period of time or not appears to such as security, authentication and below. For these reasons, I am depend on the case at hand. For an API identity protocols.’’ (Bresnahan Article convinced that Section III.E provides to be published by Microsoft, it must at 68.) The same concern is expressed the right focus. To extend Section III.E first be ‘‘hardened,’’ which means that by Stiglitz and Furman. (See Stiglitz and to cover additional areas would, as I it must undergo an extensive testing Furman Decl. at 30.) These fears are have discussed, certainly increase procedure to make sure that it works in unfounded, based on my understanding antitrust regulation with no clear different programming environments of the SRPFJ. In particular, I observe rationale or benefit. and in the hands of developers who may that Section III.J.1 exempts from 67. There does remain the issue of not use it in the same way that disclosure portions or layers of APIs, how Microsoft will decide what Microsoft does. If an API has been documentation, and protocols that, if ‘‘reasonable and non-discriminatory’’ developed for a Microsoft Middleware disclosed, would compromise the charges it will set for access to these Product and has not been hardened, it security of a particular actual communications protocols. This is a may well take some period of time installation. The exemption, as reasonable concern that has been raised before it can usefully be disclosed to described in the CIS, ‘‘is limited to by several commentators. 28 The basis ISVs and others. On the other hand, if specific end-user implementations of for such license fees is apparently that Microsoft Middleware Product uses security items such as keys, limited to intellectual property that APIs that have been published or that authorization tokens or enforcement Microsoft may have embedded in these have been hardened, then the process criteria.’’ (See CIS at 51.) That is, the protocols, as set out in Section III.I. would likely be much shorter. Thus, the SRPFJ only limits disclosure of specific Some guidance offered for what appropriate disclosure period would end-user implementation of security ‘‘reasonable and non-discriminatory’’ depend on the case at hand, and my features. For example, Microsoft would might mean is in the CIS, where it says own expertise as an economist does not not have to disclose the actual key used that the ‘‘overarching goal of this qualify me to opine further. I note, by an actual customer. It would not Section is to ensure that Microsoft however, that alternatives to the SRPFJ need to disclose an API written cannot use its intellectual property on this matter do not appear to especially for an actual customer, and rights in such a way that undermines represent a clear improvement. For no other. These limits appear the competitive value of its disclosure example, one alternative would be for reasonable. APIs relating to general Microsoft to disclose APIs tentatively at obligations, while at the same time Microsoft technologies for security, etc. permitting Microsoft to take legitimate an earlier stage, subject to the must be disclosed. steps to prevent unauthorized use of its understanding that further testing might 66. Apart from the disclosure of APIs, intellectual property.’’ (CIS at 49.) cause Microsoft to change them. In this there is also the issue of the disclosure case, a software developer, OEM or of the communications protocols Presumably, any charging mechanism other party that uses Microsoft APIs between Windows installed on a client that excluded substantial numbers of may have earlier access to them but may and a Microsoft server. Several ISVs, IAPs, ICPs, or OEMs would violate well feel reluctant to make extensive use commentators are of the opinion that this requirement. It is my understanding of a very preliminary list of APIs, this provision is very limiting and that previous DOJ antitrust consent knowing that Microsoft may make excludes, for example, communications decrees imply that the term ‘‘reasonable changes at a later date. From Microsoft’s between hand-held computers and and non-discriminatory’’ is likely to be standpoint, to release APIs that are only servers.27 As discussed above, it is not interpreted as not significantly preliminary could pose legitimate risks. clear how including such excluding competitors. On this assumption, the lack of specific rate- 25 See Comments of RealNetworks at 14. 27 See, e.g., Bresnahan Article at 68; and 26 See definition VI.R in the SRPFJ. Henderson Comment at 3 and 5–6. 28 See e.g., Bresnahan Article at 69.
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setting guidance in Section III.I is not question should also be released.30 arbitrary.32 Should corporate overhead likely to be a severe problem. Alternatively, when Microsoft releases a be allocated between development 68. Because Section III.B does not new operating system, it should projects for the purpose of pricing the constrain the structure or levels of the continue to offer the previous version at unbundled operating system? If so, on royalty schedule beyond the uniformity the original price. which of the many accounting bases requirement, some commentators have 72. This is a potentially important should it be done? How should the cost expressed the concern that Microsoft issue. If the OEM has to pay a positive of a computer used by one individual on might be able to stay within the confines price for a rival middleware product three different projects be allocated of this provision but still price in such and pays a marginal price of zero for the between them? To answer questions a way as to be anticompetitive. For same functionality bundled in the such as these, regulatory agencies (e.g., example, RealNetworks opines that operating system, then the competitive the Federal Communications Microsoft could ‘‘establish the price of battle is stacked against the competitor Commission (‘‘FCC’’) and the Federal versions of Windows without its (see Arrow Decl. at ¶ 27). The critics Energy Regulatory Commission middleware set as the default at some also suggest that OEMs will not want to (‘‘FERC’’)) evolved highly complex case artificially high price and the actual support more than one product with law over a period of decades. Speaking price Microsoft wanted to receive as a such functionality, even if icons were as a regulatory economist with nearly cash incentive to carry Microsoft’s removed for the Microsoft Middleware three decades of experience, I can assert middleware as the default application.’’ version as permitted under the SRPFJ. with confidence that such pricing of the (See RealNetworks Comments at 27.) With the underlying Microsoft unbundled operating system would be a 69. Contrary to RealNetwork’s Middleware code embedded in the regulatory quagmire at least equal in hypothetical, Section III.B.3.c states that system, the critics suggest that end users complexity to those that have kept Microsoft cannot discount the price of will still find this functionality being regulatory bodies such as the FCC busy Windows based on any requirement that invoked and thus will have support for years. is inconsistent with the proposed concerns and needs, lessening the OEM 74. In its comments intended to decree. This means that Microsoft interest in carrying the rival support the notion of an unbundled cannot offer discounts on Windows that middleware. Further, the critics claim operating system, SBC unintentionally are tied to OEMs foregoing such options the availability of the commingled discredits this proposal. In referring to as installing non-Microsoft icons Microsoft Middleware code will further the problem of pricing an unbundled pursuant to Section III.C, or setting encourage ISVs to write applications to version of Windows, SBC states: defaults, or removing Microsoft Microsoft products rather than to Non- Microsoft Middleware.31 Thus, these Several such mechanisms are possible. The Middleware Products pursuant to Final Judgment provided that pricing be Section III.H. For instance, Microsoft commenting economists have urged the guided based on bytes of code. . . .. SBC cannot set the price of Windows at $500 DOJ to require the unbundling of believes that it would be preferable to Microsoft Middleware from Windows but offer a cash discount of $450 if an allocate costs between the operating system Operating System Products. and the removed middleware based on OEM sets some Microsoft Middleware 73. However, on closer inspection, the measurement of ‘‘function point code.’’ ... Product as the default. Alternatively, requirement to have an unbundled Alternatively, SBC supports the use of a should Microsoft offer a direct payment operating system is highly regulatory pricing mechanism based on the fully based on the level of support for the and is likely to lead to more litigation. allocated product development costs for the Microsoft Middleware Product, this For example, to determine the operating system product and middleware would be a case of preferential products in questions. (See Comments of SBC appropriate discount for the unbundled at 143). treatment within the meaning of Section operating system, the general approach III.G, so that the OEM could not give would necessarily involve some In this revealing passage, SBC makes it Microsoft preferential status more than estimate of the costs of the Microsoft clear that because of the numerous and fifty percent of the OEM shipments. Middleware Products that are to be subtle common costs incurred in IV. Issues Not Addressed by the removed from the bundled version. software development, each interested Proposed Decree Such estimates, however, are likely to party would have wide scope to select be arbitrary and complex to calculate. and litigate for the (arbitrary) pricing 70. Many of the parties publicly This is because software development mechanism that favored it the most. commenting about asserted loopholes in efforts involve substantial shared costs 75. In any case, it appears to be true the proposed decree also have been between projects and benefit from that many applications on the desktop critical of claimed limitations to the common overhead expenditures. For are not paid for by the OEM or (initially) 29 remedy achieved by the settlement. In example, suppose that a given server is by the end user. Indeed, all three of the this section, I address the main used for ten development projects, both current major Instant Messaging suggestions for additional remedies middleware and non-middleware; the products are available without charge. I discussed by these commentators. cost of this server would have to be am aware of several instances in which A. Unbundling of Microsoft Middleware allocated between projects. But such third-party software applications are From the OS. cost allocation rules are inherently included by OEMs in their PC offerings, even though similar functionality is 71. An issue raised in this case is that, 30 See, e.g., Arrow Decl. at ¶ 26. bundled by Microsoft in Windows XP. if Microsoft proceeds to bundle 31 Arrow asserts that permitting OEMs to remove For example, Dell Computer offers application software with the OS, an Microsoft Middleware icons but not the underlying photo imaging and CD ‘‘burning’’ available ‘‘stripped down’’ version of code would further undermine OEM incentives to software with Microsoft XP Home the OS without the application in carry Non-Microsoft Middleware. (See Arrow Decl. at ¶ 37.) Litan et al. at 44 claim that permitted Edition-based PCs even though XP commingling of code will be fatal to the proposed 29 See generally Stiglitz and Furman Decl.; decree by ensuring universal distribution of 32 See, e.g., William J. Baumol, Michael F. Koehn, Comment of Robert E. Litan, Roger D. Noll, and Microsoft Middleware code, which when compared and Robert D. Willing (1987), ‘‘How Arbitrary is William D. Nordhaus on the Revised Proposed to partial distibution of Non-Microsoft Middleware ‘Arbitary’?—or Toward the Deserved Demise of Full Final Judgment (hereinafter ‘‘Litan et al.’’) Arrow code will encourage continued enhancement of the Cost Allocation,’’ 120 Public Utilities Fortnightly Decl.; and Bresnahan Article. applications barrier to entry. 16–21.
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Home includes similar capabilities.33 as Apple MAC OS and Linux. For intervention is not called for in these Dell includes Sierra Imaging’s Image example, Stiglitz and Furman stated a areas, as is further addressed in the Expert 2000 software on some systems, concern that the proposed decree ‘‘does following assessment of certain specific pre-installing a premium version that is not address any issues relating to the issues raised relating to corresponding available to the end user for 60 days (an pricing, distribution, or porting of Litigating States proposals in these additional fee applies to retain premium Microsoft Office.’’ (Stiglitz and Furman product areas. features after this time limit).34 Clearly, Decl. at 38.) Stiglitz and Furman and Microsoft’s bundling does not eliminate Litan et al. argue that the ‘‘porting’’ of 1. Servers the OEM’s incentive to use such Office is likely to reduce the alternative applications when they are applications barrier to entry (or at least 78. Litan et al. point to the increasing offered under desirable arrangements. reduce Microsoft’s ability to raise them importance of client-server networks Generally in such cases, the business deliberately). (See Stiglitz and Furman and server-based computing and model of an ISV is to provide the Decl. at 42 and Litan et al. Comment at conclude that a new platform entrant software to the OEM for free with hope 71–72.) I agree that this remedy would must not only overcome the application for future fees from Web services (or be a more direct attack on the advantages that Microsoft illegally other services) provided to end users applications barrier to entry. However, obtained in the desk top OS, but must through the software or from potential Office has never been a significant part also provide compatibility with ‘‘servers upgrade revenue when end users desire of the case brought against Microsoft. which are increasingly relying on premium versions of the product. For Where Office has been an issue, it Microsoft’s server operating systems’’ example, RealNetworks is pursuing relates to Microsoft’s efforts to control (see Litan et al. at 30.) This suggestion such a strategy and by August or middleware, such as the ‘‘club’’ used is at variance with the focus of the September 2001 was enjoying usage against Apple to harm Netscape, found present antitrust case, which involves rates approximately twice that of to be anticompetitive by the District Microsoft’s desktop monopoly, not the Windows Media Player. 35 Court and upheld by the Court of server market. In addition, there is no RealNetworks’ momentum has Appeals. (See Opinion at 72–74.) The clear monopoly issue in the server continued despite the fact that a version SRPFJ remedies directed at ensuring market. Microsoft’s share of server of Windows Media Player has been that rival middleware opportunities operating systems has grown from bundled with every version of Windows exist and can be freely pursued should approximately 27 percent in 1996 to 41 since Windows 95. RealNetworks be sufficient in this regard.37 appears to have competed well with percent in 2000. This gain has C. Network Server, Handheld Computer products produced by Microsoft and apparently come at the expense of other and Web Services Issues bundled in Windows.36 PC compatible network software 77. Some commentators would prefer providers (such as Novell), but not at B. Protections Concerning Microsoft the antitrust remedy to extend beyond the expense of competitors likely to be Office Practices middleware and the PC environment to the more relevant factors in the future.38 76. Several commentators suggest it is cover such emerging product areas as For example, according to a 1999 necessary to require Microsoft to ‘‘port’’ servers, handheld devices, and Web estimate issued by the International Office to other operating systems, such services to insure Microsoft does not Data Corporation (‘‘IDC’’), Linux’s server extend its monopoly to dominate share more than doubled in 1998 to 33 Dell systems shipped with CD–RW capability additional markets and erect new reach 17.2 percent.39 More recently, IDC come with Roxio Easy CD Creator, a CD burner barriers to entry. (See Stiglitz and software product. A recent article in Computer has reported that Linux’s worldwide Shopper addresses Windows XP’s CD mastering Furman Decl. at 38–39; Comments of market share in 2000 of new and capabilities. See Computer Shopper, Feb. 2002, at SBC Communications Inc. (‘‘SBC’’) at upgraded operating systems for servers 131. Another article—‘‘Windows XP Tip: My 42–43; and Arrow Decl. at ¶¶ 55, 68– had climbed to 27 percent, ranking it Pictures Folder,’’ TechTV, Oct. 26, 2001—reviews 70.) Arrow, for instance, suggests that the photo managing capabilities Microsoft has second behind Microsoft’s share of 41 end users will access the Internet with bundled into XP. Microsoft also has a separate percent.40 Litan et al. acknowledge that server and handheld devices, and he product, Microsoft Picture It 2002, that provides ‘‘the Linux OS has made significant special effect and other enhanced photo concludes that the remedy should inroads into the server market,’’ 41 while management capabilities. protect competing server operating 34 Perhaps a more significant example is systems and web services. Given IDC confirms that, excepting Microsoft RealNetworks’ RealOne media player product, and Linux, ‘‘market share declined for comprising RealPlayer and RealJukebox, currently Microsoft’s anticompetitive practices, he packaged by the OEM Sony in a Windows XP Home concludes it is reasonable to require other server systems, including Unix’’ Edition Vaio Notebook system sold in the retail parity in access to APIs, protocols, and channel. In December 2001, it was also announced documentation for interoperability 38 See Stephen Shankland, Linux Growth that Compaq will begin shipping these Underscores Threat to Microsoft, CNET News.com RealNetworks products as default media players in across product areas. (See Arrow Decl. (Feb. 28, 2001); Information Week, p. 86 (Apr. 21, Presario desktop and notebook models designed for at ¶¶ 55, 68–70). These remedies go 1997) (citing 1996 shares as reported by consumers. By mid-2002, compaq will be offering well beyond the scope of the case International Data Corp.). the newest RealOne Player, with a RealOne icon on 39 the desktop and memberships to the RealOne brought against Microsoft (as well as the Steven Brody, IDC Says Linux Likely to Lead subscription services. See EDP’s Weekly It Monitor, findings upheld by the appellate court) OS Growth, SunWorld (Mar. 31, 1999), reproduced Dec. 24, 2001. As discussed elsewhere, Windows and also well beyond the desktop, at http://www.linuxworld.com/linuxworld/lw– XP bundles a similar media player product 1999–03/lw–03–idc.html. (Windows Media Player) in the operating system, where Microsoft has its proven 40 See Elise Ackerman, Despite a Tough Road, and yet these OEMs provide the Non-Microsoft monopoly. Hence, regulatory Linux Has Never Been More Popular, San Jose Middleware product as well. Mercury News (Nov. 25, 2001); Peter Galli, Battle 35 The Wall Street Journal reported (on Sep. 24, 37 In light of the findings in this case overall and Brews Over Linux Server Share, EWEEK (June 10, 2001) August 2001 usage figures: ‘‘28.8 million of the Court of Appeal’s condemnation of 2001), reproduced at http://zdnet.com.com/2102– users accessed multimedia files on the Web in the Microsoft’s conduct toward Apple regarding Office 11–503810.html (citing also Gartner Dataquest RealNetworks format and 13 million did the same in particular, it is hard to imagine Microsoft estimates of Linux as having a share of server in Microsoft’s format’’ (based on Internet attempting the use of the ‘‘club’’ again, let alone a shipments of 6 to 8.6 percent share in third quarter measurement firm Netratings Inc. figures). party that would permit it without threats of 2000). 36 Ibid. litigation and complaints to regulators. 41 Litan et al. at 25.
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over the past year.42 For these reasons, installed, the OEMs are free to meet that However, based on my understanding of I do not believe the server market by demand and are protected from submission of Litan et al., this proposal itself raises any monopoly power issues. retaliation by Microsoft under the SRPFJ is designed to correct a perceived if they do so. Therefore, in my opinion, loophole in the proposed decree. Litan 2. Handheld Computers and Web this ‘‘must carry’’ provision is et al. state: Services disproportionate and will improperly In the absence of this provision, Microsoft 79. Similarly, some commentators are preordain market outcomes. could frequently offer new, slightly modified concerned that Microsoft practices will Furthermore, other platforms or versions of the OS that render the lead to dominance in operating systems products, aided by the SRPFJ, will have middleware based on the predecessor APIs for handheld devices, removing a partial an opportunity to serve as a carrier for unworkable with the new version. threat to at least some Windows-based Java distribution or otherwise provide Middleware developers would be personal computers. This leads them to alternative middleware platforms for discouraged if they knew that Microsoft assert that the proposed decree future application developers. could raise their costs simply by slightly improperly ignores this segment of the revising the operating system code in such a E. Publishing IE Source Code way that requires the middleware to be computer industry. Again, this remedy significantly modified. (Litan et al. at 72.) seeks a penalty outside the scope of the 81. Similarly, critics have suggested case. No findings were found or upheld that the proposed decree should force 84. It is not possible to assert that the relating to Microsoft conduct directed at the open-source licensing of IE in order SRPFJ prevents this from occurring, but handheld devices or handheld to reduce the applications barrier to it seems unlikely that Microsoft would competitors. Further, the Microsoft entry and deny Microsoft one of the find such a strategy profitable. First, it Windows CE operating system has not fruits (i.e., the dominant position of IE) would appear to be difficult for been gaining systematically on of its anticompetitive conduct. (See Microsoft to limit the damage thus competing systems over the last several Stiglitz and Furman at 41–42, and Litan created to threatening middleware years, and there is little reason to divert et al. at 71.) Litan et al. claim that third products. By changing APIs in the the focus of the SRPFJ to this area.43 parties will then ‘‘transform IE into a manner suggested by Litan et al., true independent middleware Microsoft would be requiring both ISVs D. Restoring Java as a Competitive platform,’’ ensuring that alternative and its own developers to rewrite their Threat middleware will be ubiquitous even if code substantially. Moreover, such a 80. Some commentators have the SRPFJ anti-retaliatory and disclosure strategy would be counterproductive for suggested that the proposed decree provisions are not enough to foster such Microsoft because it would serve to should require mandatory distribution an alternative. reduce the applications barrier to entry, of a Sun-compatible Java runtime 82. This claim may well be true, but since the new version of the OS would environment with each copy of open-source licensing of IE will inflict run fewer applications than its Windows (and IE) shipped by Microsoft. economic harm on Microsoft by predecessor. This necessarily implies Critics of the proposed decree have expropriating its intellectual property. that Microsoft and its ISVs would have suggested this provision is appropriate This appears to be either an effort to to rewrite, at least in part, the thousands to attempt to compensate for Sun’s lost collect damages from Microsoft or an of applications available prior to release position and lost momentum as exercise in competition policy well and would have to coordinate the Microsoft deceived developers and outside the confines of an antitrust case. development schedule of these rewrites discouraged distribution and use of If it is an attempt to collect damages with each new release of the operating Sun-compliant Java. (See, e.g., Litan et from Microsoft, then it should be linked system. Microsoft’s own spotty record in al. at 25 and 71.) Stiglitz and Furman to an estimate of the damages caused by meeting and coordinating the release believe this would decrease the Microsoft’s acts. I am not aware that schedules for even one or two major applications barrier to entry. (See such an estimate exists. Moreover, products makes this outcome an Stiglitz and Furman Decl. at 42.) There Microsoft is clearly subject to other unlikely event. is no question that the cross platform punishment outside this case, as 85. It may be that Microsoft would potential of Java was real, but there Netscape has recently filed suit seeking attempt a less extreme version of the exists significant uncertainty as to the treble damages for losses associated Litan et al. scenario, in which only some timing and impact that Java would have with Microsoft’s anticompetitive of the APIs are changed between had absent Microsoft’s unlawful conduct aimed at eliminating Netscape’s versions of Windows. However, there conduct, as discussed in the Findings of browser as a competitive threat. would still exist the problem of limiting the damage to only the middleware that Fact. Furthermore, if there is consumer F. Continued Licensing of the Microsoft regards as threatening. Even demand for PCs that come with JVMs Predecessor Version of an Operating moderate changes in APIs would likely System 42 Computerworld (Feb. 26, 2001). See also lead to large failures of backward Stephen Shankland, Linux Sales Surge Past 83. One proposal made by Litan et al. compatibility in Windows applications. Competitors, CNET News.com (Feb. 9, 2000). is that, whenever Microsoft makes a Thus, to make this strategy work, 43 According to Gartner figures, worldwide major release of a Windows Operating Microsoft would need to reduce the market share for Windows CE has been between 20 percent and 25 percent over the last four years, with System Product, it must continue to number of published APIs by a no significant trend. See Final 1998 Handheld license the predecessor version of the significant amount each year. This Computer Market Results, Gartner Dataquest (May new product at its original price. action would certainly ‘‘discourage’’ 17, 1999); Gartner Dataquest’s Worldwide PDA Possibly, the objective is to limit software developers, as Litan et al. Forecast, Gartner Dataquest (Dec. 11, 2000); and Handheld Computer Shipments Rebound in 4Q01, Microsoft’s ability to have customers suggest, but at the same time it would Gartner Dataquest Alert (Feb. 15, 2002). While upgrade to the new operating system by also discourage ISVs from writing Microsoft is expected to improve this position increasing the price of the predecessor programs for the Windows desktop. subsequent to the introduction of Pocket PC 2002 version. Of course, there is nothing in October 2001, Gartner continues to project IV. Conclusions Windows CE share at no more than 30 percent for inherently anticompetitive about 2002. See Microsoft Aims to Dominate With Pocket inducing customers to upgrade to a new 86. The antitrust remedy in this case PC 2002, Gartner Dataquest (Sep. 10, 2001). major release of an operating system. must focus attention on and fully
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resolve the appellate court finding that comments on the proposed decree. As Professional Experience Microsoft engaged in specific the discussion in Section III March, 1992–Present: John Michael anticompetitive acts to maintain its demonstrates, most of the potential Stuart Centennial Professor of operating system monopoly. In problems raised by the various Economics, University of Texas at developing this remedy, it is necessary commentators are, in fact, not problems Austin. to balance two broad factors. First, the at all, but are met by the SRPFJ. August, 1991–March, 1992: Edward remedy must place constraints on However, at first glance there does Everett Hale Centennial Professor of Microsoft’s current and future behavior appear to exist potential ways in which Economics, University of Texas at so that the unlawful acts stop and do Microsoft could engage in behavior that Austin. not recur, and competitive conditions reduces competition while claiming September, 1983–August, 1991: are restored. However, these constraints nonetheless that it satisfied the Research Manager, Bell should not be so intrusive and complex provisions of the SRPFJ. For example, Communications Research, that they themselves distort market some commentators have alleged Morristown, NJ. Head of Economics outcomes. This potential distortion can Microsoft could (1) sell middleware Research Group. take many forms, but two of the most only as bundled with the operating September 1981–September 1983: important are (1) over-extensive system, (2) set prices for access to its Member of Technical Staff, Bell government regulation of Microsoft that client-server communications protocols Laboratories, Murray Hill, NJ. may result in inefficient rent-seeking by so high that they exclude competition, September 1980–September 1981: Microsoft’s competitors, or (2) and (3) change large numbers of APIs Adviser to the Chairman of the Civil requirements that make Microsoft a less frequently through numerous releases of Aeronautics Board. efficient competitor. Thus, the difficult new operating systems. Although these January 1980–September 1980: task is to create a balanced remedy that strategies may be theoretical Consultant, Civil Aeronautics constrains anticompetitive behavior by possibilities, my analysis shows either Board, Washington, D.C. Microsoft without limiting competition that these acts would be unimportant or September 1978–January 1980: Senior on the merits. that Microsoft would lack the incentive Staff Economist, Council of 87. In my opinion, the SRPFJ achieves to undertake such actions. Economic Advisers, Executive the right balance. By focusing on Office of the President, Washington, Microsoft’s anticompetitive business 90. In sum, in my opinion, the SRPFJ D.C. practices, its provisions eliminate the focuses attention on and fully resolves October 1973–September 1978: Member artificial barriers to entry erected by the appellate court finding that of Technical Staff, Bell Microsoft that are the source of Microsoft engaged in a series of Laboratories, Holmdel, NJ. competitive concern. The provisions in anticompetitive acts to maintain its OS the proposed decree are likely to deter monopoly. The SRPFJ contains Teaching provisions that will stop the offending conduct that (1) seeks exclusivity or (2) September 1991–Present: Introductory is backed by retaliatory threats. The conduct, prevent its recurrence, and restore competitive conditions. In my Microeconomics, undergraduate SRPFJ also aims to restore and enhance and graduate Industrial competitive conditions by removing opinion, in light of the above, the SRPFJ is in the public interest. Organization. technical barriers to fair competition Fall 1989: Visiting Lecturer, Woodrow between Microsoft and rival middleware * * * * * Wilson School of Public and suppliers. From an economic I declare under penalty of perjury that the International Affairs, Princeton standpoint, middleware is important foregoing is true and accurate. Executed on February 27, 2002 in Austin, Texas. University. Graduate course in because it can expose APIs and has the regulation and public choice. potential to become an applications David S. Sibley. September 1983–December 1983: platform distinct from the Windows OS. Appendix A Adjunct Lecturer in Economics, The SRPFJ does not attempt to University of Pennsylvania. Curriculum Vitae of Professor David S. preordain market outcomes or to Graduate course on regulation. weaken Microsoft as a legitimate Sibley competitor. Publications 88. I have considered other proposals David S. Sibley, Department of A. Journal Articles carefully, including that of the Litigating Economics, University of Texas at States. However, in my view, these Austin, Austin, TX 78712, Phone: ‘‘Pricing Access to a Monopoly Input,’’ proposals fail to achieve the right (512) 475–8545, Fax: (512) 471–8899. (with M. J. Doane, M. A. Williams, balance. In an attempt to erase all Education and S. Tsai), Journal of Public theoretical ways in which Microsoft Economic Theory, 2001 could harm competition, these 1973 Ph.D. in Economics, Yale (forthcoming). alternative proposals tend to require a University ‘‘Exclusionary Restrictions in U.S. vs. Microsoft,’’ (with M.J. Doane and A. complex regulatory program that is 1969 B. A. in Economics, Stanford Nayyar), UWLA Law Review, 2001. certain to be slow-moving, litigious, and University vulnerable to manipulation by ‘‘Raising Rivals’ Costs: The Entry of a Microsoft’s competitors. For example, Teaching Fields Upstream Monopolist into the provision for how to price the Downstream Markets,’’ (with D. L. proposed unbundled operating system Industrial Organization, Economics of Weisman), Information, Economics invites arguments over cost allocations, Information and Policy 10:451–470. and other ratemaking issues, that have Research Fields ‘‘Having Your Cake—How to Preserve the potential to slow down the Universal-Service Cross Subsidies competitive process. Economics of asymmetric information, While Facilitating Competitive 89. Finally, in analyzing the SRPFJ, I telecommunications policy, public Entry,’’ (with M.J. Doane and M.A. have had the benefit of reviewing a utility pricing, models of firm’s Williams), Yale Journal on number of thoughtful and probing internal organization. Regulation, Summer 1999.
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‘‘The Competitive Incentives of ‘‘Efficiency and Competition in the ‘‘Deregulation and the Economic Theory Vertically-Integrated Local Airline Industry,’’ (with D.R. of Regulation,’’ (with W.W. Exchange Carriers: An Economic Graham and D.P. Kaplan), Bell Sharkey), in Proceedings of the and Policy Analysis,’’ (with D.L. Journal of Economics, Spring 1983. Eleventh Annual Weisman), Journal of Policy ‘‘Optimal Nonlinear Pricing for Telecommunications Policy Analysis and Management, Winter Multiproduct Monopolies,’’ (with Research Conference, 1983. 1998. L.J. Mirman), Bell Journal of ‘‘Antitrust Policy in the Airline ‘‘Multiproduct Nonlinear Prices with Economics, Autumn 1980. Industry,’’ (with S.B. Jollie), Civil Multiple Taste Characteristics,’’ ‘‘A Dynamic Model of the Firm with Aeronautics Board, October 1982. (with P. Srinagesh), Rand Journal of Stochastic Regulatory Review,’’ Transmitted by the CAB to Congress Economics, Winter 1997. (with V.S. Bawa), International as part of proposed sunset ‘‘Optional Two-Part Tariffs: Toward Economic Review, October 1980. legislation. More Effective Price Discounting,’’ ‘‘Public Utility Pricing Under Risk: The ‘‘Optimal Non-Uniform Pricing for (with R. Rudkin) in Public Utilities Case of Self-Rationing,’’ (with J.C. Electricity: Some Illustrative Fortnightly, July 1, 1997. Panzar), American Economic Examples,’’ (with R.W. Koenker), in ‘‘A Bertrand Model of Pricing and Review, December 1978. Sichel (ed.) Public Utility Entry,’’ (with W.W. Sharkey), ‘‘Regulatory Commission Behavior: Ratemaking in an Energy-Conscious Economics Letters, 1993. Myopic vs. Forward-Looking,’’ Environment, Praeger, 1979. ‘‘Regulatory Incentive Policies and (with E.E. Bailey), Economic ‘‘The Dynamics of Price Adjustment in Abuse,’’ (with D.M. Sappington), Inquiry, June 1978. Regulated Industries,’’ (with E.E. Journal of Regulatory Economics, ‘‘Optimal Decisions with Estimation Bailey), in Proceedings of IEEE June 1993. Risk,’’ (with L.C. Rafsky, R.W. Klein Conference on Systems Control, ‘‘Optimal Non-linear Pricing With and R.D. Willig), Econometrica, 1974. Regulatory Preference over November 1977. C. Books: Customer Types,’’ (with W.W. ‘‘The Demand for Labor in a Dynamic Sharkery), Journal of Public Co-editor of Telecommunications Model of the Firm,’’ Journal of Demand Analysis: An Integrated Economics, February 1993. Economic Theory, October 1977. ‘‘Ex Ante vs. Post Pricing: Optional View, North-Holland, 1989. ‘‘Optimal Foreign Borrowing with Calling Plans vs. Tapered Tariffs,’’ The Theory of Public Utility Pricing, Export Revenue Uncertainty,’’ (with (with K. Clay and P. Srinagesh), (with S.J. Brown), Cambridge J.L. McCabe), International Journal of Regulatory Economics, University Press, 1986. Second Economic Review, October 1976. 1992. printing 1986. Third printing 1989. ‘‘Permanent and Transitory Income ‘‘Thoughts on Nonlinear Pricing Under Revised edition planned. Effects in a Model of Optimal Price Cap Regulation,’’ (with D.M. Consumption with Wage Income Current Research Areas Sappington), Rand Journal of Uncertainty,’’ Journal of Economic Economics, Spring 1992. Telecommunications policy, especially ‘‘Compensation and Transfer Pricing in Theory, August 1975. access pricing and optional tariff a Principal-Agent Model,’’ (with ‘‘A Note on the Concavity of the Mean- design; Design of incentive D.E. Besanko), International Variance Problem,’’ Review of mechanisms; Organizational slack/ Economic Review, February 1991. Economic Studies, July 1975. informational asymmetries. ‘‘Regulating Without Cost Information: B. Reports and Articles in Conference Other Professional Activities Some Further Thoughts,’’ (with Volumes, and Other Publications Associate Editor of the Journal of D.M. Sappington), International ‘‘U.S. v. Microsoft: Were the Regulatory Economics. Economic Review, November 1990. Consultant to the Governor of New ‘‘Asymmetric Information, Incentives Exclusionary Practices Jersey’s Task Force on Market- and Price Cap Regulation,’’ Rand Anticompetitive’’ (with Michael J. Doane), Computer Industry Based Pricing of Electricity. Journal of Economics, Fall 1989. Referee for National Science Foundation ‘‘Optimal Two Part Tariffs for Inputs,’’ Newsletter, American Bar Association, Spring 2000, Vol. 5., and numerous professional (with J.C. Panzar), Journal of Public journals. Economics, November 1989. No. 1. ‘‘Optional Tariffs for Access in the Consulting for Bell operating companies ‘‘Regulating Without Cost Information: on a variety of pricing and public The Incremental Surplus Subsidy FCC’s Price Cap Proposal,’’ (with D.P. Heyman and W.E. Taylor), in policy issues. Scheme,’’ (with D.M. Sappington), Memberships: American Economic International Economic Review, M. Einhorn (ed.), Price Caps and Incentive Regulation in the Association; listed in Who’s Who in May 1989. the East 1990. ‘‘Optimal Consumption, the Interest Telecommunications Industry, Rate and Wage Uncertainty,’’ (with Kluwer, 1990. Response of United States to Public D. Levhari), Economics Letters, Report to the Governor, The Task Force Comments on the Revised Proposed 1986. on Market-Based Pricing of Final Judgment Electricity. Co-authored with D.M. ‘‘Reply to Lipman and Further Results,’’ In the United States District Court for Sappington, Appendix III. International Economic Review, the District of Columbia June 1985. ‘‘An Analysis of Tapered Access Public Utility Pricing Under Risk: A Charges for End Users,’’ (with W.E. United States of America, Plaintiff, v. Generalization,’’ Economics Letters, Taylor, D.P. Heyman and J.M. Microsoft Corporation, Defendant;Response June 1985. Lazorchak), published in the of the United States to Public Comments on the Revised Proposed Final Judgment. ‘‘Optimal Non-Uniform Pricing,’’ (with Proceedings of the Eighteenth M.B. Goldman and H.E. Leland), Annual Williamsburg Conference [Civil Action No. 98–1232 (CKK)] Review of Economic Studies, April on Regulation, H. Treeing (ed.), Next Court Deadline: March 6, 2002; 1984. Michigan State, 1987. Tunney Act Hearing
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Dated: February 27, 2002. 1. The Tunney Act Requires That 3. Section III.C.3 Charles A. James, Entry Of The RPFJ Be ‘‘In the Public 4. Section III.C.4 Assistant Attorney General. Interest’’ 5. Section III.C.5 Deborah P. Majoras, 2. The Court Should Grant Deference 6. Comparison To Litigating States’ Deputy Assistant Attorney General. to the Judgment of the United States Proposal Phillip R. Malone, E. Microsoft’s Compliance With E. Microsoft’s Obligations To Provide Renata B. Hesse, Section 16(g) Add/Remove Functionality And David Blake-Thomas, III. Definitions Automatic Invocations (RPFJ § III.H) Paula L. Blizzard, A. Definition Of ‘‘ISV’’ (RPFJ § VI.I) 1. Obligation To Provide Add/Remove Kenneth W. Gaul, B. ‘‘Microsoft Middleware’’ (RPFJ Functionality Adam D. Hirsh, § VI.J) 2. Obligation To Provide Automatic Jacqueline S. Kelley, 1. Distributed Separately To Update A Invocations And Exceptions Steven J. Mintz, Windows Operating System a. Obligations To Provide Automatic Barbara Nelson, Product Invocations David Seidman, 2. Trademarked Or A Major Version b. Exceptions To The Obligation To David P. Wales, Of Any Microsoft Middleware Provide Automatic Invocations Attorneys. Product 3. Microsoft’s Ability To Change Philip S. Beck, 3. Same Or Substantially Similar Configurations Special Trial Counsel. Functionality 4. Timing Issues U.S. Department of Justice, 4. Includes At Least The Software F. Commingling Of Operating System Antitrust Division, Code That Controls Most Or All Of Code And Middleware Code 601 D Street NW., Suite 1200 The User Interface V. Retaliation Against ISVs or IHVs Washington, DC 20530–0001 5. Major Updates (RPFJ § III.F) (202) 514–8276. C. ‘‘Microsoft Middleware Product’’ A. Comments On Section III.F.1 Table of Contents (RPFJ § VI.K) B. Comments On Section III.F.2 D. ‘‘Non-Microsoft Middleware’’ C. Comments On Section III.F.3 Introduction (RPFJ § VI.M) VI. Exclusionary Agreements (RPFJ I. General Comments E. ‘‘Non-Microsoft Middleware § III.G) A. Should Never Have Brought Suit Product’’ (RPFJ § VI.N) A. Omissions B. Allegations Of Political Influence F. ‘‘Personal Computer’’ (RPFJ § VI.Q) B. Exemptions C. Removing The ‘‘Fruits’’ Of G. ‘‘Trademarked’’ (RPFJ § VI.T) VII. Disclosure Provisions (RPFJ §§ III.D, Microsoft’s Anticompetitive H. ‘‘Windows Operating System III.E) Conduct Product’’ (RPFJ § VI.U) A. Disclosure Of APIs (RPFJ § III.D) D. The Litigating States’ Proposal 1. Microsoft’s Discretion 1. Product Issues E. Fines 2. Prior Windows Versions a. Microsoft’s Ability To Manipulate F. Senate Hearing 3. Operating Systems for Other The Definitions To Avoid II. Tunney Act Issues Devices Disclosure A. Adequacy Of The United States’ IV. OEM Provisions b. Products Other Than Microsoft Competitive Impact Statement A. Overreliance On OEMs Middleware 1. The CIS Complies With The B. Non-Retaliation (RPFJ § III.A) c. Products Other Than Windows Requirements Of The Tunney Act 1. Section III.A Is Sufficiently Broad Operating System Products 2. The CIS Recites ‘‘A Description 2. Section III.A Properly Allows 2. API Issues And Evaluation Of Alternatives To Microsoft To Enforce Intellectual a. Definition Of ‘‘API’’ Such Proposal Actually Considered Property Rights b. Definition Of ‘‘Documentation’’ By The United States’’ 3. Section III.A Protects OEMs From c. Source Code Access B. The United States Fully Complied Arbitrary Termination Of Their d. Intellectual Property Issues With All Tunney Act Requirements Licenses 3. Timing Issues Regarding Determinative 4. Requiring Proof Of Knowledge Is a. First Disclosures: Windows XP Documents Necessary And Can Be Met Service Pack 1 Or No Later Than C. Timing And Process Of Hearing 5. Microsoft’s Permitted Use Of November 2002 1. The Court Has Discretion To ‘‘Consideration’’ Is Appropriate b. Triggered By New Version Of Determine The Nature And Format 6. The RPFJ Uses The Common Microsoft Middleware: Last Major Of The Tunney Act Proceedings Language Definition Of ‘‘Retaliate’’ Beta Test Release 2. An Evidentiary Hearing Is Not C. Uniform Terms (RPFJ § III.B) c. Triggered By New Version Of Required In This Case 1. Top Twenty OEMs Windows Operating System 3. The Court Is Not Required To 2. MDAs Or Other Discounts Product: Timely Manner (RPFJ Permit Any Third-Party 3. OEMs Should Be Able To Negotiate § VI.R) Participation 4. Volume Discounts B. Disclosure Of Communications 4. Allowing Third-Party Participation 5. Termination—Cause, Materiality, Protocols (RPFJ § III.E) Through An Evidentiary Hearing And Notice 1. Product Issues Would Unnecessarily Delay And 6. Servers Or Office a. Windows Operating System Complicate These Proceedings 7. Key License Terms Product 5. The Tunney Act Proceedings 8. Prohibition On Enforcing b. Microsoft Server Operating System Should Not Be Held In Conjunction Agreements Inconsistent With The Product With, Or Rely Upon Evidence From, RPFJ c. Non-Microsoft Client Operating The Litigating States’ Remedy D. Freedom Of OEMs To Configure Systems Hearing Desktop (RPFJ § III.C) d. Server-To-Server Communications D. Standard Of Review Under The 1. Section III.C.1 e. Other Devices Tunney Act 2. Section III.C.2 2. Communications Protocols,
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Disclosure And Licensing of the United States to Public Comments on period, the United States received a. Definition Of ‘‘Communications the Revised Proposed Final Judgment. 32,329 public comments. This was by Protocols’’ (RPFJ § VI.B) [Civil Action No. 98–1232 (CKK)] far the most comments ever received on b. The Meaning Of ‘‘Interoperate’’ Next Court Deadline: March 6, 2002; any proposed decree under the Tunney c. License For Use Tunney Act Hearing. Act. By comparison, the number of d. The Meaning Of ‘‘Natively’’ 1. Pursuant to the requirements of the comments received on the RPFJ vastly e. Licensing On ‘‘Reasonable And Antitrust Procedures and Penalties Act exceeds the number received in the Non-Discriminatory Terms’’ (‘‘Tunney Act’’), 15 U.S.C. 16(b)–(h), the AT&T case—which completely 3. Timing Issues United States hereby responds to the restructured the telecommunications C. Compulsory Licensing (RPFJ § III.I) public comments received regarding the industry—by more than an order of 1. Reasonable And Non- Revised Proposed Final Judgment (RPFJ) magnitude. United States v. AT&T, 552 Discriminatory Royalty in this case. F. Supp. 131, 135 (D.D.C. 1982) (‘‘over 2. Restriction On Sublicenses 2. Simultaneously with this Response, six hundred documents’’), aff’d mem. 3. Cross-Licenses the parties have filed a Second Revised sub. nom. Maryland v. United States, 4. Scope Of Intellectual Property Proposed Final Judgment (SRPFJ), 460 U.S. 1001 (1983); 47 FR 21214–24 Rights which includes modifications to which (1982) (listing name and address of each 5. Comparison To Litigating States’ the United States, Microsoft, and the Proposal commentor on proposed AT&T decree, Settling States have agreed.1 Because with length of comment in pages).5 D. Security Carve-Outs (RPFJ § III.J) every comment addresses the RPFJ, this 1. Limitation On Obligations To 5. The large volume of comments in Response is couched in terms of, and Document, Disclose Or License this case reflects, in part, the generally refers to, the proposed decree 2. Conditioning Licenses On Certain widespread use of electronic mail to before the modifications (i.e., the RPFJ), Requirements submit comments (approximately 90– E. Disclosure Of File Formats addressing the modifications of the 95% of the comments were submitted VIII. Enforcement SRPFJ only as required. However, the via e-mail, as opposed to approximately A. The Enforcement Powers Of decree the Court should enter is the 5–10% via facsimile and fewer than 1% Plaintiffs And The Court modified version of the RPFJ—that is, via hand delivery) and the fact that B. The Technical Committee the SRPFJ. various groups, both opposed to and in 1. Technical Committee Powers Introduction 2 favor of entry of the RPFJ, placed 2. Composition And Control Of The 3. The United States and Microsoft 3 solicitations on their websites or sent Technical Committee mass electronic mailings urging C. Internal Compliance filed the RPFJ on November 6, 2001, thereby proposing to end on mutually submission of comments on the D. Voluntary Dispute Resolution proposed settlement.6 E. Proposals For A Special Master agreeable terms litigation that began on May 18, 1998. Pursuant to the 6. Approximately 1,500 comments F. Proposed Reporting Requirements were unrelated to either the United IX. Termination requirements of the Tunney Act, the States v. Microsoft case generally or the X. Comparing the RPFJ to the IFJ United States filed its Competitive A. Structural Relief vs. Conduct Impact Statement (CIS) on November RPFJ specifically, or were merely Restrictions 15, 2001, and published the RPFJ, CIS, duplicate copies of comments by the B. Anti-Tying Provisions and a description of the procedures for same individual or entity. A small C. Intentionally Disabling Rival submitting public comments on the number of these submissions are simply Software proposed decree in the Federal Register advertisements or, in at least one case, D. Agreements Limiting Competition on November 28, 2001. 66 FR 59452 pornography. The United States has not XI. Other Proposed Remedies (2001). The United States also posted filed these comments with the Court A. Restrictions On Software information on those procedures on the and does not intend to publish them. Development Tools Department of Justice website. See Approximately 1700 comments relate to B. Java Must-Carry
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7. Approximately 22,750 comments every comment individually, it is not and thorough investigation into specific express an overall view of the RPFJ. Of responding to comments on an Microsoft practices that unlawfully these, roughly 5,700 do not, for individual comment-by-comment basis; restrained competition in the PC example, attempt to analyze the rather, it summarizes the issues raised operating system market. This substance of the RPFJ, do not address by specific comments and provides investigation led the United States to any of its specific provisions, and do not references for locating these issues in conclude that Microsoft undertook describe any particular strengths or specific comments. On each issue, the several illegal actions to protect its shortcomings of it.8 Approximately Response refers to some of the market position. Both the District 16,700 comments can be characterized comments that raised it; 12 other Court’s decision and the unanimous, en as containing some generally limited comments may raise the same issue but banc Court of Appeals’ decision analysis of the RPFJ. These comments are not identified in this Response. ‘‘uphold[ing] the District Court’s finding typically are one-to-two pages and of monopoly power in its entirety,’’ and contain limited discussion of issues I. General Comments affirming in part ‘‘the District Court’s related to the RPFJ. 9 The remaining 350 A. Should Never Have Brought Suit judgment that Microsoft violated § 2 of comments expressing an overall view the Sherman Act by employing can be characterized as containing a 10. Many comments complain about anticompetitive means to maintain a degree of detailed substance concerning the legitimacy of the charges brought monopoly in the operating system the RPFJ. These comments range from against Microsoft. These comments market,’’ United States v. Microsoft one- or two-page discussions of some typically characterize the prosecution of Corp., 253 F.3d 34, 51, 46 (D.C. Cir. aspect of the RPFJ, to 100-plus-page, Microsoft as an unjustified assault upon 2001) (en banc) (per curiam) detailed discussions of numerous of its a successful business, and often refer to (‘‘Microsoft’’), support the United States’ provisions or alternatives. 10 There is the benefits Microsoft has generated for conclusion. substantial overlap among these more the economy and shareholders. These B. Allegations of Political Influence substantial comments in terms of the comments object to the RPFJ as 13 issues and arguments that they address. unnecessary relief. 13. Certain commentors allege that the Of these roughly 350 comments, the 11. Comments challenging the RPFJ resulted from improper influence United States characterized 47 as validity of the United States’ case, or exerted by Microsoft on the United ‘‘detailed’’ comments based on their alleging that it should not have been States. They generally base their length and the detail with which they brought, are challenges to the initial allegations on the fact and size of analyze significant issues relating to the exercise of the United States’ Microsoft’s political contributions and RPFJ. 11 There is also considerable prosecutorial discretion and are outside assert that, because the RPFJ does not duplication of the issues addressed and the scope of this proceeding. The contain the relief that the commentors arguments raised among these purpose of this proceeding is not to prefer, the RPFJ must be the result of ‘‘detailed’’ comments. evaluate the merits of the United States’ malfeasance or corruption on the part of 8. Of the total comments received, case. A Tunney Act proceeding is not an the United States. 14 roughly 10,000 are in favor of or urge opportunity for a ‘‘de novo 14. The commentors’ allegations, entry of the RPFJ, roughly 12,500 are determination of facts and issues,’’ but however, lack any factual support. opposed, and roughly 9,500 do not rather ‘‘to determine whether the Commentors contend that Microsoft directly express a view in favor of or Department of Justice’s explanations extensively lobbied both the legislative against entry. For example, a significant were reasonable under the and executive branches of the federal number of comments contain opinions circumstances’’ because ‘‘[t]he balancing government to bring an end to the concerning Microsoft generally (e.g., ‘‘I of competing social and political litigation. 15 By citation to Microsoft’s hate Microsoft’’), or concerning this interests affected by a proposed antitrust lobbying and political contributions, antitrust case generally (e.g., ‘‘This case decree must be left, in the first instance, commentors apparently seek to raise an should never have been brought’’), but to the discretion of the Attorney inference of impropriety on the part of do not state whether they support or General.’’ United States v. Western Elec. representatives of the Antitrust Division oppose entry of the RPFJ. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993) of the Department of Justice. 9. In the remainder of this Response, (citations omitted). Courts consistently Commentors suggest that these the United States responds to the have refused to consider ‘‘contentions representatives somehow were various types of comments according to going to the merits of the underlying corrupted by Microsoft’s general the issues that the comments raise. For claims and defenses.’’ United States v. lobbying activities. example, we respond to comments that Bechtel, 648 F.2d 660, 666 (9th Cir. 15. Allegations that the substance of raise issues relating to the disclosure 1981). Accordingly, those comments the RPFJ reflects any kind of political provisions of the RPFJ (Sections III.D seeking to challenge the legitimacy of corruption are meritless. Just as a judge and III.E) in one section, and we the United States’ underlying case should not accept conclusory respond to comments that suggest that against Microsoft are beyond the allegations of bias or prejudice based the United States should have pursued purview of appropriate Tunney Act upon mere opinions or rumors as the a structural remedy against Microsoft in inquiry. basis for disqualification, 16 so too must another section. Although the United 12. Nevertheless, the United States States has reviewed and categorized notes in response to these comments 14 Relpromax 3–4, 18, 20–22, Ex. 10; CCIA 18–34 that, prior to filing the Complaint, the & Decl. Edward Roeder; ProComp 78–86. 15 Commentors also allege that Microsoft has 8 Reid; Karkess. United States conducted an extensive failed adequately to disclose lobbying contacts as 9 Becker; Gallagher. required by the Tunney Act, 15 U.S.C. § 16(g). 10 Daly; Love. 12 Thus, unless otherwise noted, citations to Pursuant to the Court’s Order dated February 13, 11 The United States provided copies of these specific comments merely are representative of 2002, Microsoft will respond to allegations of detailed comments to the Court on February 14, comments on that issue, and should not be deficiencies in its compliance with § 16(g). 2002, and posted copies of these comments on the interpreted as an indication that other comments 16 See, e.g., United States v. Haldeman, 559 F.2d Department of Justice website on February 15, 2002. were not reviewed. 31, 134 (D.C. Cir. 1976); In re United States, 666 These comments may be found at
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allegations of corruption on the part of was Microsoft’s elimination of the middleware to obtain necessary support, Department of Justice attorneys be ability of potentially threatening promotion, and distribution. supported by something more than middleware to undermine the 20. The second group of commentors 17 supposition and innuendo. Actual applications barrier to entry without sets forth a variety of different views evidence of corruption is required in interference from Microsoft. The RPFJ regarding what the ‘‘fruit of the illegal order to support rejection of a consent addresses and remedies precisely this conduct’’ is in this case. Many of these decree. Mere speculation and conjecture issue. comments rely on assertions that exceed are insufficient. Because there is simply 18. Criticism of the RPFJ’s alleged the scope of either the liability findings no credible evidence of corruption in failure to remove the fruits of in this case, or the theory of the case this case, there are no specific facts to Microsoft’s unlawful conduct falls into generally, or both. For example, some which the United States can respond on two general categories: (1) comments comments define the fruit as Microsoft’s this issue. that define ‘‘fruits’’ consistently with 16. More generally, the comments on enduring monopoly in its Windows the Court of Appeals’ ruling, as this issue ignore the indisputably operating system and suggest that an described in the preceding paragraph, neutral influences on the settlement appropriate remedy must directly attack but claim that the RPFJ does not restore 24 process, such as (1) the decision of nine the operating system monopoly. But competitive conditions sufficiently that independent States to join the the United States never alleged in this middleware has the potential to flourish settlement, (2) the decision by the Court case that Microsoft illegally acquired its without risk of interference from of Appeals in Microsoft, which operating system monopoly. And significantly narrowed the scope of Microsoft; and (2) comments whose neither the District Court nor the Court Microsoft’s potential liability and cast definition of ‘‘fruits’’ is inconsistent of Appeals adopted the view that substantial doubt on the legal viability with either the claims alleged in this Microsoft ‘‘would have lost its position of potential remedies, particularly case, the Court of Appeals’ decision, or in the OS market but for its divestiture, and (3) the interest in both. anticompetitive behavior.’’ Microsoft, obtaining prompt implementation of 19. The first group argues that the 253 F.3d at 107; see also United States remedies without the delay inherent in RPFJ permits Microsoft to retain the v. Microsoft Corp., 84 F. Supp. 2d 9, 111 further litigation and appeals. fruits of its illegal conduct by allowing at ¶ 411 (D.D.C. 1999) (‘‘Findings of it ‘‘free rein to squash nascent, albeit Fact’’) (‘‘There is insufficient evidence C. Removing the ‘‘Fruits’’ of Microsoft’s unproven competitors at will,’’ 20 and to find that, absent Microsoft’s actions, Anticompetitive Conduct does not sufficiently remove the Navigator and Java already would have 17. Certain public comments suggest applications barrier to entry.21 In the ignited genuine competition in the that the RPFJ does not sufficiently phrasing of one commentor, as a result market for Intel-compatible PC remove the ‘‘fruits’’ of Microsoft’s illegal of its anticompetitive conduct toward operating systems.’’). In keeping with conduct, 18 and that the decree must go Netscape, Microsoft allegedly is left the original framework of the case and further than simply barring Microsoft with the freedom from a competitive the Court of Appeals’ decision, the from further bad behavior. 19 Such environment in which threats could be United States believes that there is no criticism is not well-taken. As the nurtured.22 As described in detail below basis for imposing a remedy that seeks United States previously stated in the (see Sections III–VII), however, the RPFJ to strip Microsoft of its position in the CIS (at 24), the restoration of protects the ability of middleware to operating system market. competition is the ‘‘key to the whole compete by imposing a variety of 21. Other commentors define the question of an antitrust remedy,’’ United affirmative duties and conditions on ‘‘unlawful fruit’’ as Microsoft’s control States v. E.I. du Pont de Nemours & Co., Microsoft. The RPFJ is devised to ensure of the browser market and contend that 366 U.S. 316, 326 (1961). Competition that middleware developers have access was injured in this case principally any remedy must prevent Microsoft to the necessary information—e.g., from using similar conduct to gain because Microsoft’s illegal conduct through disclosure of APIs and server maintained the applications barrier to control of services that rely on Internet communications protocols—to create Explorer.25 Other criticism is directed entry into the PC operating system middleware that can compete with market by thwarting the success of toward the decree’s failure to ban Microsoft’s products in a meaningful contractual tying.26 A number of middleware that had the potential to way.23 It also restricts Microsoft’s erode that barrier. Thus, the key to the commentors, including the Litigating conduct toward OEMs and others, and States, propose that Microsoft be proper remedy in this case is to end thus opens the door for competing Microsoft’s restrictions on potentially required to offer open source licenses to threatening middleware, prevent it from Internet Explorer source code without 20 ProComp 29–30 (quoting Microsoft, 253 F.3d at royalty.27 These commentors claim that, hampering similar nascent threats in the 79). Similarly, CCIA complains that one of the chief future, and restore the competitive advantages gained by Microsoft was the ability to because Microsoft’s intent in offering conditions created by similar control the browser, not just as a source of a Internet Explorer as a free product was middleware threats. In this context, the alternate OS-neutral APIs, but specifically as the central to its unlawful conduct, the gateway to Internet computing. As such, this open source remedy may be appropriate fruit of Microsoft’s unlawful conduct commentor defines the fruit as the ‘‘suppressed development of competitive threats,’’ but criticizes to restore competition and deprive ‘‘rumors, innuendos, and erroneous information the decree as not addressing this concern. Microsoft of the fruits of its unlawful published as fact in the newspapers’’); McClelland 21 Kegel 3. conduct.28 Similarly, certain v. Gronwaldt, 942 F. Supp. 297 (E.D. Tex. 1996). 22 Catavault 9. commentors propose that Microsoft be 17 Lobbying activities by the defendant, even 23 Certain comments assert that erosion of the though ‘‘intensive and gross,’’ are insufficient to applications barrier to entry would be 24 Sun 6. establish corruption on the part of the United accomplished better through mandatory support of 25 States. See, e.g., United States v. Associated Milk cross-platform Java. Litigating States 17; SIIA 49; SILA 7–8; CCIA 42; Litigating States’ Proposal Producers, 394 F. Supp. 29, 39–40 (W.D. Mo. 1975), Nader/Love 6. For a discussion regarding the § 17. aff’d, 534 F.2d 113 (8th Cir. 1976). United States’ decision to promote opportunities for 26 AOL 31–32. 18 AOL 31; Henderson 10; Gifford 8; Litan 58–59; all middleware, rather than a particular competitor, 27 CCC 19–20; Harris 15; Litigating States’ RealNetworks 10; SIIA 7–8, 44–48. see the discussion of comments that propose a ‘‘Java Proposal 16–17 (§ 12); PFF 30; SSI 19, 45. 19 Nader/Love 6. Must Carry’’ provision, at ¶¶ 428–29 below. 28 CCC 19–20.
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required to port Internet Explorer to States’ primary consideration when property’’). Moreover, the goals of the other operating systems.29 crafting the RPFJ was to focus on the remedy in this case are to enjoin the 22. Stripping Microsoft of its market practices engaged in by Microsoft that unlawful conduct, prevent its position in the browser market or the Court of Appeals found unlawful. recurrence, and restore competitive banning contractual tying, however, are As explained in the CIS, elsewhere in conditions in the market affected by remedies that are not warranted on the this Response, and in the U.S. Microsoft’s unlawful conduct. See Nat’l existing record. This case was not a Memorandum, the United States Soc’y of Prof’l Eng’rs v. United States, monopoly leveraging case, and the believes that the RPFJ takes the correct 435 U.S. 679, 697 (1978); United States Court of Appeals reversed the District approach toward addressing the v. E.I. du Pont de Nemours & Co., 366 Court’s judgment as it related to anticompetitive conduct found by the U.S. 316, 326 (1961). The RPFJ attempted monopolization of the Court of Appeals, preventing its accomplishes these goals. By contrast, browser market, and vacated and recurrence, and restoring lost punishment is not a valid goal.37 remanded the District Court’s judgment competitive conditions in the F. Senate Hearing on the tying claim. Microsoft, 253 F.3d marketplace. 33 at 46. The remedy in this case must be 25. Where relevant, we have 28. The Senate Judiciary Committee evaluated in terms of the viable claims addressed the differences between the submitted a comment consisting of the remaining after the Court of Appeals’ Litigating States’ proposals and their record from its hearing on December 12, decision; under that construct, remedial counterparts in the RPFJ and have 2001, ‘‘The Microsoft Settlement: A measures targeted at Internet Explorer responded to the comments that address Look to the Future.’’ The hearing record are unsupportable. these differences. The Litigating States’ consists of the following items: (1) A list 23. In particular, neither open Proposal also contains several of witnesses at the hearing; (2) a sourcing the Internet Explorer source provisions that are not directly transcript of the hearing; (3) written code nor requiring Microsoft to port comparable to any of the provisions in statements of Senators Leahy, Hatch, Internet Explorer to other operating the RPFJ. For the reasons described Kohl, Durbin and Sessions; (4) written systems would be an appropriate below, the United States believes that statements of Charles A. James remedy. As one commentor notes, that such provisions are not appropriate as a (Assistant Attorney General—Antitrust remedy would benefit Microsoft’s remedy for the violations found by the Division, U.S. Department of Justice), competitors rather than ensuring a level Court of Appeals. Jay L. Himes (New York Attorney playing field for all participants in the General’s Office), Charles F. Rule software industry.30 Most importantly E. Fines (counsel to Microsoft), Professor for consumers, it would not 26. Many comments criticize the RPFJ Lawrence Lessig (Stanford Law School), significantly enhance those competitors’ for not imposing monetary damages on Dr. Mark N. Cooper (Consumer incentives or ability to develop new or Microsoft. According to these critics, the Federation of America), Jonathan Zuck better products. The disclosure decree does not ‘‘include anything that (Association for Competitive provisions of the RPFJ instead provide would make Microsoft pay for its past Technology), Matthew Szulick (Red Hat, middleware developers with access to misdeeds.’’ 34 Others similarly complain Inc.), and Mitchell E. Kertzman sufficient information for that the proposed decree does not (Liberate Technologies); (5) written interoperability that will allow them to contain any provision for the statements submitted for the record of create middleware—including disgorgement of illegal profits.35 Still Ralph Nader and James Love (Consumer browsers—that have the ability to others complain that the decree should Project on Technology), Mark Havlicek compete with Microsoft’s middleware in have required Microsoft to reimburse (Digital Data Resources, Inc.), Jerry a meaningful way.31 The goal of the the United States for the attorneys’ fees Hilburn (Catfish Software, Inc.), Lars H. RPFJ is to restore the opportunity for expended on this case.36 Liebeler (Computing Technology middleware of all types. The United 27. Monetary damages, including Industry Association), and Dave Baker States believes that this approach is attorneys’ fees, are not available to the (EarthLink, Inc.); (6) the RPFJ; (7) News consistent with the Court of Appeals’ United States in this case. This is a Statement of Citizens Against opinion and will sufficiently deprive government civil action for injunctive Government Waste; (8) letter from Microsoft of the fruits of its unlawful relief, and monetary damages are not Senator Hatch to Assistant Attorney conduct. available in such actions. See 15 U.S.C. General James; (9) letter from Assistant Attorney General James to Senator D. The Litigating States’ Proposal 4 (authorizing the United States ‘‘to institute proceedings in equity to Hatch; (10) letter from Robert H. Bork to 24. A number of comments suggest prevent and restrain such violations’’) Senators Leahy and Hatch; (11) letter that the United States should have (emphasis added). Cf. 15 U.S.C. 15(a) from James L. Barksdale to Senators proposed a remedy similar to the (damages available to United States Leahy and Hatch; (12) letter from Vermont Attorney General William H. proposal submitted by the Litigating when it is ‘‘injured in its business or States in their remedy proceeding with Sorrell to Steven A. Ballmer; (13) 32 written questions of Senators Leahy, Microsoft in New York. The United 33 We again note, as discussed in the U.S. Memorandum and elsewhere in this Response, that Hatch, Kohl, DeWine, Durbin, and 29 19–20; Palm 13. the Litigating States’ Proposal and RPFJ are to be McConnell; and (14) answers to written 30 CompTIA 17 (mandatory sharing of source evaluated under different standards, and are questions from Assistant Attorney code). properly addressed separately by the Court. We General James, Professor Lawrence 31 address the Litigating States’ Proposal for the sole Carroll 4 (‘‘It’s the external behavior that’s Lessig, Mitchell Kertzman, Matthew important for interoperability, not the internal upurpose of responding to those commentors design.’’) (including the Litigating States themselves) who Szulik, Charles F. Rule, Jonathan Zuck, 32 See Plaintiff Litigating States’ Remedial contend that the United States should have adopted and Jay L. Himes. Proposals (‘‘Litigating States’ Proposal’’). The a remedy identical, or similar, to the proposal by the Litigating States. Litigating States’ Proposal is Exhibit B to the 37 See United States v. E.I. du Pont de Nemours 34 Litigating States’ comment. Comments that Nader/Love 6; Holland 1; Brinkerhoff 1; & Co., 366 U.S. 316 326 (1961); United States v. advocate the Litigating States’ Proposal include SBC McWilliams 1; Lewis 1; Harris 2; Alexander 2. Oregon State Med. Soc’y, 343 U.S. 326, 333 (1952); 131–132; AOL 58–61; Litan 69–74; PFF 29–31; CFA 35 KDE 17; Maddux ¶ 2; Thomas 2–3. United States v. Nat’l Lead Co., 332 U.S. 319, 338 101; Davis; Pratt. 36 Philips; Wong. (1947).
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29. The materials submitted by the States to comply with the Tunney Act, without adding greatly to the United Senate Judiciary Committee constitute a for the most part the objections are in States’ workload: the six prescribed self-contained record of the Committee’s substance comments on the RPFJ itself. items ‘‘do not require considerably more comments on the settlement (in the form Because the CIS fully complies with the information than the complaint, answer of both questions and written and oral Tunney Act requirements, none of the and consent decree themselves would statements) submitted to the Department objections is well taken. provide and, therefore, would not be of Justice, and the Department’s burdensome requirements.’’ The responses to those comments. As such, 1. The CIS Complies With the Antitrust Procedures and Penalties Act: the United States does not respond Requirements of the Tunney Act Hearings on S. 782 and S. 1088 Before again here to those comments 32. Congress enacted the Tunney Act, the Subcomm. on Antitrust and specifically. The United States notes, among other reasons, ‘‘to encourage Monopoly of the Senate Comm. on the however, that many of the Committee’s additional comment and response by Judiciary, 93d Cong. 3 (1973) (‘‘Senate comments on the settlement are providing more adequate notice Hearings’’) (statement of Sen. Tunney) identical to or overlap with other [concerning a proposed consent (‘‘Tunney Statement’’). In light of the comments (including an individual judgment] to the public,’’ S. Rep. No. more than 30,000 public comments comment from Senator Kohl), to which 93–298, at 5 (1973) (‘‘Senate Report’’); concerning the RPFJ submitted to the the United States does respond. H.R. Rep. No. 93-1463, at 7 (1974) United States, there can be little debate (‘‘House Report’’), reprinted in 1974 that the CIS contained sufficient II. Tunney Act Issues U.S.C.C.A.N. 6535, 6538. The CIS is the information for the public to make A. Adequacy Of The United States’ primary means by which Congress ‘‘informed comments o[r] objections’’ Competitive Impact Statement sought to provide more adequate notice relating to the RPFJ. 30. Several commentors claim that the to the public. The Tunney Act requires 34. There is no serious dispute that CIS fails to comply with the Tunney that the CIS ‘‘recite’: the CIS satisfies the requirements of the Act.38 Thus, one commentor contends (1) The nature and purpose of the Tunney Act with respect to items 1, 2, that the CIS is deficient for failing to proceeding; 4, and 5 listed above. Also as discussed include substantive economic (2) A description of the practices or above, most of the comments purporting analysis.39 Another contends that the events giving rise to the alleged to address item 3 (explanation of the CIS is too terse, and therefore does not violation of the antitrust laws; proposed judgment) in fact are meet the requirements of the statute, the (3) An explanation of the proposal for complaints about the substance of the standard set by the CIS filed by the a consent judgment, including an RPFJ and not the sufficiency of the CIS. United States in AT&T (47 FR 7170–01), explanation of any unusual These comments are addressed in this or requirements of agency circumstances giving rise to such Response according to the provision of rulemakings.40 Other commentors assert proposal or any provision contained the RPFJ to which they apply. To the that the CIS is inadequate for failing to therein, relief to be obtained thereby, extent that any comments intend to provide a detailed explanation for and the anticipated effects on suggest that the explanation in the CIS rejection of alternative remedies.41 Still competition of such relief; itself is deficient, the United States other commentors fault the CIS for (4) The remedies available to potential believes that the CIS is more than allegedly misstating or adding terms to private plaintiffs damaged by the adequate to its intended purpose of the RPFJ.42 One commentor specifically alleged violation in the event that such describing the proposed decree’s criticizes the CIS’ lack of explanation of proposal for the consent judgment is provisions and eliciting public (1) the use of a definition of entered in such proceeding; comments. ‘‘Middleware’’ in the RPFJ that differs (5) A description of the procedures 2. The CIS Recites ‘‘A Description And from that used by the Court of Appeals; available for modification of such Evaluation Of Alternatives To Such (2) the lack of a Java-related remedy; (3) proposal; and Proposal Actually Considered By The the failure of the RPFJ to prohibit all (6) A description and evaluation of United States’’ forms of retaliation; and (4) the failure alternatives to such proposal actually considered by the United States. 35. Section V of the CIS (CIS at 60– of the RPFJ to address all of the harms 63) describes alternatives the United 43 15 U.S.C. 16(b). identified by the Court of Appeals. States considered and rejected,46 and Another comment also contends that the 33. When Senator Tunney introduced describes the reasons why they were United States has failed to produce the bill that became the Act, he rejected. It explains why the United ‘‘determinative documents,’’ as required explained that a purpose of the six items 44 States viewed the RPFJ as a superior by 15 U.S.C. 16(b). of information required in a CIS was to alternative to continued litigation; why 31. As this recitation shows, while the ‘‘explain to the public[,] particularly the United States decided not to commentors couch their objections in those members of the public with a continue to seek a break-up of terms of an alleged failure by the United direct interest in the proceeding, the Microsoft; and the reasons for basic data about the decree to enable differences between the interim conduct 38 These comments include ProComp 80–82; such persons to understand what is CCIA 33–34; AOL 53–56; PFF 10–17; AAI 12; provisions of the Initial Final Judgment Relpromax 8–9, Ex. 11. Similar issues also were happening and make informed (IFJ), United States v. Microsoft Corp., raised in the complaint filed in American Antitrust comments o[r] objections to the 97 F. Supp. 2d 59, 66–69 (D.D.C. 2000), Institute v. Microsoft, Civ. No. 02–CV–138 (D.D.C.) proposed decree during the 60-day (CKK), and Motion Intervention filed by Relpromax period.’’ 119 Cong. Rec. 3452 (1973) 46 Antitrust, Inc. As the CIS makes clear (CIS at 63), it does not 39 Relpromax 8–9. (Remarks of Sen. Tunney) (‘‘Tunney describe literally every remedial proposal 45 considered and rejected. The statute should not be 40 PFF 10–17. Remarks’’). The purpose could be interpreted to require that the CIS do so, for such 41 AAI 12; PFF 15. achieved, Senator Tunney suggested, a requirement would be unduly burdensome and 42 ProComp 82; CCIA 33–34. serve no useful purpose. As Senator Tunney said, 43 AOL 53–56. 45 The other purpose, Senator Tunney explained, the CIS ought to provide ‘‘some of the alternatives 44 Further explanation of the United States’ was to focus the attention of the parties during that were considered by the Department.’’ Senate compliance with its obligations under the Tunney settlement negotiations. Tunney Remarks, 119 Hearings at 108 (remark of Sen. Tunney) (emphasis Act is contained in the U.S. Memorandum, Part II. Cong. Rec. at 3452. added).
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vacated, 253 F.3d 34, 46 (D.C. Cir. 2001) (quoting brief of the United States). The discretion concerning the nature of any (en banc) (per curiam), and the court concluded that the statutory proceedings to review a proposed provisions of the RPFJ. It also lists a language ‘‘seems to point toward the consent decree. Congress clearly number of other remedy proposals, the government’s view . . . and confines intended that ‘‘the trial judge will criteria used to evaluate them, and the § 16(b) at the most to documents that are adduce the necessary information results of that evaluation. The either ‘smoking guns’ or the exculpatory through the least time-consuming means recitations contained in the CIS are fully opposite.’’ Id. The court added that possible,’’ see S. Rep. No. 298, 93d consistent with providing ‘‘basic data ‘‘[t]he legislative history in fact supports Cong. 6 (1973) (‘‘Senate Antitrust about the decree to enable [members of the government’s still narrower Report’’); H.R. Rep No. 93–1463, 93d the public with a direct interest] to reading.’’ Id.; see also United States v. Cong. Sess. 8 (1974), reprinted in 1974 understand what is happening and Bleznak, 153 F.3d 16, 20–21 (2d Cir. U.S.C.C.A.N. 6535, 6539 (‘‘House make informed comments o[r] 1998) (only documents that were a Antitrust Report’’), even though the objections to the proposed decree,’’ 119 ‘‘substantial inducement to the court may take other steps as it may Cong. Rec. 3452 (1973) (Tunney government to enter into the consent deem appropriate. 15 U.S.C. 16(f). The Remarks), and with Senator Tunney’s decree’’ need be disclosed). No court of procedural devices enumerated in view that the statutory requirements appeals has said otherwise.50 Section 16(f) are discretionary—the should not be burdensome. See Tunney 38. Thus, the commentor who asserts legislative history characterizes them as Statement. The number and nature of that the United States must have failed ‘‘tools available to the district court or the comments themselves suggest that to comply with the statute because it [sic] its use, but use of a particular the level of analysis in the CIS was more ‘‘cannot be accurate’’ that no procedure is not required.’’ 119 Cong. than adequate to stimulate informed determinative documents exist,51 Rec. 3453 (Feb. 6, 1973) (Remarks of public comment about the proposed misapprehends the meaning of Sen. Tunney). Such procedures were remedy and about the relative merits of ‘‘determinative documents.’’ The United made discretionary ‘‘to avoid needlessly alternative remedies. As the United States simply did not consider any complicating the consent decree States described recently in its response document in this case to be a ‘‘smoking process.’’ Id. to AAI’s lawsuit,47 the recital complied gun or its exculpatory opposite’’ with a 41. The legislative history further with the statutory requirement and significant impact on the formulation of indicates that Congress did not intend fulfilled its purpose. its decision regarding the RPFJ. the Tunney Act to produce lengthy hearings on the merits and thereby C. Timing and Process of Hearing B. The United States Fully Complied undermine the incentives for the United With All Tunney Act Requirements 39. Several comments say that an States and defendants to reach Regarding Determinative Documents evidentiary hearing with third party settlements in civil antitrust cases. See 36. The Tunney Act requires the participation is necessary and that the Senate Antitrust Report at 3. Rather, United States to make available to the hearing should be held in conjunction Congress meant to retain the consent public copies of ‘‘any other materials with—or even after—the remedy decree as a viable settlement option, and documents which the United States hearing in New York. We disagree. calling it ‘‘a substantial antitrust considered determinative in formulating 1. The Court Has Discretion To enforcement tool.’’ See Senate Antitrust [the proposed final judgment].’’ 16(b). Determine the Nature and Format of the Report at 6–7; House Antitrust Report at The CIS explained that the United Tunney Act Proceedings 8; United States v. Microsoft Corp., 56 States is not filing any determinative F.3d 1448, 1456 (D.C. Cir. 1995) 40. A court in a Tunney Act documents in this case because there are (‘‘Microsoft I’’). none within the meaning of the statute. proceeding is vested with great One comment says that this disclosure 2. An Evidentiary Hearing Is Not is deficient,48 but it is mistaken. 50 ProComp cites United States v. Central Required in This Case Contracting Co., 527 F. Supp. 1101, 1104 (E.D. Va. 37. The United States did not file any 1981), in which the court called ‘‘almost 42. Several commentors argue that the determinative documents with the Court incredible’’ the United States’ representation that Court should conduct an evidentiary or disclose any in the CIS for the simple no determinative documents existed. After further hearing given the complexity and reason that there are no such documents review, and acknowledging that in most cases a 52 ‘‘smoking gun’’ document will not exist, the court importance of this case. But the in this case. The Court of Appeals has adopted a broader standard under which, even if Tunney Act does not mandate a hearing addressed the definition of documents are individually not determinative, they or trial. See United States v. Airline ‘‘determinative documents’’ in a Tunney can be determinative in the aggregate. See United Tariff Publ’g Co., 836 F. Supp. 9, 11 n.2 Act case. Mass. Sch. of Law at Andover, States v. Central Contracting Co., 537 F. Supp. 571, 575 (E.D. Va 1982). The United States does not (D.D.C. 1993); United States v. NBC, 449 Inc. v. United States, 118 F.3d 776 (D.C. believe that there are determinative documents in F. Supp. 1127 (C.D. Cal. 1978). Indeed, Cir. 1997) (‘‘MSL’’). In MSL, the court this case even under the standard of Central such a hearing could largely defeat the held that a third party was not entitled Contracting. But in any event, Central Contracting’s broad definition of determinative documents has principal considerations behind the a wide range of documents from the not been followed by any Tunney Act court, has RPFJ: to avoid the uncertainty of a trial 49 government’s files. The United States been squarely repudiated by one district court, and to obtain ‘‘prompt relief in a case there said the statute referred to United States v. Alex. Brown & Sons, Inc., 169 in which illegal conduct has long gone documents ‘‘that individually had a F.R.D. 532, 541 (S.D.N.Y. 1996) (‘‘Central Contracting’s broad definition of ‘determinative unremedied.’’ CIS at 60. The legislative significant impact on the government’s doucments’ may conflict with Congress’s intent to history ‘‘clearly and expressly formulation of relief—i.e., on its maintain the viability of consent decrees’’) (cited establishes that ‘[i]t [was] not the intent decision to propose or accept a with approval in MSL, 118 F.3d at 785), aff’d sub of the committee to compel a hearing or particular settlement.’’ Id. at 784 nom. United States v. Bleznak, 153 F.3d 16 (2d Cir. 1998), and cannot be reconciled with decisions of trial on the public interest issue.’’’ NBC, the Court of Appeals for the District of Columbia 449 F. Supp. at 1143–44 (quoting Senate 47 United States’ Motion to Dismiss, AAI v. Circuit and the Second Circuit. See MSL, 118 F.3d Antitrust Report, quoted with approval Microsoft Corp., No. 02–CV–138 (D.D.C.) (CKK), at at 784; Bleznak, 153 F.3d at 20 (citing MSL and 16–23 (Feb. 8, 2002) (‘‘Br. Dismiss AAI’’); see also quoting ‘‘ ‘smoking gun’ or exculpatory opposite’’ in House Antitrust Report at 8–9). U.S. Memorandum at 20–28. with approval). Central Contracting is simply not 48 ProComp 81–82. good law in this regard. 52 AAI 12; AOL 55–58; Novell 34–35; ProComp 49 See also Br. Dismiss AAI 19–21. 51 ProComp 81. 84.
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Instead, the ‘‘Tunney Act expressly party participation, if any, is still under v. Manning, Maxwell & Moore, Inc., 51 allows the court to make its public consideration. The Court will have F. Supp. 972, 973 (D. Mass. 1943)). interest determination on the basis of access to a sufficient body of materials 47. Much of the ‘‘evidence’’ that such the competitive impact statement and to determine whether the RPFJ is in the commentors seek to present during an response to comments alone.’’ United public interest without resorting to an evidentiary hearing consists of materials States v. Enova Corp., 107 F. Supp. 2d evidentiary hearing that would both that have been, or could have been, 10, 17 (D.D.C. 2000). delay and unnecessarily complicate the included in their public comment 43. The court may, in its discretion, evaluation of the RPFJ. submissions 54 or that could be invoke additional procedures when it addressed through briefing and oral determines that such proceedings may 3. The Court Is Not Required To Permit argument, should the Court choose to assist in the resolution of issues raised any Third-Party Participation allow such third-party participation. by the comments. See id. But the 45. Whether and to what extent to Resubmitting such materials through the legislative history indicates that allow third parties to participate is left form of testimony would result only in ‘‘[w]here the public interest can be to the Court’s discretion; the Tunney delay and a waste of judicial resources. meaningfully evaluated simply on the Act permits, but does not require, the The commentors—who already have basis of briefs and oral argument, this is Court to authorize third-party been given an opportunity fully to be the approach that should be utilized.’’ participation. 15 U.S.C. 16(f)(3). Courts heard—have not demonstrated that an House Antitrust Report at 8. ‘‘Only usually deny third-party participation in evidentiary hearing would in any way where it is imperative that the court Tunney Act proceedings both because advance the public interest or permit should resort to calling witnesses for the the potential for delay outweighs the them to improve materially on the purpose of eliciting additional facts benefit from intervention (see, e.g., points made in the extensive comments should it do so.’’ Id. Even in AT&T, United States v. IBM Corp., 1995 WL already submitted. which at the time was considered ‘‘the 366383 (S.D.N.Y. June 19, 1995)) and largest and most complex antitrust 5. The Tunney Act Proceedings Should because interested third parties are Not Be Held in Conjunction With, or action brought since the enactment of heard through the comments process. the Tunney Act,’’ the court concluded Rely Upon Evidence From, the United States v. G. Heileman Brewing Litigating States’ Remedy Hearing that ‘‘none of the issues before it Co., 563 F. Supp. 642, 652 (D. Del. require[d] an evidentiary hearing,’’ and 1983); United States v. Carrols Devel. 48. Finally, a number of comments instead invited briefing from interested Corp., 454 F. Supp. 1215, 1221–22 propose that the Court consider the individuals and allowed participation (N.D.N.Y. 1978). That is particularly RPFJ either in conjunction with, or after, through oral argument at the two-day true in this case, where a large number consideration of the Litigating States’ hearing on the proposed modifications of highly interested and motivated third proposed remedy in New York. Some to the final judgment that were at issue. parties have taken full advantage of the argue that the Court should not make its AT&T, 552 F. Supp. at 145, 219. opportunity to submit extensive determination regarding the RPFJ until 44. It is not imperative to hold an comments that set forth their views of after the Litigating States have presented evidentiary hearing in this case because the RPFJ and whether the Court should their case, claiming that such an the Court has sufficient information to enter it. As a result, although the Court approach is necessary to avoid determine whether to approve a consent 55 ultimately may choose to hear from prejudicing the Litigating States’ case. decree. United States v. Associated Milk 53 Others assert that the Court should hold Producers, 394 F. Supp. 29, 45 (W.D. third parties, they have already had a full and effective mechanism to present a hearing on the RPFJ, if at all, only after Mo.), aff’d, 534 F.2d 113 (8th Cir. 1976); 56 to the Court any arguments or concerns the Litigating States’ hearing. Finally, United States v. G. Heileman Brewing at least one commentor proposes that Co., 563 F. Supp. 642, 650 (D. Del. they believe it should address in its public interest determination. the Court hold a single hearing to 1983). In this case, the Court already has evaluate all possible remedial options, the benefit of a broad array of materials 4. Allowing Third-Party Participation including the Litigating States’ proposal, to assist in making the public interest Through an Evidentiary Hearing Would the RPFJ, and major structural determination. Over 30,000 public Unnecessarily Delay and Complicate remedies.57 comments were submitted, including These Proceedings 49. These proposals are ill-advised detailed comments from, among others, and unworkable for a number of 46. Insofar as commentors claim that some of Microsoft’s primary competitors reasons. First, the RPFJ and the third parties should be allowed to and most vociferous critics (such as Sun Litigating States’ proposed remedy are participate in an evidentiary hearing, Microsystems, AOL/Time Warner, and to be evaluated separately and under doing so would serve only to complicate RealNetworks) as well as computer and different standards. See U.S. and delay these proceedings. Allowing software industry trade groups Memorandum at 35–46. Second, it third-party participation in an representing the interests of such firms would be inappropriate to introduce evidentiary hearing would delay the (such as ProComp, CCIA, and SIIA). The evidence relating to New York in this much-needed relief the United States Court also has this Response, as well as Tunney Act proceeding. The United seeks in the public interest. As the court additional briefing submitted by the States is not a party to New York, has in IBM wisely observed, ‘‘ ‘[a]dditional United States, Microsoft, and the not participated in the discovery or parties always take additional time. Settling States. The Court has scheduled other aspects of that case, has played no Even if they have no witnesses of their a two-day hearing on the RPFJ, during role in the development of the evidence own, they are a source of additional which the Court has indicated it will related to that case, and will not questions, objections, briefs, arguments, hear oral argument from the United participate in that hearing. motions and the like which tend to States, Microsoft, and the Settling Consideration of evidence from that States, as well as pose questions to the make the proceedings a Donnybrook parties. The Court has further indicated Fair.’’’ IBM, 1995 WL 366383, at *5 54 AOL 53; Litan 59–60; ProComp 84–86. that it may hear brief oral argument (quoting Crosby Steam Gage & Valve Co. 55 AAI 11: SIIA 8–9. from third parties during the hearing, 56 AOL 58–61; Litan 59–60; Novell 3, 34–35. although the precise nature of third- 53 CCC 2; ProComp 84–86. 57 PFF 4.
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case in this proceeding, therefore, standard citing legislative history, case actually considered, and any other would be inappropriate. Cf. Fed. R. law, and treatises.62 considerations bearing upon the adequacy of Evid. 804(b)(1) (testimony given in 53. These comments have at least such judgment; another hearing in a different three overriding themes. First, most (2) the impact of entry of such judgment agree, citing Microsoft, that the correct upon the public generally and individuals proceeding can be admitted against a alleging specific injury from the violations party only ‘‘if the party against whom standard for relief is to unfetter a market set forth in the complaint including the testimony is now offered or . . . a from anticompetitive conduct, terminate consideration of the public benefit, if any, to predecessor in interest, had an the illegal monopoly, deny to the be derived from a determination of the issues opportunity and similar motive to defendant the fruits of its illegal at trial. develop the testimony by direct, cross, conduct, and ensure that no practices Id. (emphasis added). As is apparent or redirect examination’’). remain likely to result in from the permissive language of the 63 50. Finally, proposals to have the two monopolization in the future. Second, statute, these factors for consideration cases considered concurrently, or to most argue that, because of the are discretionary.66 postpone consideration of the RPFJ until procedural posture of the case, the 55. In determining whether the RPFJ after the remedial hearing in New York, judgment of the United States in is in the public interest, the Court may unnecessarily would delay the Court’s agreeing to the RPFJ as an appropriate properly consider whether ‘‘the public interest determination regarding resolution of the charges it brought and remedies [are] so inconsonant with the the RPFJ. See U.S. Memorandum at 74– the case it proved is due little or no allegations charged as to fall outside of 78. The Litigating States’ hearing is deference.64 And finally, many argue, the ‘reaches of the public interest.’’’ scheduled to begin on March 11, 2002. again because of the procedural posture United States v. Microsoft Corp., 56 F.3d The parties there have proposed of the case, that the District Court is 1448, 1461 (D.C. Cir. 1995) (‘‘Microsoft between 170 and 300 hours of total required to apply a more stringent I’’) (internal citations omitted). In testimony in that case. See Joint Status review, and even entitled to fashion its Microsoft I, and again in Massachusetts Report 2, No. 98–CV–1233 (Feb. 13, own relief based upon an independent School of Law at Andover, Inc. v. United 2002). Although the Court has indicated 65 review of the record. Although the States, 118 F.3d 776 (D.C. Cir. 1997) that the proposed length is far longer commentors correctly identify the (‘‘MSL’’), the D.C. Circuit explained that than it expected or believes is relevant standard of relief set forth by this inquiry entails consideration of four reasonably necessary, the Court has not the Court of Appeals, they are incorrect specific factors: yet determined the precise format or in concluding that the procedural length of that hearing. See Tr. 2/15/02 posture of the case eliminates any need The district court must examine the decree at 26–27, No. 98–CV–1233. In all in light of the violations charged in the for deference to the judgment of the complaint and should withhold approval likelihood, the hearing could last United States or justifies a court-created several weeks. only [1] if any of the terms appear remedy. In essence, these commentors ambiguous, [2] if the enforcement mechanism 51. All of these proposals stand to argue that the Court of Appeals’ is inadequate, [3] if third parties will be delay consideration, and entry of, the mandate precluded the possibility of a positively injured, or [4] if the decree RPFJ by the Court. Delay of this nature, negotiated settlement. It did not. The otherwise makes ‘‘a mockery of judicial which will not result in the Court Court of Appeals recognized that even a power.’’ See [Microsoft I, 56 F.3d] at 1462. hearing more or better information litigated remedy should be ‘‘tailored to MSL, 118 F.3d at 783.67 about the settlement, is not only fit the . . . drastically altered scope of 56. The requirements of an antitrust unnecessary but also subverts one of the Microsoft’s liability . . . .’’ Microsoft, remedy are familiar. As the Court of primary goals of both the RPFJ and the 253 F.3d at 107. As explained in the Appeals noted in remanding this case: Tunney Act—prompt relief.58 The Court U.S. Memorandum, and below in A remedies decree in an antitrust case therefore should not postpone entry of Sections IV through XII, the RPFJ fits the RPFJ. must seek to ‘‘unfetter a market from that altered scope of liability. anticompetitive conduct,’’ Ford Motor Co.[ v. United States], 405 U.S. [562, ] 577 [(1972)], D. Standard of Review Under The 1. The Tunney Act Requires That Entry Tunney Act 59 to ‘‘terminate the illegal monopoly, deny to of the RPFJ Be ‘‘In the Public Interest’’ the defendant the fruits of its statutory 52. Numerous comments address the 54. As noted by the United States in violation, and ensure that there remain no standard of review applicable under the its CIS and by virtually all commentors practices likely to result in monopolization 60 Tunney Act to the RPFJ. These remarking on the issue, the Tunney Act in the future,’’ United States v. United Shoe comments range from brief references to requires that the Court determine Mach. Corp., 391 U.S. 244, 250 . . . (1968); the language of the Tunney Act 61 to see also United States v. Grinnell Corp., 384 whether entry of the RPFJ is ‘‘in the U.S. 563, 577 . . . (1966). lengthy discourses on the correct public interest.’’ 15 U.S.C. 16(e). In making that determination, the Court 253 F.3d at 103. 58 Although Microsoft has agreed to be bound by may consider: 57. The Court of Appeals also much of thye RPFJ pending its entry (Stipulation emphasized, however, that the ‘‘ ‘[m]ere ¶ 2 (Nov. 6, 2001)), some important provisions (1) the competitive impact of such become effective only after entry. See, e.g., RPFJ judgment, including termination of alleged existence of an exclusionary act does § IV.B (Technical Committee must be created violations, provisions for enforcement and not itself justify full feasible relief ‘‘[w]ithin 30 days of entry of this Final Judgment’’); modification, duration or relief sought, against the monopolist to create id. § IV.C (Microsoft’s internal compliance program beings ‘‘within 30 days of entry’’). anticipated effects of alternative remedies maximum competition.’’’ Id. at 103 59 The standard to be applied in this proceeding (quoting 3 Antitrust Law ¶ 650a, at 67). is discussed in U.S. Memorandum, Part II. 62 ProComp 1–25; ACT 2–18; AAI 2–13; CCIA 9– The scope of the remedy must be clearly 60 RealNetworks 5–10; Red Hat 9–10; SBC 21–32; 11; Litan 4–11; SBC 21–32. related to the anticompetitive effects of Litan 4–11, 31–42; Sen. Kohl 2; Kegel 3; KDE 1–2; 63 CCIA 9, 34–38; Red Hat 9; ProComp 2, 16–20; the illegal conduct. Microsoft I, 56 F.3d Elhauge 5–6, 10, 13; Economides 4; CFA 2; Litan 34; AOL 2–8; Kegel 3; SIIA 9–10. CompTIA 4–5; CCIA 9–11, 18–41; AAI 2–13; ACT 64 ProComp 2, 12, 20–23 (no deference); AAI 5– at 1460 (quoting International Salt Co. 2–18; SIIA 9–11; WLF 3–4; PFF 1–9; ProComp 1– 9; CCIA 9–10, 19–33: SBC 30. 25; Novell 30–37; AOL 1–9. 65 Novell 30–37; RealNetworks 5–10; ProComp 66 S.Rep. No. 93–298, at 6(1973). 61 WLF 3; CFA 2; Kegel 3; Sen. Kohl 2; KDE 1– 15–23; AOL 4–9; Litan 33–36; SBC 29–32; AAI 4– 67 For further discussion of these factors, see U.S. 2; CompTIA 4–5. 13; CCIA 19–39. Memorandum at 36–42.
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v. United States, 332 U.S. 392, 401 continuing position in the operating identical to the litigation risks it faces (1947)). Although an antitrust conduct systems market,’’ 253 F.3d at 106–07, when it negotiates a settlement prior to remedy is not limited to enjoining sufficient to justify structural relief trial, the teaching of Microsoft I remains precisely the conduct found to be (although it did not rule out the applicable. The District Court’s unlawful, e.g., United States v. Hartford- possibility that the District Court would evaluation of the RPFJ is properly Empire Co. v. United States, 323 U.S. find such a connection on remand).70 informed by the public interest in a 386, 409 (1945); AT&T, 522 F. Supp. at Moreover, the Court of Appeals vacated certain and timely remedy for 150 n.80, nevertheless ‘‘the remedies the District Court’s judgment of liability Microsoft’s unlawful conduct and must must be of the ‘‘same type or class’’ as with respect to tying, id. at 84 (leaving take account of the uncertainties and the violations, and the court is not at open the possibility of further litigation risks of further litigation, an inquiry that liberty to enjoin ‘‘all future violations of on remand), and reversed as to properly respects the realistic choices the antitrust laws, however unrelated to attempted monopolization, id. at 80–84; the United States faced in deciding to the violations found by the court.’’’ it also limited the scope of the conduct settle the case on the negotiated terms Microsoft I, 56 F.3d at 1460.68 found to constitute illegal of the RPFJ. monopolization, reversing on 8 of the 20 63. Moreover, in making its 2. The Court Should Grant Deference to acts found by the District Court. The determination, the District Court the Judgment of the United States remedy ultimately imposed on remand, properly accords significant weight to 58. Commentors assert that the the Court of Appeals directed, ‘‘should the United States’ predictive judgments current procedural posture of the case, be tailored to fit the wrong creating the as to the efficacy of remedial provisions. after trial and affirmance on appeal, occasion for the remedy.’’ Id. at 107. Indeed, such deference is proper even eliminates any need for deference to the 61. In the absence of a settlement, outside the consent decree context. See judgment of the United States. therefore, the United States would face Ford Motor Co, v. United States, 405 Commentors urge the Court to the prospect of extended litigation with U.S. 562, 575 (1972) (‘‘once the undertake an independent review of the respect to the numerous issues related Government has successfully borne the record, and even substitute a litigated to relief in this case. An appeal likely considerable burden of establishing a remedy for that of the RPFJ. Such a would follow the conclusion of the violation of law, all doubts as to the result is inconsistent with the purposes proceedings in the District Court. remedy are to be resolved in its favor’’) and intent of the Tunney Act. Microsoft also might choose to seek (quoting United States v. E.I. du Pont de 59. As explained in the U.S. Supreme Court review of the Court of Nemours & Co., 366 U.S. 316, 334 Memorandum, the Court’s assessment of Appeals’ decision affirming its liability (1961)). Similarly, it is proper to defer the adequacy of the RPFJ must take into for monopolization. See Petition for a to the United States as representative of account the risks and uncertainties of Writ of Certiorari, No. 01–236 (listing the public interest when the parties are further litigation that would be required issues for future petition). Despite the requesting entry of an agreed-upon before there could be an adjudicated Findings of Fact and Conclusions of judgment.72 final judgment, safe from further Law, and despite the Court of Appeals’ 64. As the Court of Appeals has challenge on appeal, that would remedy affirmance of a number of the holdings, explained, the degree of deference the the anticompetitive harm attributable to including liability for monopolization, trial court gives to ‘‘the government’s conduct found to violate the Sherman the ultimate outcome of continued predictions as to the effect of the Act. See U.S. Memorandum at 45–46. litigation is uncertain, and the path of proposed remedies’’ in a Tunney Act The Court of Appeals explained in litigation would be both risky and costly proceeding may vary with the extent of Microsoft I that it is ‘‘inappropriate for in terms of resources that might the court’s familiarity with the market the judge to measure the remedies in the otherwise be devoted to other antitrust and other factors. Microsoft I, 56 F.3d at decree as if they were fashioned after enforcement concerns.71 1461. But, as the Court of Appeals also trial. Remedies which appear less than 62. Thus, although the litigation risks emphasized, even a court that has vigorous may well reflect an underlying the United States faces here are not extensive relevant expertise should not weakness in the government’s case, and lightly reject the government’s for the district court to assume that the 70 Among the goals of an antitrust decree are predictions. For example, in the case of allegations in the complaint have been ‘‘terminat[ing] the illegal monopoly’’ and the AT&T decree—‘‘a decree the formally made out is quite ‘‘deny[ing] to the defendant the fruits of its oversight of which had been the 69 statutory violation.’’ Microsoft, 253 F.3d at 103 unwarranted.’’ Id. at 1461. (internal quotation omitted). But plaintiffs never business of a district judge for several 60. This case does differ from alleged, and neither the District Court nor the Court years,’’ Microsoft I at 1460—the Court of Microsoft I in that there have been both of Appeals found, that Microsoft acquired its Appeals instructed that the district findings of fact and conclusions of monopoly unlawfully. See id. at 58 (Microsoft court should not reject an agreed-upon ‘‘violated § 2 by engaging in a variety of liability affirmed on appeal. But the exclusionary acts . . . to maintain its monopoly’’); modification of the decree unless the difference is one of degree, not kind. see also Microsoft I, 56 F.3d at 1452. Thus, whether, court had ‘‘ ‘exceptional confidence that Although the Court of Appeals in this and to what extent, Microsoft now has an ‘‘illegal adverse antitrust consequences [would] case affirmed the District Court’s monopoly’’ depends on whether its unlawful result—perhaps akin to the confidence conduct increased or extended Microsoft’s that would justify a court in overturning judgment of liability for monopoly monopoly—that is, whether the fruits of its maintenance, it emphasized that neither statutory violations included increments to the the predictive judgments of an it, nor the District Court, had so far magnitude or duration of its market power. Again, administrative agency.’’’ Id. (quoting found ‘‘a causal connection between neither the District Court nor the Court of Appeals United States v. Western Elec. Co., 993 found this direct causal connection between the F.2d 1572, 1577 (D.C. Cir. 1993)). Microsoft’s exclusionary conduct and its conduct and the continuance of the monopoly. 71 See Note, The Scope of Judicial Review of Indeed, if courts do not give appropriate 68 Nor may relief in a civil antitrust case be Consent Decrees under the Antitrust Procedures deference to the United States’ views, punitive. See page 15 & n.37 above. and Penalties Act of 1974, 82 Mich. L. Rev. 153, 69 Congress intended that the statutory ‘‘public 175 n.143 (1974) (‘‘The legislative history of the 72 See, e.g., United States v. Paramount Pictures, interest’’ concept encompass ‘‘compromises made [Tunney Act] should make the courts sensitive to Inc., 334 U.S. 131, 177 (1948); United States v. for non-substantive reasons inherent in the process the efficient allocation of the Department’s Borden Corp., 347 U.S. 514, 518 (1954); United of settling cases through the consent decree resources in making their public interest States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. procedure.’’ House Report at 12. determinations.’’). 1981).
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Tunney Act proceedings will become matter be eliminated as an antitrust Act district court, and any other district equivalent to the proceedings that lead enforcement tool, despite Congress’ court the Tunney Act court designates, to adjudicated judgments with directive that it be preserved.’’ AT&T, copies of the proposed decree and ‘‘any adjudicated remedies. 552 F. Supp. at 151. other materials and documents which 65. Commentors are also incorrect in 67. Thus, even in the AT&T case, a the United States considered their assertion that the procedural case of unparalleled public importance determinative in formulating such posture of the case requires the District in which the trial court had unusual proposal.’’ Id. But the Tunney Act does Court to fashion and impose an familiarity with both the evidence and not depend solely on the Federal adjudicated judgment. The District the legal arguments of the parties, see Register to inform the public. The next Court’s role in making this public id., the court determined to approve the subsection, 15 U.S.C. 16(c), requires the interest determination differs from its parties’ settlement ‘‘[i]f the [proposed] United States to publish, repeatedly, role in formulating an adjudicated decree meets the requirements for an summaries of the proposal and the CIS, judgment. Because the District Court ‘‘is antitrust remedy.’’ Id. at 153. The court together with a list of the determinative evaluating a settlement, it is not as free made clear that it intended to follow documents made available for to exercise its discretion in fashioning a that standard whether or not the ‘‘meaningful public comment,’’ in remedy,’’ AT&T, 552 F. Supp. at 151, as proposed decree corresponded to the general circulation newspapers. it would be in a case litigated to an decree the court itself would have 70. By contrast, the lobbying adjudicated judgment. The District imposed had the parties pushed forward provision at issue here, Section 16(g), Court is not ‘‘empowered to reject [the to an adjudicated judgment. See id. at merely requires defendants in antitrust remedies sought] merely because [it] 166 n.147 (noting that if the case ‘‘were cases to file their disclosure statements believe[s] other remedies [are] to proceed to final judgment and with the Tunney Act court—there are no preferable.’’ Microsoft I, 56 F.3d at 1460. liability were found, the Court might requirements of public notice, Federal In this procedural setting, the District determine that [certain measures not Register publication, newspaper Court’s ‘‘function is not to determine part of the proposed decree] are summaries, or distribution to other whether the resulting array of rights and appropriate remedies, either as district courts. Moreover, the statutory liabilities ‘‘is the one that will best serve alternatives to the divestiture of the provisions addressing disclosure of society,’’ but only to confirm that the Operating Companies or in addition to information supporting informed public resulting settlement is ‘‘ ‘within the such divestiture’’). comment (Sections 16(b), (c)), appear reaches of the public interest.’’’ Id. E. Microsoft’s Compliance With Section immediately before the provisions (quoting United States v. Western Elec. 16(g) dealing with consideration of, and Co., 990 F.2d 283, 309 (D.C. Cir. 1990) response to, public comment (Section (‘‘Triennial Review Opinion’’) (emphasis 68. Several comments question whether Microsoft made adequate 16(d)) and the court’s public interest in original), in turn quoting United determination (Sections 16(e), (f)). The States v. Bechtel Corp., 648 F.2d 660, disclosures under 15 U.S.C. 16(g).73 At the February 8, 2002, Status Conference, lobbying provision comes after all of 666 (9th Cir. 1981), in turn quoting those Sections. The statutory structure United States v. Gillette Co., 406 F. the Court directed Microsoft to brief the issue of its compliance with Section thus makes clear the different purposes Supp. 713, 716 (D. Mass. 1975)). of the two different kinds of disclosure 66. This standard reflects not only the 16(g), and expressed its assumption that provisions.75 Thus, even if Microsoft proper role of a court of equity asked to this issue was one that ‘‘the government failed to satisfy the requirements of lend its authority to the parties’ isn’t necessarily going to be commenting Section 16(g), that would not provide agreement, but also the critical role that on, but it is something that is any basis to begin the comment period consent decrees play in effective public [Microsoft’s] responsibility.’’ 74 The anew and further delay entry of the antitrust enforcement. See Senate United States therefore supplies the 76 Report at 5 (‘‘the consent decree is of following information concerning the RPFJ. crucial importance as an enforcement purpose of the disclosures required III. Definitions tool, since it permits the allocation of pursuant to Section 16(g), but does not resources elsewhere’’); 119 Cong. Rec. respond to the substance of the A. Definition of ‘‘ISV’’ (RPFJ § VI.I) 24,600 (1973) (Statement of Sen. comments that question Microsoft’s 71. Several comments address Section Gurney) (Tunney Act ‘‘is designed to compliance with the requirements of VI.I, which defines ‘‘ISV’’ as ‘‘an entity enhance the value and effectiveness of Section 16(g). other than Microsoft that is engaged in the consent decree as a tool of public 69. The Tunney Act treats disclosure the development or marketing of policy’’). A consent decree, such as the requirements intended to inform public software products.’’ All of the comments RPFJ, is the product of negotiation. The comment regarding a proposed consent concern the breadth of the definition. parties weigh the benefits of prompt and judgment entirely separately from the certain resolution of the case against the other disclosure requirements set forth 75 Although the statutory language is possibility that continued litigation in the Act. To facilitate public comment unambiguous, legislative history also bears out the might improve their respective on a proposed consent judgment in a distinction. The Senate Report notes that the ‘‘bill seeks to encourage additional comment and positions. Settlements potentially offer government civil antitrust case, the response by providing more adequate notice to the the public the benefits of more timely Tunney Act provides, in a single public,’’ S. Rep. No. 93–298 at 5, and goes on to and certain relief, as well as significant subsection, that the proposed decree describe the provision of information to the public. savings in judicial and prosecutorial itself must be published in the Federal As in the Tunney Act, the Report’s description of resources. But if courts refused to enter the lobbying provision is separated from its Register, along with a CIS, which the treatment of the provision of information to the any consent decree that did not match United States must furnish to any public by another topic entirely, the court’s public precisely the relief the court would have person requesting it. 15 U.S.C. 16(b). In interest determination. See id. at 6–7. The House imposed in the absence of a settlement, addition, that same subsection requires Report is to the same effect. See H.R. Rep. No. 93– ‘‘defendants would have no incentive to 1463 at 6–7. (information provided to public the United States to file in the Tunney through Federal Register and newspapers; id. at 9 consent to judgment and this element of (lobbying disclosures). compromise would be destroyed. The 73 Relpromax 21–23; CCC 3; CCIA 26–32. 76 For a fuller discussion, see Br. Dismiss AAI at consent decree would thus as a practical 74 Tr. 2/8/02 at 16–17. 24–28.
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72. Several commentors misread the user might perceive them. This single digit to the right of the decimal definition, contending that ‘‘ISV’’ definition is used in Sections III.C and point. inappropriately covers only companies III.H, as well as indirectly, via the 1. Distributed Separately To Update a creating software that runs on Windows Microsoft Platform Software definition, Windows Operating System Product Operating System Products.77 The in Sections III.A, III.F and III.G. definition shows on its face that this 76. In contrast, the Microsoft 78. Some commentors argue that it is concern is misplaced: any ‘‘software Middleware definition describes inappropriate for Microsoft Middleware product’’ is covered, whether or not it software code, and is only used in to depend on separate distribution from runs on Windows. Sections III.D and III.G. Most a Windows Operating System Product.82 73. Several commentors suggest commentors focus on its use in Section They argue that there is no logical expanding the definition of ‘‘ISV’’ III.D concerning API disclosure. The reason for such a distinction and that explicitly to include developers of reason Microsoft Middleware is directed requiring separate distribution merely particular categories of products. One at software code and not functionality is provides another way for Microsoft to commentor worries that Microsoft could that it is difficult to take any given piece avoid its disclosure requirements. construe the definition to exclude of functionality and identify exactly 79. The definition requires separate developers or marketers of non- which pieces of software code distribution for two reasons. First, there Microsoft operating systems, and correspond to that functionality. For must be a straightforward and suggests that the definition be modified instance, a word processor displays text enforceable way to determine which to include them explicitly.78 Another on a screen, and that is a functionality software code is implicated. Separate worries that the definition does not that the end user associates with the distribution provides a clear line clearly encompass developers of word processor. The software code that between two segments of code. software products designed to run on draws characters on the screen, Moreover, interfaces between pieces of new versions of Windows or on other however, is driven largely by code that code that have never been distributed next-generation devices, and that it many would consider part of the separately are more likely to be internal excludes vendors of competing operating system. The word processor interfaces that are not tested or durable. servers.79 These concerns are misplaced uses some of its own software code and In contrast, interfaces between and, therefore, the proposed some of the operating systems services separately distributed pieces of code are modifications are unnecessary. The to make the functionality appear to the more often tested and durable, because RPFJ defines ‘‘ISV’’ to include user. Therefore, to avoid confusion and there is always the risk that the other developers or marketers of ‘‘software disagreements over which software code side of the interface will be a different products,’’ and that very broad category corresponded to which functionality, version than expected. Interfaces that of products unambiguously includes the United States designed a software are not tested and durable may be operating systems (including server code-based definition for use in Section unreliable, potentially resulting in operating systems), operating system III.D. malfunctions. products (including server operating 77. In response to comments, two of 80. Second, the competitive system products), and software designed the specific requirements of the significance of middleware products to run on any platform on any device. Microsoft Middleware definition have such as browsers and media players will 74. Other commentors express been changed in the SRPFJ to more be relatively small if they are never concern that individuals, particularly clearly reflect the parties’ intent. Each distributed in any form separate from a individual developers writing and requirement and any associated Windows Operating System Product. If trading code within the ‘‘open source’’ modifications are discussed Microsoft chooses only to distribute its community, might not qualify as individually below. For reference, the programs by including them in ‘‘entities’’ and so might not qualify as complete revised definition is as Windows, then it will not be able to ‘‘ISVs’’ under Definition VI.I.80 The follows: reach the large installed base of RPFJ, however, sets no minimum size or RPFJ Section VI.J. ‘‘Microsoft Windows machines. Instead, Microsoft organizational standard for an ‘‘entity.’’ Middleware’’ means software code that will only be able to offer new versions Any individual or group of individuals, 1. Microsoft distributes separately when users choose to upgrade their whether incorporated or not, that from a Windows Operating System operating system or buy new computers. otherwise meets the definition of ‘‘ISV’’ Product to update that Windows Competing middleware products, in is considered to be an ISV within the Operating System Product; contrast, would not be limited to such meaning of the RPFJ. 2. is Trademarked or is marketed by methods of distribution and might offer Microsoft as a major version of any many new versions over the course of B. ‘‘Microsoft Middleware’’ (RPFJ § VI.J) Microsoft Middleware Product defined the two to three year hardware upgrade 75. Many commentors criticize the in Section VI.K.1; and cycle. Thus, while a competitor might RPFJ definition of Microsoft 3. provides the same or substantially offer three new versions of its program Middleware. Occasionally, a commentor similar functionality as a Microsoft every year, Microsoft only would be simply fails to realize which Middleware Product. able to offer a single version every two middleware definition, Microsoft Microsoft Middleware shall include at to three years. In the past, with Middleware Product or Microsoft least the software code that controls programs such as Internet Explorer, Middleware, is used in a given most or all of the user interface elements Windows Media Player, and Windows section.81 To review, Microsoft of that Microsoft Middleware. Messenger, Microsoft always has offered Software code described as part of, Middleware Product describes separate versions available for and distributed separately to update, a functionality and products, as an end download. Microsoft Middleware Product shall not 81. Commentors point to specific 77 Palm 10; Carroll 2. be deemed Microsoft Middleware unless products that have never been 78 Red Hat 24. identified as a new major version of the distributed separately and argue that 79 AOL, Klain, 9–10, 12. Microsoft Middleware Product. A major 80 AAI 38; KDE 16; Wang 1. version shall be identified by a whole 82 CCIA 65; AAI 20–21; ProComp 44; NetAction 81 Henderson 5–6; Gifford 3. number or by a number with just a 12; Novell 9–10; Maddux ¶ 19; Kegel 5, 23; SIIA 18.
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they should be included. Several version, which required that software logo or a name that satisfies the commentors point out that Windows satisfy the Trademark requirement in definition of Trademarked is unlikely to Media Player 8, sometimes referred to as order to be considered Microsoft achieve the widespread usage needed Windows Media Player for Windows Middleware. The SRPFJ modification for competitive significance. XP, is only included in Windows XP means that software can now satisfy this Additionally, this definition was not and that the interfaces between this element of the definition by being either intended to capture security patches, player and the operating system will not (1) Trademarked, or (2) marketed as a minor ‘‘bug’’ fixes, or other small be disclosed.83 This is correct. However, major version of any of the named downloads that Microsoft makes the interfaces between Windows Media Microsoft Middleware Products as available via Windows Update. Limiting Player 7.1, the latest version available defined in Section VI.K.1 (i.e., Internet the covered software code to that which for download or redistribution, will be Explorer, Microsoft’s Java Virtual is Trademarked or marketed as a major disclosed. While there may be some Machine, etc.). version of a Microsoft Middleware unique interfaces that Windows Media 84. Many commentors argue that the Product under Section VI.K.1 ensures Player 8 uses to call on services in Trademarked requirement is that code not comprising a ‘‘product,’’ Windows XP, the United States is not inappropriate, or that at a minimum, as that term is generally understood by aware of any such interfaces that are not many existing Microsoft Middleware the public, will not be included. also in Windows Media Player 7.1. Products would not have any 3. Same or Substantially Similar Thus, for example, the API for a digital corresponding Microsoft Middleware Functionality rights management technology called code.86 Turning to the latter, several Secure Audio Path is a key interface argue that products such as Internet 86. Some commentors opine that used by Windows Media Player 7.1 and Explorer, Windows Media Player, Microsoft Middleware should not be thus will be disclosed. Moreover, if Microsoft’s Java Virtual Machine, and required to have the same or Windows Media Player 8 is ever Window Messenger arguably were not substantially similar functionality as a distributed separately in the future, then Trademarked as that term is defined in Microsoft Middleware Product. its interfaces would be disclosed. the RPFJ, or argue that the Trademarked Microsoft Middleware Products, as 82. Other commentors argue that requirement was not appropriate. The defined, include only products Active Directory, a Microsoft directory United States does not necessarily agree distributed with a Windows Operating service, should be Microsoft with any or all of these arguments System Product. Commentors argue that Middleware, but it does not qualify concerning whether these particular software that comes under some concept because it has never been distributed products satisfied the definition of of middleware should be included, separately from a Windows Operating Trademarked. To clarify any issues regardless of whether it is the same or System Product.84 As this commentor surrounding the status of these substantially similar to a Microsoft notes, however, directory services ‘‘have products, however, the Microsoft Middleware Product. For instance, some become competitively critical links Middleware definition was modified to commentors argue that Microsoft Office between the desktop and network include explicitly the software code that should be Microsoft Middleware, and computing.’’ 85 Accordingly, directory is marketed by Microsoft as a major the interfaces between Office and a services are most protected under version of any Microsoft Middleware Windows Operating System Product Section III.E, which addresses the Product under VI.K.1. The limitation in should be disclosed.87 licensing of Communications Protocols the modified language to a major 87. The focus of the plaintiffs’ case used natively by Windows Operating version of a Microsoft Middleware was never Internet Explorer or System Products to interoperate with Product is simply a restatement of the middleware technologies that were only Microsoft server operating system limitation in the last paragraph of the distributed separately; the focus was products. For instance, if Active definition, discussed further below, always on applications that were both Directory software is included natively which limits the covered software code integrated into Windows and in Windows XP and that software uses to that identified as a major version of distributed separately. One of the a Communications Protocol to a Microsoft Middleware Product. This reasons that Microsoft’s anticompetitive communicate with a Windows 2000 change should resolve many of the actions were able to have the effect that server, then the Communications concerns raised. Under the revised they did was that they covered multiple Protocol must be available for license. definition, each Microsoft Middleware distribution channels. Internet Explorer Thus, a competing active directory Product discussed by commentors has and Microsoft’s Java Virtual Machine service could license and implement the corresponding Microsoft Middleware. were bundled with Windows, and they Communications Protocol and 85. Other commentors argue that were included in the ‘‘First Wave’’ communicate with Windows XP using inclusion of the Trademarked contracts with ISVs covering separately the same method as Active Directory. requirement has no relation to the distributed products, and they were function of the software code and available for separate download. 2. Trademarked or a Major Version of should not be part of the Microsoft 88. The disclosure of interfaces Any Microsoft Middleware Product Middleware definition. The requirement between software that is not the same or 83. The second requirement for that the software code satisfy the substantially similar to functionality Microsoft Middleware is that the Trademarked definition is based on the distributed with a Windows Operating software code either be Trademarked or business reality that Microsoft develops System Product is beyond the scope of marketed by Microsoft as a major logos and names for marketing the the case as it emerged from the Court of version of any Microsoft Middleware technologies that it wishes developers Appeals. For example, even assuming Product as defined in Section VI.K.1. and consumers to adopt. Software code arguendo that Office has some This is a modification reflected in the that is not marketed under a distinctive characteristics that make it middleware, SRPFJ that differs from the RPFJ Office has never been integrated into 86 CFA 93–94; CCIA 65–67; AOL 49–50; AAI 21; ProComp 44–46; Palm 9–10; Novell 10; Maddux Windows or referred to by Microsoft as 83 CCIA 65; RealNetworks 12; Maddux ¶ 19. ¶ 19; Litan 51; KDE 16; Gifford 3; Sen. Kohl 2–3; 84 Novell 13–16. Relpromax 14; SBC 36–38; Giannandrea 6; SIIA 27– 87 Palm 9–10; Kegel 13; SBC 38–39; SIIA 17–20, 85 Novel 13. 28. 38–41, 62–64; Johnson 5.
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being part of a Windows Operating mean that Microsoft could create be designated by new major version System Product. Office is a separate artificially small subsets of code numbers. Microsoft has little reason to product that is purchased separately. containing only the user interface develop a new feature based on 89. Finally, some commentors argue elements of Microsoft Middleware improved services from the operating incorrectly that requiring Microsoft Products.89 Commentors point out that system, such as improved speed or Middleware to have the same or the interfaces between user interface better coordination with other operating substantially similar functionality as a elements and the Windows Operating system functions, and then not promote Microsoft Middleware Product System Product are unlikely to be that feature to developers or consumers. encourages commingling of software competitively significant.90 This Moreover, should Microsoft Middleware code.88 Commingling of code, as modification does not substantively use a new API in an update that is not discussed by the Court of Appeals and change this definition, but instead a new major version, then that API still the District Court, is ‘‘placing code makes clear that this provision governs will be disclosed, at a minimum, when specific to Web browsing in the same the scope of what code must be the next new major version is released. files as code that provided operating included in the Microsoft Middleware. The only way for Microsoft to hide an system functions.’’ Microsoft, 253 F.3d API indefinitely is to never release a at 65. Products can be distributed with 5. Major Updates new major version, which historically Windows and not have their code 91. The last paragraph of Microsoft has not happened and is not likely to commingled with operating system Middleware discusses software code happen in the future. functions. To the contrary, requiring described as part of, and distributed software to be both distributed C. ‘‘Microsoft Middleware Product’’ separately to update, a Microsoft (RPFJ § VI.K) separately and substantially similar to Middleware Product. That code shall be software distributed with Windows deemed Microsoft Middleware if it is 94. A number of commentors address encourages the opposite: because the identified by a new major version Section VI.K, which defines ‘‘Microsoft code must be distributed separately, number, i.e., a whole number (‘‘6.0’’) or Middleware Product.’’ This definition is there must be a clear distinction a by a number with a single digit to the referenced in Sections III.C (prohibiting between code that belongs to the right of the decimal point (‘‘7.1’’). Microsoft from imposing certain Microsoft Middleware and code that Several commentors argue that restrictions on OEM licensees) and III.H belongs to the operating system. If all Microsoft can withhold interfaces (ensuring OEM flexibility in product the code for a Microsoft Middleware simply by updating its products with offerings) and, as subsumed by Section Product is commingled into operating version numbers such as ‘‘7.11’’ that do VI.L’s definition of ‘‘Microsoft Platform system files, then the separately not qualify as major versions, and that Software,’’ is also referenced in Sections distributed Microsoft Middleware the major version limitation is III.A (prohibiting retaliation against version will be enormous and constitute inappropriate.91 OEMs), III.F (constraining Microsoft’s a redistribution of the operating system. 92. It was necessary to draw a line to relationships with ISVs), and III.G Clearly, such a separate distribution include some code updates as Microsoft (prohibiting certain exclusionary would be unworkable. Middleware and exclude others. Per contracts). ‘‘Microsoft Middleware Product’’ means either the functionality 4. Includes at Least the Software Code standard software engineering practices, provided by one of a set of existing, That Controls Most or all of the User Microsoft assigns every change to the named products (e.g., Internet Explorer) Interface code a new version number, and the importance of the change is designated and their successors or, for products 90. The RPFJ included a fourth by how far to the right the number is. that do not now exist, the functionality requirement, that Microsoft Middleware For instance, a tiny change may be that meets several specific conditions. must include at least the software code designated by an increase from 5.011 to 95. Contrary to the views of several that controls most or all of the user 5.012; a slightly larger change is commentors, the definition does not interface elements of that Microsoft designated as going from 5.01 to 5.02, limit Microsoft Middleware Products to Middleware. This provision now has and a major version is designated as 5.1 a set of products that now exist, and so been clarified in the SRPFJ such that it to 5.2. Although Microsoft maintains does not fail to account for future 92 is no longer the fourth required element, these version numbers, they are not development. This critique ignores the but is a separate paragraph at the end of always advertised to the public because second part of the definition, which the definition. This change reflects the small changes are not advertised as new, explains what future technology will be fact that the first three requirements are improved, or updated products. Rather, considered Microsoft Middleware sufficient to define Microsoft products that are significant upgrades Products. Similarly, there are no limits Middleware. The now-separate sentence that will be promoted to the public are in the definition on the kinds of always was intended to be a minimum designated with new major version products (in the commentor’s words, size or ‘‘floor’’ as to the collection of numbers. ‘‘categories of applications’’) that may, software code that is included in a 93. The United States does not believe in the future, be considered Microsoft 93 particular piece of Microsoft that requiring Microsoft continuously to Middleware Products. It thus is Middleware. This ‘‘floor’’ prevents review small changes to its Microsoft inaccurate to state that the Litigating Microsoft from arbitrarily breaking up Middleware would yield significant States’ proposed definition (Provision into separate pieces the software code of competitive effects that would outweigh 22(x)) of Microsoft Middleware Product what would otherwise be Microsoft the costs to Microsoft. Significantly applies to products to be developed in 94 Middleware, thereby omitting from the improved features, including those the future and the RPFJ does not. Microsoft Middleware definition certain based on better APIs, are most likely to 96. Although the Litigating States’ critical or significant pieces of code that proposed definition of Microsoft constitute the Microsoft Middleware. 89 CCIA 64; Pantin 32; Palm 10: Novell 10–11; Middleware Product is somewhat Some commentors read this provision to Harris 11. 90 CCIA 64; Harris 11. 92 SBC 38; AOL 49; Henderson 6. 88 Novell 10; Palm 10; Maddux ¶ 19; Real 91 Pantin 12, 32; NetAction 10, 13; Kegel 5; Harris 93 SBC 39 n.7. Networks 11, 28; SBC 37, 39. 11; Maddux ¶ 15. 94 SBC 158–59.
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broader than the definition in the RPFJ, be included in the list of Microsoft obligated to disclose pursuant to III.D.’’ the United States believes that its Middleware Products (e.g., Microsoft See also Section VII.(A)(2) below. definition is clearer and therefore more Office, Outlook, handheld 103. One commentor argues that enforceable. Unlike the Litigating States’ synchronization software, Microsoft certain important software categories list of current products, for example, the Visual Studio, Microsoft Exchange). such as web-based software and digital RPFJ’s list (Section VI.K.1) consists Others, such as Microsoft .Net, are in imaging software are not present in any solely of known named products; there fact covered as to the elements that of the middleware definitions.103 This is no room to debate, for instance, products marketed under the .Net label assertion is incorrect, because neither of exactly what ‘‘systems and enterprise are among the products named in the the Non-Microsoft Middleware management software’’ (Litigating States definition of Microsoft Middleware definitions use any categories at all; Provision 22(c)i) is and is not covered. Product.101 And some lack the both cover any software functionality 97. Similarly, the RPFJ’s restriction on competitive significance of the products that otherwise meets the requirements. future products to those that are that are included in the list of existing Given that these definitions provide the Trademarked helps clearly to define the Microsoft Middleware Products (e.g., substance of what the decree protects, it set of covered products and reflects the MSN Explorer, MSN Messenger). would be inappropriate to place any business reality that Microsoft often 100. The definition of Microsoft category restrictions, such as digital names and markets the technologies that Middleware Product goes well beyond imaging software, in the definition. In a it wishes developers and consumers to the Internet browser and Java somewhat similar fashion, one adopt. Microsoft has little incentive to technologies that, as threats to the commentor argues that there is no bury its new products inside other Windows operating system against longer any demand for Non-Microsoft applications in order to avoid having it which Microsoft took anticompetitive Middleware, but bases his argument on meet the Trademark standard, as one actions, were at issue in this case. browsers, failing to realize that Non- commentor worries.95 Some Further, this definition balances the Microsoft Middleware can have any commentors claim that the Trademarked desire to include future middleware functionality.104 requirement would leave out many products—the character of which no 104. One commentor argues that the Microsoft products currently in the one can accurately predict—with the definition proposed by the Litigating market, but the commentors do not need for certainty in compliance and States or the definition from the IFJ identify any particular product.96 enforcement. would be preferable, but offers no 98. The Litigating States object that specific criticisms of Non-Microsoft the definition of Microsoft Middleware D. ‘‘Non-Microsoft Middleware’’ (RPFJ Middleware.105 Another commentor Product, as it pertains to future § VI.M) suggests that ‘‘non-Microsoft software products, excludes software that has not 101. The definition of Non-Microsoft product’’ be replaced with ‘‘non- been distributed separately from a Middleware is one of the most Microsoft technology’’ but also states Windows Operating System Product or important definitions in the RPFJ, but it that the definition seems appropriate to that is not similar to a competitor’s received very little criticism by define middleware.106 product.97 The nature of their concern is commentors. Non-Microsoft 105. One commentor argues that the unclear, however, given that the Middleware is the term used most often definition should not be limited to Litigating States’ own definition of to describe the products that the decree software that runs on Windows Microsoft Middleware Product in their is intended to protect. Toward that end, Operating System Products, because own Proposed Final Judgment contains it is one of the broadest definitions in that limitation leaves Microsoft free to very similar exclusions.98 the decree. retaliate against middleware software 99. Some commentors object to the 102. One criticism, which while that runs on other devices, such as 107 omission of Microsoft Office from the serious was based on an inadvertent servers and handhelds. The intended list of existing products that are error, points out that due to the meaning of this comment is unclear, Microsoft Middleware Products within definition of API, on which Non- because the retaliation section of the the meaning of the RPFJ, pointing to Microsoft Middleware depends, it might decree applicable to ISVs and IHVs, Office’s status as middleware and its be impossible for any Non-Microsoft Section III.F, does not use the term Non- large market share among office suites.99 software to satisfy the definition. 102 Microsoft Middleware. 106. Finally, the Non-Microsoft Others object to the omission of other These commentors point out that the Middleware definition is criticized on specific products or technologies, e.g., API definition only includes Microsoft the ground that Netscape 1.0 would not Microsoft Outlook, MSN Messenger, APIs, rendering the other definitions have satisfied it, because the earliest MSN RunTime, MSN Explorer, the MSN that use the term API nonsensical. This version of Netscape did not expose a client software, Passport, Microsoft was an inadvertent error in the RPFJ, range of functionality to ISVs through Exchange, Microsoft Visual Studio, and it has been corrected in the SRPFJ. published APIs.108 Microsoft, Net, and software that The previous definition of API has been Nevertheless, the synchronizes handheld devices with United States finds this definition 100 inserted directly in Section III.D, which PCs. The reasons for the omission of was the only section it was designed to completely appropriate, because it is the these products from the definition vary. address. A generic definition of API, presence of APIs that allows Some of these products have never been which is intended to invoke the middleware to threaten the applications part of a Windows Operating System common usage of the term API, and not barrier to entry. To remove the Product, but only are installed to be tied to Microsoft products, has requirement for APIs from the definition separately and so logically should not been inserted as definition VI.A. The would be to ignore the theory of the definition now reads: ‘‘’API’’ means 95 AOL, Klain 6. 103 Litigating States, Ex. B 17, 28. 96 Palm 10. application programming interface, 104 Gifford 8. 97 Litigating States, Ex. A 18. including any interface that Microsoft is 105 SBC 158. 98 Litigating States, Ex. B at 34–35. 106 Pantin Comment VI.5, VI.3. 99 SBC 38 n.6; SIIA 18. 101 AOL, Klain 13; Palm 9–10; Kegel 6. 107 Palm 9. 100 AOL 49–50, Klain 13; Palm 9–10; SIIA 19. 102 AAI33–34; Giannandrea 7. 108 Giannandrea 7.
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case.109 Moreover, whether or not the operating system (as set forth in ‘‘Personal Computer.’’ 115 See RPFJ software has published APIs is Section H). The limitation strikes the § VI.Q. This definition is referenced in completely within the control of the proper balance between (1) the RPFJ Sections III.A (prohibiting software developer. substantial costs associated with such retaliation against OEMs) and III.H documentation and redesign efforts, (ensuring OEM flexibility in product E. ‘‘Non-Microsoft Middleware Product’’ offerings), and in Definitions VI.H (RPFJ § VI.N) which these obligations require and (2) the competitive potential of products (‘‘IHV’’), VI.O (‘‘OEM’’), VI.P 107. Several comments raise issues with fewer than one million copies (‘‘Operating System’’), and VI.U relating to the definition of Non- distributed. In a nutshell, it prevents (‘‘Windows Operating System Microsoft Middleware Product.110 The Microsoft from having to undertake Product’’). majority of these comments relate to documentation and redesign work any 113. One commentor argues that the subsection (ii) of the definition, which time an ISV has a concept for a product definitions of ‘‘Personal Computer’’ and requires that ‘‘at least one million it decides to call ‘‘middleware.’’ In a ‘‘Windows Operating System Product’’ copies’’ of the product have been world of about 625 million PC users and might, when read together, distributed in the United States within software distribution via downloads and unintentionally exclude future 111 the previous year. Other commentors direct mail, distribution of only one Microsoft operating systems from the complain that the definition does not million copies, rather than sales, RPFJ’s provisions. The commentor 112 include web-based software. Finally, installation or usage, is a relatively expresses concern that the restriction of one commentor questions whether minor threshold in the software ‘‘Personal Computer’’ to a computer Netscape Navigator would have satisfied industry today. Indeed, almost ten years ‘‘configured so that its primary purpose the definition of Non-Microsoft ago the Mosaic browser achieved is for use by one person at a time’’ Middleware Product because it does not distribution to over 2 million people in would, in combination with the 113 expose Microsoft APIs. ‘‘just a year.’’ Gina Smith, Inside Silicon restriction of ‘‘Windows Operating 108. The RPFJ’s provisions apply Valley, A High-Tech Top 10 Computers System Product’’ to software distributed generally not only to a wide range of & Technology, San Francisco Examiner, ‘‘for use with Personal Computers,’’ currently marketed middleware 1995 WL 4901748 (Jan. 1, 1995). cause future Microsoft operating products, but also to products that have 110. Web-based software and web- systems not to be covered by the RPFJ not yet been developed. Certain of these based services are not explicitly if Microsoft continues its evolution provisions, of course, impose excluded from the definition of Non- toward operating systems—like affirmative obligations on Microsoft to Microsoft Middleware Product. Any Windows XP—that facilitate shared or take actions vis-a-vis middleware portion of web-based software or multiple-person use or that facilitate products. To ensure that Microsoft can 116 services that runs on a Windows home networking. This concern is undertake these obligations in Operating System Product and unwarranted. What Windows XP allows compliance with the RPFJ’s provisions otherwise meets the requirements of the is for different users of the same (and that the United State can enforce definition could qualify as a Non- computer (e.g., members of the same them), the characteristics of what Microsoft Middleware Product. To the family) to store individualized settings products will be considered middleware extent that any Microsoft software in the computer and access them in the future must be defined today natively implemented in a Windows through personal passwords. Whether or according to objective criteria. The Operating System Product not a computer is configured primarily definition of Non-Microsoft Middleware communicates natively with a Microsoft to facilitate use by different people at Product relates and is incorporated into server operating system product, the different moments in time is immaterial the portion of the definition of Microsoft Communications Protocols must be to whether it is configured primarily to Middleware Product that sets forth the available for license pursuant to Section be used by one person at a given characteristics that future products must III.E. moment in time—the relevant criterion meet to be considered Microsoft 111. Finally, the suggestion that for its designation as a Personal Middleware Products. Netscape Navigator could not satisfy the Computer in the RPFJ. 109. The one-million-copy limitation definition of Non-Microsoft Middleware 114. Several commentors question the applies only to the affirmative Product in the RPFJ, because Navigator exclusion of machines made by Apple obligations that Microsoft make public does not expose Microsoft APIs, is Computer from the definition of the APIs used in its own middleware 117 correct where the erroneous definition ‘‘Personal Computer.’’ Apple’s products (as set forth in Section III.D), of API contained in the RPFJ is applied. machines do not contain ‘‘Intel x86 and redesign the operating system to Based on comments that correctly compatible (or successor) provide a competing middleware identified a flaw in the definition of microprocessors,’’ and so do not fall product ‘‘default’’ status, i.e., the ability API, however, the United States and within the meaning of the definition. to override automatically Microsoft Microsoft have agreed to modify the Indeed, Apple computers were middleware functions integrated into definition. See Section VII(A)(2) below. expressly excluded from the relevant market in which Microsoft was found to 109 Stockton 2 (argues that middleware has very Under the new definition of API in the SRPFJ, 114 Netscape Navigator would be a monopolist. See Microsoft, 253 F.3d little to do with exposing APIs). at 52. The sole conduct that the United 110 Thomas 5–6; Sen. Kohl 2; Palm 9; SBC 40–41, qualify as a Non-Microsoft Middleware 159; ProComp 65–66; AOL 50; AOL, Klain 13–14; Product. States alleged, and the Court of Appeals PFF 21; Litigating States, Ex. A 17–18; CCIA 85; found, to be unlawful relating to Apple Litan 50; RealNetworks 13–14; AAI 34; F. ‘‘Personal Computer’’ (RPFJ § VI.Q) computers was the exclusive dealing Giannandrea 7. arrangement that Microsoft imposed on 111 Thomas 5–6; Sen. Kohl 2; Palm 9; SBC 40–41, 112. A few commentors raise 159; ProComp 65–66; AOL 50; AOL, Klain 13–14; concerns about the RPFJ’s definition of Apple. See id. at 74. Section III.G.1 of PFF 21; Litigating States, Ex. A 17–18; CCIA 85; Litan 50; RealNetworks 13–14. 114 Definition VI.A in the SRPFJ now reads: ‘‘‘API’ 115 Clapes 22; Litigating States 35 (offering own 112 Litigating States, Ex. A 18; AOL 50; AOL, means application programming interface, definition); ProComp B–2 (offering own definition). Klain 14. including any interface that Microsoft is obligated 116 SBC 43, n.10. 113 AAI 34. to disclose pursuant to III.D.’’ 117 Maddux ¶ 58; Giannandrea 7.
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the RPFJ fully addresses this conduct by Trademarked is inappropriate because it definition of Trademarked does not prohibiting such exclusive arrangements permits Microsoft to manipulate the operate in that manner. Instead, this with certain entities, including ISVs—a application of the middleware clause is designed to ensure that, to the category that unquestionably includes definitions to its products.123 extent that Microsoft distributes a Apple. Modifying the definition of 117. The definition of Trademarked is product in commerce under generic or Personal Computer to include Apple designed to ensure that the Microsoft descriptive terms or generic or computers would improperly expand Middleware and Microsoft Middleware descriptive terms in combination with the scope of the RPFJ beyond the Products that Microsoft distributes either the Microsoft or the Windows liability findings in this case. (either for free or for sale) to the market name and claims on that basis that such 115. Other commentors raise concern as commercial products are covered by product does not fall within the about the final sentence in Section the RPFJ. Thus, the definition of definition of Microsoft Middleware or VI.Q, 118 which reads: ‘‘Servers, Trademarked correctly describes the Microsoft Middleware Product, it will television set top boxes, handheld manner in which businesses typically be unable to claim trademark protection computers, game consoles, telephones, identify the source of the products that for such marks in perpetuity. pagers, and personal digital assistants they distribute in commerce, while H. ‘‘Windows Operating System are examples of products that are not seeking to carve out from the definition Product’’ (RPFJ§ VI.U) Personal Computers within the meaning products, such as ‘‘bug’’ fixes, that of this definition.’’ One commentor might be distributed under the 120. Definition U defines ‘‘Windows appears to suggest that any such devices Microsoft or the Windows names but Operating System Product’’ to mean for which Microsoft eventually offers a that are not of commercial significance. ‘‘the software code . . . distributed version of a Windows Operating System 118. Several commentors argue that commercially by Microsoft for use with Product should be considered Personal the exception for generic or descriptive Personal Computers as Windows 2000 Computers for purposes of the RPFJ.119 terms contained in the Trademarked Professional, Windows XP Home, The United States disagrees with the definition is a significant loophole that Windows XP Professional, and commentors’ views that any change to will permit Microsoft to exempt many successors to the foregoing. . . .’’ In 124 expand application of the RPFJ to products from coverage by the RPFJ. general terms, the term refers to software written for, for example, The exception for generic and Microsoft’s line of ‘‘desktop’’ operating telephones and pagers, is justified by descriptive terms, however, simply systems, as opposed to its server or the Court of Appeals’ decision in this reflects the reality that products other operating systems. Windows case, which is limited to the illegal distributed in commerce under such Operating System Product applies to maintenance by Microsoft of its names may not be trademarked unless software marketed under the listed monopoly in operating systems for Intel- the names develop secondary meaning. names and anything marketed as their Under the Trademarked definition, compatible PCs.120 Moreover, such a successors, regardless of how that Microsoft simply announces in advance change would be inconsistent with the software code is distributed, whether that it will not claim such terms as intent of the RPFJ to identify Personal the software code is installed all at once trademarks and, therefore, that such Computers with clarity because it would or in pieces, or whether different terms never will gain secondary create unmanageable circularity: a license(s) apply. meaning. It is for precisely this reason Personal Computer would be a machine that any product distributed in 1. Microsoft’s Discretion for which a Windows Operating System commerce under, or identified by, Product is available, and a Windows 121. Various comments address the marks that consist of any combination of Operating System Product would be a final sentence of Definition U, which generic or descriptive terms and a product designed for use with a reads: ‘‘The software code that distinctive logo or other stylized Personal Computer. comprises a Windows Operating System presentation are not exempted from Product shall be determined by G. ‘‘Trademarked’’ (RPFJ § VI.T) coverage as Trademarked, because such Microsoft in its sole discretion.’’ Some 116. A number of commentors marks are inherently distinctive. of the comments assert, incorrectly, that 119. At least one commentor suggests address the scope of the definition of permitting Microsoft the discretion to that the portion of this definition ‘‘Trademarked’’ in the RPFJ.121 Most of determine what package of software is relating to Microsoft’s disclaimer of these commentors suggest that the labeled as a ‘‘Windows Operating certain trademarks or service marks, and definition is too broad and would System Product’’ for purposes of the its abandonment of any rights to such permit Microsoft to evade its disclosure RPFJ will allow Microsoft to re-label as trademarks or service marks in the obligations under the RPFJ by part of the ‘‘Windows Operating System future, conceivably operates to remove manipulating its use of trademarks.122 Product’’ code that would otherwise be automatically trademark protection from Several commentors complain that middleware and thereby avoid having marks that Microsoft already has basing the determination of whether a that code constitute ‘‘Microsoft registered but that also fall within this product is either Microsoft Middleware Middleware’’ or provide the description.125 or a Microsoft Middleware Product on But this portion of the functionality of a ‘‘Microsoft Middleware Product’’ under the whether the product has been 123 ProComp 44–45; CCIA 65–67; Pantin 36; 126 Giannandrea 6. RPFJ. Microsoft could, these 118 Palm 8–9, 14–15 124 ProComp 44–45; KDE 15–16; CCIA 65–67; SBC commentors hypothesize, essentially 119 Pantin 34. 38 n.5. ‘‘decide for purposes of the decree 120 Maddux ¶ 58; Pantin 34; Alexander 125 See CCIA, at 66–67 (‘‘Indeed, Microsoft could obligations where the OS stops and (unpaginated). plausibly argue that the Windows Media mark where middleware begins,’’ 127 and 121 KDE 15–16; Litan 51; ProComp 44–45; CCIA does not come within the ‘Trademarked’ definition 65–67; SBC 38 n.5; Pantin 36; Giannandrea 6. as it is, since even that mark consist of no more than thereby evade the decree’s technical 122 For a discussion of issues relating to the the Windows mark in combination with the intersection of the definition of Trademarked with generic term ‘media.’ RPFJ § VI(T) may therefore 126 AOL 20 n.19; CCIA 53; Harris 12; KDE 12; the definitions of Microsoft Middleware and embody Microsoft’s disclaim[er of] any trademark Litan 43–44; ProComp 7; SBC 42; SIIA 26; TRAC Microsoft Middleware Product, see Sections III(B) rights in such descriptive or generic terms apart 8. and III(C) above. from the Microsoft or Windows trademarks.’’’). 127 CCIA 53.
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provisions, including the disclosure 2. Prior Windows Versions applications. Going forward, developers provisions of Section III.D 128 or the 124. A few commentors 131 suggest are unlikely to write middleware or removal provisions of Section III.H. that Definition U. also should include— applications to any significant degree to 122. These comments are incorrect. in addition to the software code the older, 9x operating systems, because Microsoft’s discretion under Definition Microsoft distributes as Windows 2000 those versions are built on a different U as to its packaging decisions (i.e., Professional, Windows XP Home and code base than that underlying Windows 2000, Windows XP, and what it chooses to ship labeled as Professional, and their successors— future versions of Windows. ‘‘Windows’’) does not give it the ability prior versions of Windows, including to exclude software code from the Windows 9x (Windows 95, Windows 3. Operating Systems for Other Devices application of any other relevant 98, Windows 98 Second Edition, and definition of the RPFJ. Thus, nothing in Windows ME) and Windows NT 4.0. 126. Finally, a few commentors Definition U alters the fact that, under These Microsoft operating systems were suggest that Definition U should be broadened to include operating systems the RPFJ, software code that Microsoft not included in the RPFJ’s definition of for non-desktop PCs and non-PC ships labeled as ‘‘Windows’’ can also Windows Operating System Product because their current commercial and devices, such as tablet PCs and constitute ‘‘Microsoft Middleware’’ or a competitive significance is significantly handheld devices,133 and even ‘‘Microsoft Middleware Product.’’ So more limited than the operating systems operating systems used in ‘‘an extensive long as software code or the included in the definition. For example, set of devices,’’ most with little or no functionality it provides meets the Windows 95, as its name suggests, was similarity to PCs, including, among requirements of any other definition(s) first shipped by Microsoft some seven others, smart phones, digital cameras, in the RPFJ, Microsoft’s ‘‘discretion’’ years ago and is no longer actively retail point of sale devices, automobile under Definition U to call it part of a distributed by Microsoft, while computing systems, industrial control Windows Operating System Product Windows 98 and 98 Second Edition will devices, and smart cards.134 will not change the result.129 Thus, for soon enter a phase of restricted 127. There is no basis in the Court of example, Internet Explorer is both a 132 availability. Windows Millennium Appeals’ opinion for such a sweeping Microsoft Middleware Product and part Edition (ME), though much more recent, definition and the sweeping scope of of a Windows Operating System has enjoyed only limited success and coverage of the RPFJ that would follow Product. already has been supplanted as from it. Plaintiffs’ case focused on 123. A number of commentors also Microsoft’s primary OS by Windows Microsoft’s anticompetitive use of its PC assert that the final sentence of 2000 and Windows XP, both of which operating system monopoly to thwart Definition U might be read to transform are covered by Definition U. emerging middleware threats to the what otherwise would be two separate 125. The OEM-related provisions of applications barrier to entry into the PC products for antitrust purposes into one, the RPFJ, including Sections III.A, III.B, OS market that protected that or somehow to immunize Microsoft III.C, and III.H, apply primarily to monopoly. The Court of Appeals from potential liability for illegal OEMs’ ongoing shipments of Microsoft affirmed the District Court’s finding that tying.130 Such a reading is untenable. operating systems with their new PCs, Microsoft possessed a monopoly in a Nothing in this provision, or in the RPFJ not to the installed base, and the great market for PC operating systems, and as a whole, purports to, or could, alter majority of those shipments today and that it engaged in a variety of illegal the application of the antitrust laws to going forward will be Windows 2000, actions to maintain that monopoly. Microsoft’s conduct or its products. In Windows XP, and successors. Further, Extending, as these commentors urge, particular, the RPFJ does not grant the provisions of Sections III.D and each of the provisions of the RPFJ to a Microsoft any new rights or any III.H, which require certain technical or wide variety of non-PC devices—all of design changes by Microsoft to its immunity under the antitrust laws with them outside of the relevant market Windows Operating System Products, respect to otherwise illegal tying or proved at trial and upheld on appeal— are relevant largely to OEM and product integration. Similarly, is unwarranted and unrelated to any consumer choices regarding operating Microsoft’s decision to distribute certain proper remedial goal in this case. systems that will be shipped under the software code as part of a Windows RPFJ, rather than the installed base of IV. OEM Provisions Operating System Product for purposes operating systems that have already A. Overreliance on OEMs of this definition does not in any way been distributed. Finally, the disclosure affect the status or characterization of provisions of Section III.D are likely to 128. Several commentors suggest that such code under the antitrust laws or have the greatest competitive the RPFJ burdens OEMs with the the application of those laws to such significance for Windows 2000 and responsibility of injecting competition code—e.g., whether software Microsoft Windows XP and their successors, into the operating system market, a says is part of the package it distributes because those operating systems burden that, in the view of these as its ‘‘Windows Operating System represent the versions of Windows to commentors, the OEMs are not Product’’ is or is not a separate which the great majority of developers financially or technically capable of ‘‘product’’ for antitrust purposes. are likely to write middleware or bearing. Under this view, the low margins and fierce price competition in 128 Litan 9, 43; RealNetworks 11; SIIA 25–27. 131 Giannandrea 1–2; NetAction 2, 6–8; Pantin 36. the OEM business will deter OEMs from 129 Indeed, this sentence in Definition U merely 132 Microsoft’s product website indicates that undertaking the costs and risks of confirms what Microsoft already had the power to Windows 95 was designated as being in the ‘‘Non- do—label the package of what it calls its own Supported phase’’ (where licenses may no longer be exercising their new flexibility, operating system products. The sentence does not available and support is limited) on November 30, guaranteed by RPFJ Section III.H, to narrow or alter the operative provisions of the RPFJ; 2001; Windows 98, Windows 98 SE, and Windows replace access to Microsoft Middleware those provisions principally rely on other 4.0 will all enter the ‘‘Extended’’ phase (where Products with access to Non-Microsoft definitions, such as Microsoft Middleware Product, licenses may no longer be available to consumers regardless of how Microsoft labels its operating and support is somewhat limited) on June 30, 2002. 133 system. See
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Middleware Products.135 To correct this take advantage of the RPFJ’s flexibility Although some commentors perceived problem in the RPFJ, one even if they have not taken advantage of congratulate the United States for commentor proposes to require the very limited flexibility Microsoft has provisions that are procompetitive, Microsoft to license the binary code of offered them so far. In fact, at least one represent real benefits to consumers, its Windows Operating Systems OEM recently showed that it will and take the club out of Microsoft’s Products to ISVs and system integrators replace Microsoft middleware when it hand,140 others believe that this section at the lowest license fee that Microsoft believes other options are more is not broad enough. Some commentors charges to any OEM or other customer; profitable: Compaq announced, on propose, for example, that the section be the ISVs or system integrators would be December 12, 2001, that its main expanded to cover: (1) all software, allowed to repackage Windows with consumer line of PCs will ship with including Microsoft Office; 141 (2) non-Microsoft middleware and RealNetworks’ RealOne Player, rather entities other than OEMs; 142 (3) threats applications and license the new than Microsoft’s Windows Media of retaliation; 143 (4) all forms of package to interested OEMs or other Player, set as the default media retaliation; 144 (5) retaliation for any consumers.136 player.138 Second, other OEMs may lawful acts undertaken by an OEM; 145 129. The argument that competitive have been reluctant to start customizing (6) existing forms of non-monetary pressures constrain OEMs, and so will their systems until a final judgment is consideration and all monetary make them unwilling to load non- in place and they know the precise consideration; 146 and (7) shipping PCs Microsoft middleware, ignores the fact contours of their options. Third, as without an operating system.147 One that the OEMs will respond to explained above, even if an OEM commentor seeks to eliminate from competitive pressures in choosing what chooses not to replace Microsoft Section III.A Microsoft’s ability to software to offer consumers. The low products with non-Microsoft products, enforce its intellectual property rights margins and fierce competition in the that does not detract from the value of through patent infringement suits.148 OEM industry make OEMs more providing the OEM with the flexibility Commentors also believe that the sensitive to consumer preferences, not to do so. The RPFJ is intended to protect Section does not protect OEMs from less. If an OEM believes it can attract the competitive process, not to impose arbitrary termination of their Windows more customers by replacing a Microsoft particular competitive outcomes. licenses.149 Commentors further claim product with a non-Microsoft product, it 132. More broadly, the emphasis in that the standard contained in Section will do so; if not, it will not. And, the RPFJ on provisions to free OEMs’ III.A. of subjective, actual knowledge is indeed, this is precisely the way that a choices is entirely appropriate, given too hard to meet,150 and that Microsoft’s market should work. Thus, the success their importance in the case. The Court ability to offer Consideration is too of the RPFJ in ensuring competitive of Appeals found that OEM broad.151 Finally, some commentors conditions should not be judged by preinstallation was ‘‘one of the two most object to the RPFJ’s failure to define which choices OEMs make; rather it cost-effective methods by far’’ of ‘‘retaliation.’’ 152 should be judged by whether OEMs distributing browsers, and that 1. Section III.A Is Sufficiently Broad have the opportunity to make those Microsoft used various license 135. Section III.A is designed to choices, free from contractual restrictions on OEMs to ‘‘prevent[] prevent Microsoft from undertaking restrictions and fear of retaliation. OEMs from taking actions that could 130. Similarly, the likely competitive increase rivals’ share of usage.’’ actions against OEMs that have the impact of the RPFJ cannot be evaluated Microsoft, 253 F.3d at 60, 62. The RPFJ’s purpose and effect of impairing an by looking at how OEMs have provisions reflect that preventing OEM’s ability freely to choose to responded to the limited freedom to Microsoft from defeating future distribute and support middleware that may threaten Microsoft’s operating replace Microsoft’s desktop icons in middleware threats through restrictions 153 Windows XP that Microsoft voluntarily and pressure on the OEM channel is system monopoly. See also CIS at 25. offered to OEMs in a letter dated July essential to ensuring that there are no Furman 31–32; AOL 34–38; AOL, Klain 2–3; Nader/ 11, 2001. Several commentors leap from practices likely to result in Love 1–6; Maddux ¶¶ 2–4; Sen. Kohl 4; Lococo 1. the observation that no OEM has so far monopolization in the future. 140 Nader/Love 2; CompTIA 5. chosen to remove Internet Explorer from 141 B. Non-Retaliation (RPFJ § III.A) SBC 97; Sen. Kohl 3–4; Nader/Love 2; AOL, the desktop to the assertion that Klain 2; Pantin 4–7; ProComp 59; PFF 19; AAI 31– therefore the RPFJ’s provisions 133. Section III.A of the RPFJ 33. prohibits a broad range of retaliatory 142 SBC 95–96, 99; Schulken 1; McBride 1 (should permitting the removal of end-user apply to Xbox). access to Microsoft Middleware conduct by Microsoft. Specifically, 143 Microsoft may not retaliate against an Palm 14; Red Hat 22–23; ACT 27. Products will have no competitive 144 Sen. Kohl 4; Pantin 4–7; ProComp 59; CFA effect.137 OEM based upon the OEM’s 88–89; Young 1. 131. Such a leap is unwarranted for contemplated or actual decision to 145 Pantin 6–7. several reasons. First, the RPFJ will support certain non-Microsoft software. 146 RealNetworks 24–25; AOL, Klain 3. grant OEMs significantly greater This section assures OEMs the freedom 147 Pantin 4–7; Harris 4; Alexander 2; Godshall 1 to make decisions about middleware or (shipping PCs with a single non-Windows operating flexibility to customize Windows system); Miller 2; Hafermalz 1; Scala 1; Schulze 2; compared to Microsoft’s voluntary offer. other operating systems without fear of Peterson 3; Burke 2. An OEM’s ‘‘experience’’ under reprisal. 148 Red Hat 11–13, 16–18, 22–23. Microsoft’s July 11 letter does not 134. Commentors express several 149 AOL, Klain 3; CCIA 85–86; Pantin 6–7; Harris equate to experience under the RPFJ. concerns about Section III.A.139 4. The United States believes that it is 150 SBC 97; ProComp 59; KDE 13. 151 quite possible that OEMs will choose to 138 See Compaq Press Release, Dec. 12, 2001, Maddux ¶ 5; AOL, Klain 3. http://www.compaq.com/newsroom/pr/2001/ 152 SBC 96; Red Hat 16–17. pr2001121204.html. 153 Levy 1 (settlement adequate). This would 135 ProComp 56–57; CCIA 58–59; CCIA, Stiglitz & 139 RealNetworks 24–25; AAI 25–34; SBC 91–100; include linking the price or terms of Office to the Furman 32–33; SIIA 56–60. Harris 4; Bast 2–3; Thomas 2–3; Red Hat 11–13, 16– promotion of rival middleware. Doing so would 136 SIIA 56–60. 18, 22–23; Alexander 2; KDE 13–14; CFA 88–89, represent an alteration in Microsoft’s commercial 137 SIIA 16; CCIA 54–55; AOL 15–16; ProComp 93–95; CompTIA 5; PFF 19; ProComp 55–60; Pantin relationship with that OEM because of that OEM’s 60. 4–7; Palm 14–15; CCIA 85–87, and Stiglitz & promotion of middleware.
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The Section is logically limited to to accept a third party’s offer in lieu of 3. Section III.A Protects OEMs From retaliation against OEMs,154 as no Microsoft’s. Arbitrary Termination of Their Licenses evidence was presented at trial to show 139. Certain commentors also argue 142. Commentors are simply incorrect that entities other than OEMs, ISVs, and that limiting retaliation to withholding in their assertions that the terms of the IHVs have been subject to retaliation in ‘‘newly introduced’’ forms of non- RPFJ permit arbitrary termination of the past, or that other entities are so monetary Consideration somehow Covered OEMs’ Windows licenses.158 dependent upon commercial relations exempts existing forms of such The RPFJ states expressly that Microsoft with Microsoft (or Microsoft’s Consideration from the reach of Section may not terminate a Covered OEM’s Consideration) that they are susceptible III.A. This is incorrect. As noted in the license without first providing a written to retaliation. CIS (at 26), this clause specifically notice and opportunity to cure. It is only 136. Comments suggesting that applies to ‘‘successor versions of if the OEM has failed to cure the Section III.A is deficient because it fails existing forms of Consideration.’’ violation after the two letters that to address threats of retaliation similarly Microsoft then may terminate the OEM’s are misplaced. Section III.A ensures that 140. Finally, certain comments license. If the OEM cures the violation, Microsoft cannot retaliate based upon recommend that this Section expressly Microsoft cannot terminate for that the OEM’s contemplated or actual permit shipping a computer without a violation. Microsoft cannot reasonably decision to support certain non- Microsoft operating system or no be barred from ever terminating an Microsoft software. Threats of operating system at all. The United OEM’s license, because there may be retaliation are empty when Microsoft States notes, however, that such legitimate reasons for doing so (e.g., an cannot follow through on them. machines are already available in the OEM’s failure to pay). 156 137. Some commentors contend that market and sees no reason for the 143. Section III.A.3 also protects 157 Microsoft should be prohibited from all RPFJ to address the question. OEMs from losing their Windows license in retaliation for exercising any forms of retaliation, noting that Section 2. Section III.A Properly Allows III.A does not prohibit retaliation that is option provided for in the RPFJ. Microsoft To Enforce Intellectual Pursuant to those provisions, for unrelated to middleware. Commentors Property Rights urge the Court to expand Section III.A. example, Microsoft may not terminate a to prohibit retaliation for any lawful act 141. Section III.A provides that Windows license because an OEM has by an OEM. This position, however, nothing in the provision prohibits removed end-user access to any misapprehends the case. This case dealt Microsoft from enforcing its intellectual Microsoft Middleware Product. with Microsoft’s actions with respect to property rights where doing so is not 4. Requiring Proof of Knowledge Is middleware threats to Microsoft’s inconsistent with the RPFJ. A Necessary and Can Be Met operating system. The RPFJ prohibits commentor suggests that Section III.A 144. Certain commentors allege that Microsoft both from repeating those should, in fact, prohibit Microsoft from requiring proof that Microsoft knew that actions found to be illegal, and from bringing or threatening lawsuits to an OEM was or was contemplating undertaking other, similar acts that may enforce such rights. This suggestion is undertaking any of the enumerated protect its operating system monopoly meritless. The commentor would force actions before finding retaliation sets an from middleware threats. Microsoft to dedicate its intellectual impossible standard. In fact, such a 138. The provision of Section III.A property, effectively putting all of its requirement is reasonable because an covering non-monetary patented and copyrighted material into inference of retaliation would be Consideration 155 also drew comments. the public domain. Although inappropriate unless Microsoft knows of Commentors suggest that the provision Microsoft’s competitors would the action that it is seeking to punish or be re-written to include monetary appreciate an ability to free-ride on prevent. Consideration. In fact, Section III.A. Microsoft’s investment in research and 5. Microsoft’s Permitted Use of already covers existing and successor development, the antitrust laws do not ‘‘Consideration’’ Is Appropriate forms of monetary Consideration, as require such a draconian remedy with Microsoft is expressly prohibited from its attendant destruction of incentives 145. The RPFJ permits Microsoft to retaliating by ‘‘altering . . . commercial for innovation. The RPFJ seeks to draw provide Consideration to an OEM with relations with [an] OEM . . .’’ Dropping a balance between preventing Microsoft respect to a Microsoft product or or changing monetary Consideration from engaging in anticompetitive acts to service, but only where the level of would alter commercial relations. protect its operating system monopoly Consideration is commensurate with the Section III.A, however, does not while still encouraging it to compete OEM’s contribution to the development, prohibit Microsoft from competing by, and to innovate. Prohibiting Microsoft distribution, promotion, or licensing for example, offering to pay OEMs for from enforcing its intellectual property that particular product or service. This desktop placement. But Section III.A rights would deter innovation unduly portion of Section III.A is designed to would prohibit Microsoft, in this and encourage infringement without address permissible collaborations example, from retaliating by altering its barring conduct found by the District between an OEM and Microsoft to commercial relations with, or Court and Court of Appeals to violate promote Microsoft products and services. In exchange for the OEM’s withholding non-monetary the antitrust laws. Consideration from, OEMs that choose assistance, Microsoft may provide a different level of consideration 156 The Internet site Yahoo! lists in its commercial relationship with that OEM because of that OEM’s directory a substantial number of retailers offering commensurate with that OEM’s promotion of middleware. custom-built PCs, at least some of which will contribution—so that, for example, an 154 Section III.F addresses retaliation against ISVs provide a computer without an operating system at OEM that collaborates with Microsoft on and IHVs. a discounted price (for example, Discovery developing a particular product through 155 ‘‘Consideration’’ is defined in Section VI.C. Computers). Many refurbished computers are extensive testing, or offers advertising or Briefly, Consideration includes such things as offered without an operating system, as well. preferential licensing terms, support, product Moreover, component retailers offer replacement other promotion, may be compensated information, certifications, and permission to hard drives, also without an operating system. display trademarks, icons, or logos. 157 See also, RPFJ § III.C. 158 ‘‘Covered OEM’’ is defined in Section VI.D.
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for its greater role through a higher level 1. Top Twenty OEMs 2. MDAs Or Other Discounts of Consideration for that product than 149. Section III.B is limited to the 152. A number of commentors argue one that is not developing or supporting that Section III.B should forbid all that product. Similarly, this provision twenty OEMs with the highest worldwide volume of licenses of market development allowances would permit Microsoft to provide (‘‘MDAs’’) or other discounts.162 This different levels of Consideration to those Windows Operating System Products. Some commentors criticize this approach would be unnecessarily OEMs buying larger quantities of overbroad and would discourage product. The OEM buying one million limitation, arguing that it leaves Microsoft free to retaliate against efficient behavior that has little or no copies of a product may be offered potential to be used by Microsoft for greater support than the OEM buying smaller OEMs, including regional ‘‘white box’’ OEMs.160 The top twenty anticompetitive purposes. There are a five copies. Microsoft may, however, OEMs, however, together account for a range of business activities involving base the level of Consideration only on substantial percentage, in excess of 75 Microsoft and OEMs, having nothing to the OEM’s support for the same do with operating system or middleware percent in fiscal 2001, of all Windows Microsoft product or service, and not on competition, where MDAs or other licenses. Consequently, providing those an OEM’s agreement not to support or discounts would be procompetitive. key OEMs with the added guarantees of develop a competing product or to 153. At the same time, Section III.B freedom to distribute and promote support or develop other Microsoft carefully guards against Microsoft particular types of software that could products. misusing MDAs or other discounts to erode Microsoft’s monopoly—the reward or retaliate against particular 6. The RPFJ Uses the Common Language purpose of Section III.B—is of extreme OEMs for the choices they make about Definition of ‘‘Retaliate’’ competitive significance. In any event, installing and promoting Non-Microsoft all OEMs are protected from retaliation Middleware or Operating Systems or for 146. Commentors also complain that by Section III.A of the RPFJ. Section any other purpose that is inconsistent the RPFJ fails to define ‘‘retaliate.’’ In III.B is intended to provide an with the provisions of the RPFJ.163 To fact, no separate definition for the term additional layer of protection for these avoid the risk of Microsoft misusing is needed. The RPFJ prohibits Microsoft twenty OEMs that are likely to be of MDAs or other discounts to reward or from retaliating by altering commercial great significance. retaliate against OEMs for competitive relations with, or withholding newly- 150. At least one commentor would middleware activities, Section III.B introduced forms of non-Monetary go much further and seek to require provides that, if Microsoft utilizes Consideration from, an OEM. In this Microsoft to offer uniform terms not MDAs or similar discounts, they must context, ‘‘retaliate’’ does not require only to the top twenty OEMs, but also be available and awarded uniformly to further elaboration. to all of the hundreds of OEMs, the ten largest OEMs on one discount C. Uniform Terms (RPFJ § III.B) whatever their size, and even further to scale and separately to the ten next ‘‘all third party licensees.’’ 161 There is largest on the same or another discount 147. To ensure that the twenty no rational basis for treating every scale. In addition, the discounts must be Covered OEMs will be free from the licensee of Windows, from the largest based on objective, verifiable criteria, threat of Microsoft retaliation or OEM to the smallest corporation, and those criteria must be applied coercion, Section III.B requires that equally with respect to their Windows uniformly to the relevant OEMs. Microsoft’s Windows Operating System royalties and all the terms and 154. The RPFJ does prohibit Microsoft Product licenses with those OEMs conditions of their licenses. Certainly from using MDAs or other discounts if contain uniform terms and conditions, the intent to prevent Microsoft from they are inconsistent with any other including uniform royalties. These discriminating or retaliating in response provision in the RPFJ. This would royalties must be established by to competitive activities cannot begin to include, for example, retaliation against Microsoft and published on a schedule justify such a broad provision. In fact, computer manufacturers for using non- that is available to Covered OEMs and such a requirement would be Microsoft middleware that is the Plaintiffs. enormously inefficient and disruptive implemented through incentive 148. Windows license royalties and and would ignore vast differences payments for faster ‘‘boot up.’’ between differently situated types or terms are inherently complex and easy 3. OEMs Should Be Able To Negotiate groups of licensees. for Microsoft to use to affect OEMs’ 155. Several commentors argue that 151. In any event, neither the antitrust behavior, including what software the there should be a limited exception to laws generally, nor the Court of OEMs will offer to their customers. the requirement of uniform license Section III.B is intended to eliminate Appeals’ decision specifically, require that even a monopolist like Microsoft any opportunity for Microsoft to set or 162 SBC 101, 136; Herrmann 1; Timlin 3; Mitchell modify a particular OEM’s royalty, or its treat all third parties equally. In fact, in 2; Weiller 2; Clapes 5. other license terms or conditions, in many instances ‘‘unequal’’ treatment 163 For example, several commentors raise the order to induce that OEM not to (e.g., collaboration between two specter of Microsoft offering OEMs MDA discounts companies that does not include other on Windows licenses based on the number of promote non-Microsoft software or to copies of Office shipped by the OEMs. Kegel 9; CFA retaliate against that OEM for promoting firms) evidences legitimate competition. 12. But such discounts would be barred by the final competing software.159 By removing any Thus, Section III.B was crafted carefully paragraph of Section III.A, which forbids Microsoft mechanism for Microsoft to use such to provide extra protection against from paying consideration with respect to one improper rewards or retaliation product based on an OEM’s distribution of a leverage, this provision will further different Microsoft product. Section III.B.3 would permit OEMs to make their own involving the most significant OEMs, then preclude an MDA for such a purpose, since it independent choices without fear of without precluding other conduct that would be ‘‘otherwise inconsistent with any portion retribution. could result in potentially of this Final Judgment.’’ Similarly, the AOL procompetitive benefits. comment erroneously asserts that the MDA provision would allow OEMs that promote 159 Economides 12 (‘‘this restriction can help Microsoft products to receive MDA discounts that avoid possible retaliation of Microsoft, so in the 160 Kegel 9; Schulze 2; Francis 1. are denied to OEMs that deal with Microsoft’s present context, it may be in the public interest.’’) 161 SBC 136. rivals. AOL 35–36.
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terms and conditions in Section III.B to conditions, so long as any term or that Microsoft could abuse the notice permit OEMs to continue to negotiate condition resulting from that agreement provision and then terminate a with Microsoft concerning exceptions to then becomes the uniform term or disfavored OEM without any certain intellectual property ‘‘non condition, is included on the required opportunity to cure. assertion covenants’’ or ‘‘non assertion schedule, and is offered on a non- 161. First, any abuse of the of patents’’ provisions in their licenses discriminatory basis to all Covered opportunity to cure or termination with Microsoft.164 In these covenants, OEMs. And certainly nothing in the provisions by Microsoft—e.g., through which have been part of Windows RPFJ specifies what terms or conditions sham notices—would be a serious license agreements with OEMs for years ultimately will become the uniform breach of its obligations under the RPFJ. but which historically have been the terms and conditions. Those terms and Second, if the process is not misused, subject of intense negotiation between conditions may be set at a variety of two previous notices and opportunities Microsoft and OEMs, the OEMs agree levels determined either by Microsoft to cure during a single license term not to assert certain patent claims itself or through advance discussion and should provide ample protection against against Microsoft.165 negotiation with the OEMs; the RPFJ retaliation for OEMs that are dealing 156. According to these commentors, specifies neither the process nor the with Microsoft in good faith and ample the uniform licensing terms provision of resulting level. protection for Microsoft against OEMs Section III.B of the RPFJ appears to be 158. The Litigating States also assert that fail to comply with their preventing Microsoft from negotiating that Microsoft’s view is that it is contractual obligations. Finally, a with OEMs about the latest non authorized to insist on uniform, and requirement that any termination be for assertion provisions.166 One of the uniformly onerous, non assertion ‘‘good cause’’ is unnecessary and overly commentors, Sony, urges a modification provisions by the terms of Section III.I.5. regulatory; once again, any sham or clarification of the RPFJ that would To the extent that anyone at Microsoft termination by Microsoft for permit it and other OEMs to negotiate (or elsewhere) ever believed or anticompetitive purposes would with Microsoft for more favorable non conveyed to any OEM that Section III.I.5 constitute a serious breach of the RPFJ. assertion provisions than those of the RPFJ authorizes Microsoft to 6. Servers Or Office contained in Microsoft’s uniform terms insist on broad patent non-assertion and conditions, with any new terms provisions, that belief was inaccurate. 162. Section III.B requires that obtained then required to be offered to The cross-license provision in III.I.5 was Microsoft employ uniform license all Covered OEMs on a non- extremely narrow and applied only in a agreements and uniform terms and discriminatory basis; individual OEMs particular, limited type of situation. In conditions for the top twenty OEMs could choose to accept or decline.167 any event, in part in response to these only with regard to its licensing of 157. The United States believes that comments, and to avoid any possibility Windows Operating System Products. such a modification is unnecessary. that Section III.I.5 could be The provision is limited to Windows Currently, nothing in the RPFJ prevents misinterpreted in a way that discourages licenses because the relevant market in Microsoft from negotiating with Covered any third party from taking advantage of which Microsoft was found to have a OEMs prior to establishing its uniform options or alternatives offered under the monopoly consists of PC operating terms and conditions. The RPFJ does RPFJ, the United States and Microsoft systems, and because the various illegal not in any way require that Microsoft have agreed to delete Section III.I.5 from actions in which Microsoft engaged must unilaterally set those terms, the SRPFJ. See Section VII(C)(3) below. were undertaken to protect that without any advance negotiation with or monopoly, not other products. input from the OEMs. Similarly, nothing 4. Volume Discounts 163. Some commentors argue that in the RPFJ prevents Microsoft from 159. One commentor claims that the Microsoft can evade the restrictions of agreeing with an OEM to provisions that RPFJ should permit Microsoft to utilize Section III.B simply by shifting its depart from the uniform terms and volume discounts only if they are based retaliatory price discrimination to other on an independent determination of the key Microsoft products such as Office or 170 164 Sony 2, 4. See also Litigating States’ Motion actual volume of shipments, in order to server operating systems. To the for Limited Participation in Light of the Deposition avoid Microsoft manipulation of such extent the commentors intend to assert of Mr. Richard Fade, filed February 19, 2002, at 6– discounts.168 But such a regulatory that this limitation in Section III.B 7, 19 (‘‘Litigating States’ Motion’’). In their Motion, leaves Microsoft free to use the Litigating States seek an order that would mechanism is not necessary under the permit them to participate in this Tunney Act RPFJ. It requires that any volume discriminatory licensing terms or proceeding for the limited purpose of submitting discounts must be ‘‘reasonable’’ and conditions for Office or other important portions of the transcript of a Microsoft employee, based on the ‘‘actual volume’’ of Microsoft products in order to reward or Richard Fade, purportedly relating to the issues of punish OEMs for their actions regarding Section III.B, the non assertion of patent provisions, Windows licenses. The RPFJ’s and Section III.I.5. The United States’ Response to enforcement mechanism will ensure Microsoft and non-Microsoft the Litigating States’ Motion did not object to that Microsoft does not misuse the Middleware, that assertion is wrong. participation in this one instance colely for the calculation of such discounts. Although Section III.B is limited to narrow purpose identified—adding the proffered Windows Operating System licenses, information to the Litigating States’ public 5. Termination—Cause, Materiality, comment—but did object to any broader or the general anti-retaliation provisions of continued participation. Microsoft filed its And Notice Section III.A are not so limited. See Response (‘‘Microsoft Response’’) on February 22, 160. Some commentors criticize Section IV(B) above. Any attempt by 2002, in which it did not oppose the participation Microsoft to alter the terms of any (not and submission, and to which it attached a Section III.B for not requiring Microsoft declaration of Richard Fade (‘‘Fade Decl.’’). Because to demonstrate ‘‘good cause’’ before just the top twenty) OEM’s license for the Court has not yet ruled on the Motion, the terminating a Covered OEM’s license, Office or any other product (or any other United States will proceed to respond here to the and for not requiring even more notices commercial relationship with that OEM) substance of the information proffered in the because that OEM is working with rival Litigating States’ Motion. and opportunities to cure before 169 165 Sony 2; Litigating States’ Motion 6–7; termination. The commentors argue Platform Software or any product or Microsoft Response 4–5; Fade Decl. ¶¶ 11–16. service that distributes or promotes non- 166 Sony 4; Litigating States’ Motion 7. 168 SBC 102, 136. 167 Sony 4. 169 SBC 102–03; Drew 1. 170 CCIA 87–88; Turk.
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Microsoft middleware will be well as by agreements.174 The United 1. Section III.C.1 prohibited by § III.A. States believes that the limitation to 169. Several comments suggest that, agreements is appropriate in this under Section III.C.1, OEMs should be 7. Key License Terms 175 section. The most obvious and given greater flexibility in configuring 164. One commentor argues that the effective means for Microsoft to restrict Windows, extending to such things as RPFJ should require Microsoft to an OEM’s conduct is by agreement, as taskbars, toolbars, links, and default provide OEMs and other licensees with reflected in the record in this case. In pages and similar end user features in equal access to ‘‘licensing terms, addition, as explained in the CIS, the Internet Explorer; features of Windows discounts, technical, marketing and RPFJ uses the term ‘‘agreement’’ broadly XP such as the My Photos, My Music, sales support, product and technical to include any contract, requirement, or and similar operating system folders; information, information about future understanding.176 Use of other means by and elimination or alteration of the Start plans, developer tools or support, Microsoft to influence, limit, or reward Menu.178 hardware certification and permission the options of OEMs is appropriately 170. Subsection III.C.1 strikes an to display trademarks or logos.’’ 171 covered in other provisions, such as appropriate balance between the Otherwise, the commentor claims, Sections III.A, III.B, and III.G. Technical interests of Microsoft and OEMs in Microsoft can keep such information means of limiting the options of OEMs order to allow promotion and secret and take advantage of licensees’ installation of Non-Microsoft ignorance about what terms are are addressed by Section III.H. Middleware. In fact, the provision available.172 With respect to the top 167. Looking at the products covered covers some of the features requested by twenty Covered OEMs, however, by this section, some comments argue commentors, such as quick launch bars Microsoft already is required by Section that the provision should extend to any and the Start Menu. As discussed in the III.B to offer all license terms and application, not just middleware, or at CIS (at 30), ‘‘a list of icons, shortcuts or conditions on a uniform and non- least to Microsoft Office.177 The United menu entries’’ includes a wide variety discriminatory basis. States believes that the decree correctly of access points in Windows Operating 8. Prohibition On Enforcing Agreements focus on middleware, because that was System Products, including the system Inconsistent With The RPFJ the focus of Plaintiffs’ case and of the tray, ‘‘right-click’’ lists, ‘‘open with’’ courts’ holdings. Section III.C provides 165. One commentor urges that lists, lists that appear based on an action broad protection for non-Microsoft or event, such as connecting hardware Microsoft should be forbidden from Middleware as it is configured for use enforcing any contract term or or inserting an audio CD, and even lists with Windows. Because this section within folders such as MyMusic or agreement that is inconsistent with the focuses on OEM flexibility in 173 MyPhotos. This flexibility must be decree. But such a provision is both configuring Windows Operating System unwarranted and unnecessary. To the balanced against Microsoft’s interest in Products, it would be illogical to presenting a user interface on its extent that a contract term or agreement consider products, such as Office, that seeks to bar someone from doing Windows products that has been well are not part of the Windows Operating something that is required or permitted tested and is simple and intuitive for System Product. under the RPFJ, or requires someone to users. Windows is, after all, Microsoft’s do something that Microsoft is 168. It is important to remember that product. The United States believes that forbidden from offering, the RPFJ this section pertains to OEM the provision allows for many already would prevent such action. In configurations, and not to what users or opportunities for promotion and certain key areas, the RPFJ does include Non-Microsoft Middleware itself can installation of Non-Microsoft a provision prohibiting Microsoft from initiate if selected by a user. These Middleware without going so far as to retaliating against an OEM for exercising provisions, in essence, control how the allow OEMs to make drastic changes to any of its options or alternatives under configuration will appear the first time Microsoft’s user interface. Cf. Microsoft, the RPFJ (Section III.A.3) or from basing the user boots the computer. After that 253 F.3d at 63 (Microsoft’s restrictions on OEM reconfiguration of user MDAs on any requirements that are first time, the user may take many interface did not violate Section 2). inconsistent with the RPFJ (Section actions, such as clicking on icons, 171. Another commentor argues that III.B.3.c). In the latter case, the provision rearranging the desktop, or making other the RPFJ merely codifies Microsoft’s is necessary to make clear that, by program choices, that drastically alter affirmatively authorizing Microsoft to existing practices regarding flexibility of the configuration of the computer. A configuration and serves almost no do something (offer MDAs or other user launching a program by clicking on 179 discounts), the RPFJ is not authorizing remedial purpose. To the contrary, an icon may change many of the Section III.C gives OEMs much greater Microsoft to base those discounts on configuration options of the computer, inappropriate criteria. flexibility than they have ever had. Even including whether the program will as late as summer 2001, Microsoft still D. Freedom Of OEMs To Configure subsequently launch automatically or be was restricting the placement of icons in Desktop (RPFJ § III.C) displayed in a certain size or be the Windows. The flexibility OEMs receive default application. Thus, Section III.C 166. Section III.C of the RPFJ under Section III.C, combined with the governs only OEM configuration, but prohibits Microsoft from restricting by ability to remove access to Microsoft not any subsequent configurations based agreement any OEM licensee from Middleware Products under Section on user choices. exercising certain options and III.H, will allow OEMs to offer many alternatives. A few comments argue that different configurations and promote 174 Microsoft should be prohibited from Pantin 8; Maddux ¶ 5. Non-Microsoft Middleware in a variety 175 Levy 1 (Section III.C adequately prohibits of ways. That Microsoft voluntarily restricting OEMs by ‘‘other means’’ as Microsoft from preventing OEMs and consumers form installing rival operating systems or removing provides certain flexibility does not 171 SBC 101–02, 136–37 (describing Litigating Microsoft middleware products and installing rival eliminate the need for relief requiring States’ § 2(b)). middleware). 172 SBC 136–37. 176 CIS at 29. 178 SIIA 22–23, Pantin 9. 173 SBC 136–37. 177 CFA 95; Nader/Love 2; Pantin III.13; Novell 8. 179 ProComp 10, 67.
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that flexibility, as the Court of Appeals’ Appeals found, Microsoft has an interest regardless of whether Microsoft has a decision mandates. in preventing unjustified drastic competing product. At a minimum, 172. Commentors also note that the alterations of its copyrighted work. Section III.C.2 allows for any Non- term ‘‘functionality’’ (see Section III.C.1) Microsoft, 253 F.3d at 63. The limitation Microsoft Middleware to be installed is not defined, that Microsoft is free to preventing shortcuts from impairing the and displayed on the desktop with a decide what categories qualify for functionality of the user interface was shortcut, completely independent of the display, and that Microsoft could designed to respect this interest, while existence or characteristics of any exclude Non-Microsoft Middleware for still giving OEMs considerable freedom Microsoft product. The only issue is which no Microsoft counterpart exists to promote Non-Microsoft Middleware. where else in the Windows interface the or otherwise restrict the meaning of Non-Microsoft Middleware will be 3. Section III.C.3 functionality.180 As explained in the CIS promoted. As discussed above (see (at 30), ‘‘functionality’’ is intended to 175. There are many comments Section IV(D)(1)), Microsoft has a valid capture broad categories of products, related to Section III.C.3. Some interest in presenting an orderly user and not to be used to discriminate comments argue that this subsection interface such that, for example, lists of against Non-Microsoft Middleware. gives Microsoft design control because what are supposed to be word Thus, for example, Microsoft may Microsoft could set parameters for processors do not clutter lists of media reserve a particular list for multimedia competition and user interface design players. If the Windows interface has a players, but cannot specify either that via the limitation on ‘‘similar size and space for listing, for example, Internet the listed player be its own Windows shape,’’ which then leaves competing applications, then any Internet Media Player, or that the player be applications to conform to Microsoft’s application can go there regardless of capable of supporting a particular ‘‘look and feel.’’ 182 This is not the intent whether Microsoft has a competing proprietary Microsoft data format. Such or effect of this provision. See CIS at 31– application. If the Windows interface non-generic specification, which would 32. For programs that are configured by has no listing for a particular new have the effect of restricting the display the OEM to launch automatically, either category of application, then there will of competing Non-Microsoft in place of, or in addition to, Microsoft be, and always has been, a general place Middleware, would not be non- Middleware Products, the restriction where applications can be listed, such discriminatory. Microsoft cannot limits whether applications can launch as the desktop. prescribe the functionality so narrowly with their full user interface, no 178. It is correct that, under Section that it becomes, in effect, interface, or appear in the system tray or III.C.3, Non-Microsoft Middleware discriminatory. similar location. Thus, this provision cannot be configured to launch 173. Moreover, Microsoft cannot addresses Microsoft’s interest in automatically unless a Microsoft completely forbid the promotion or preventing unjustified drastic Middleware Product would have display of a particular Non-Microsoft alterations to its copyrighted work, as otherwise launched. However, this Middleware Product on the ground that recognized by the Court of Appeals. See governs only the original OEM Microsoft does not have a competing 253 F.3d at 63. configuration. If the user clicks on an product itself. To do so would be 176. Some commentors argue that icon or otherwise runs the Non- discriminatory; there must always be Microsoft retains control of desktop Microsoft Middleware, that application (and there always has been) a place for innovation because it can prevent OEMs can itself set up to launch automatically applications generally to be listed or from installing or displaying icons or on subsequent boot sequences, or at any their icons displayed. Without this other shortcuts to Non-Microsoft number of other times, including but functionality limitation, developers of software or services if Microsoft does not limited to connections to the Non-Microsoft Middleware with media not provide the same software or Internet. Section III.C.3’s approach is a player functionality could insist that it service.183 Others say that the reasonable compromise with Microsoft’s wants to be displayed with instant middleware icon provisions of III.C.1 interest in having the computer boot up messaging services, making groupings of and III.C.3 apply only when Microsoft quickly the first time it is turned on, a supposedly competitive products with has a competing product, and Microsoft characteristic that users value. the same or similar functionality can limit the OEMs’ ability to promote 179. A few commentors believes it is meaningless and hopelessly chaotic for competing programs.184 Still others inappropriate that Microsoft be allowed the user. criticize that Section III.C.3 limits to decide what forms the user interface, 186 2. Section III.C.2 automatic launches to the boot-up e.g., a desktop with icons, may take. sequence or when the user connects to The United States disagrees. Microsoft 174. A few commentors argue that, the Internet, thus limiting the options of has a valid interest in developing its under Section III.C.2, Microsoft has OEMs.185 products, which some users actually control over what non-Microsoft 177. The majority of these comments prefer on the merits, and in preventing products may be promoted by an OEM are misplaced. Section III.C.1 does not unjustified drastic alterations to its because Microsoft could define what prevent OEMs from installing or copyrighted work. The purpose of the ‘‘impair[s] the functionality of the user promoting Non-Microsoft Middleware, remedy is not to strip Microsoft of the 181 interface.’’ Section III.C.2 applies ability to design operating systems or only to shortcuts, but it allows those 182 AOL 37; AOL, Klain 4; CFA 95; RealNetworks compete on the merits. shortcuts to be of any size and shape. 23; Henderson 8–9; Litigating States, Ex. A 10; Potentially, these shortcuts could be so ProComp 64; CCIA, Stiglitz & Furman 28; Maddux 4. Section III.C.4 large as to cover key portions of the ¶ 8; Pantin 9–11; Alexander 2–3; Giannandrea 3; Miller 2; Thiel 2; Schneider 2. 180. Some commentors argue that Windows user interface (for example, 183 Palm 14; AOL 37; AOL, Klain 4; CCIA 60; PFF Section III.C.4 does not prohibit the Start Menu). As the Court of 20; Pantin 9–11; RealNetworks 22; SBC 140; Microsoft from deleting or interfering Waldman 3, 8; CCIA 59–60; Clapes 5; Schneider 1. with competing boot loaders, does not 180 SBC 51, 138–39; Maddux ¶ 6; Pantin 9–11; 184 Litan 46, 50; CFA 95; SBC 52; Litigating States, allow OEMs to ship machines without Litigating States, Ex. A 10; Elhauge 8–9; Clapes 5– Ex. A 10; ProComp 64; CCIA, Stiglitz & Furman 28; 6; PFF 20. Giannandrea 3; Waldman 3; Hammett 2. any operating system, and otherwise 181 SBC 52; CCIA 56; Maddux ¶ 7; Miller 2; 185 ProComp 64; Pantin 9–11; Giannandrea 3; Hofmeister 2. Rovero 3. 186 SBC 52, 140; Godshall 1; Schneider 1–2.
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does not assist the OEMs’ ability to United States advocated before the modifications are not limiting because promote non-Microsoft operating District Court and on appeal, has been the provision clearly allows for systems.187 The United States partially removed.191 The simple answer to this modification of any ‘‘other aspect of a agrees and partially disagrees with these question is that the Court of Appeals Windows Operating System Product comments. Section III.C.4 provides for reversed the finding of liability on this (including any aspect of any the option of launching other operating point (see Microsoft, 253 F.3d at 63), Middleware in that product).’’ Provision systems and prohibits Microsoft from and to provide for such a remedy would 2.c also provides five examples attempting to delete or interfere with be inappropriate in this case. (¶¶ 2.c.i–v), but these are given ‘‘[b]y competing boot loaders that accomplish 6. Comparison To Litigating States’ way of example, and not limitation.’’ this task. This subsection does not Proposal This Proposal thus appears to allow any enable OEMs to sell machines without and all modifications. an operating system, as that would not 184. Several commentors argue that 187. These types of broad promote Non-Microsoft Middleware. the Litigating States’ Provision 2.c modifications are not necessary to allow However, Microsoft would run afoul of (‘‘OEM and Third-Party Licensee for vigorous competition in the Section III.A if it attempted to restrict Flexibility in Product Configuration’’) middleware market. Indeed, it appears 192 OEMs from shipping PCs with rival should replace RPFJ Section III.C. that the vast majority of these operating systems. The United States believes that modifications have very little, if Provision 2.c is overbroad and largely 5. Section III.C.5 anything, to do with middleware and unrelated to middleware competition therefore are beyond the scope of the 181. Some comments criticize Section that could threaten Microsoft’s desktop liability findings in this case. III.C.5 for providing promotional operating system monopoly. flexibility only for IAP offerings, and Additionally, the Litigating States’ E. Microsoft’s Obligations To Provide even then only for an OEM’s ‘‘own’’ IAP Proposal appears to ignore the Court of Add/Remove Functionality And offer but not for other products.188 At Appeals’ decision that Microsoft is Automatic Invocations (RPFJ § III.H) least one commentor notes that the entitled to prevent an unjustified drastic 1. Obligation To Provide Add/Remove Windows XP initial boot sequence offers alteration of its copyrighted work, and Functionality a wide range of Microsoft products and to prohibit OEMs from substituting a services, including Passport, Hotmail, different user interface automatically 188. Some commentors argue that Instant Messenger, and Internet upon completion of the initial boot Section III.H.1 allows Microsoft to force telephony.189 Some commentors predict sequence. Microsoft, 253 F.3d at 63. Non-Microsoft Middleware Products that Microsoft will use the ‘‘reasonable Regardless of how broadly one reads into an Add/Remove utility.194 The technical specifications’’ to this portion of the Court of Appeals United States believes that one of the unreasonably exclude competitors.190 decision, Provision 2.c would appear to primary goals of the RPFJ is to enable 182. Section III.C.5 permits OEMs to allow an OEM to make the very ‘‘drastic users to make choices on the merits create and display a customized offer for alteration[s] [to] Microsoft’s copyrighted about Microsoft and Non-Microsoft the user to choose an IAP during the work’’ that the Court of Appeals found Middleware Products. In the current initial boot sequence. A user’s IAP can Microsoft lawfully could prohibit. See Add/Remove utilities available in be an important source of choices about id. Windows Operating System Products, a wide variety of Non-Microsoft 185. Provision 2.c essentially provides Microsoft Middleware Products are Middleware. It is the OEM’s ‘‘own’’ IAP that Microsoft cannot restrict by often not present at all, or are presented in the sense that the OEM selects it, not contract, technical, or any other means as Windows components in a separate necessarily that the OEM is itself an a licensee from modifying any aspect of window. Non-Microsoft Middleware IAP. Microsoft is not permitted a Windows Operating System Products, which currently routinely add unreasonably to exclude competitors via Product.193 The breadth of this themselves into the Add/Remove utility the technical specifications for IAP provision appears to require that upon installation, are in a different offers. Microsoft previously and Microsoft allow, and provide the Add/Remove window. Without the understandably has given such information to accomplish, any RPFJ, there is no easy way for the user reasonable technical specifications to modification to any portion of a to realize that something labeled as a OEMs, and the United States does not Windows Operating System Product, no Windows system component can be expect Microsoft to deviate from its matter how unrelated to middleware. replaced with a Non-Microsoft prior standards as to what is reasonable. For example, this provision appears to Middleware Product. This provision After all, Microsoft has an interest in allow licensees to change the manner in will alter Microsoft’s current practice of offering OEMs an operating system that which Windows implements disk creating an artificial distinction between works, and absent reasonable technical compression, the TCP/IP protocol, the these Non-Microsoft Middleware standards, performance might be calculator program, and the Windows Products and Microsoft Middleware degraded. Help system. These modifications Products. 183. At least one commentor argues apparently could be at any level of 189. Other commentors point out that that there should be a provision granularity, including very small exclusivity cannot be provided to Non- allowing OEMs to replace the Windows segments of code. Microsoft Middleware Products, that desktop, and sees no explanation in the 186. Although Provision 2.c also Microsoft does not have to compensate CIS as to why this provision, which the identifies specific types of an OEM for the presence of its icons on modifications—e.g., the boot sequence, the desktop, and that every computer 187 KDE 14; Pantin 11–14; Harris 5, CFA 89; desktop, or start page—these types of shipped represents an expense to the CompTIA 5 (supports); Akin 2; Hafermalz 1; Young non-Microsoft software and income via 1. 191 SBC 53, 138. the Windows license to Microsoft.195 It 188 AOL 37–38, Klain 4; CCIA, Stiglitz & Furman 192 SBC 137. 27. 193 Litigating States’ Provision 4 additionally 189 SBC 53; Akin 2. requires that Microsoft disclose all the necessary 194 Palm 15; AOL, Klain 6; SBC 58; Thomas 6– 190 Maddux ¶ 9; SBC 52, 141; NetAction 10, 14; APIs, Communications Protcols and Technical 7. Schneider 2. Information to accomplish such modifications. 195 SIIA 24; ProComp 62; Schneider 2.
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is incorrect that exclusivity, at least as comments about competing products Microsoft’s overriding of user choice to icons and other visible means of end- when offering such a choice. 197 This is was unlawful. Microsoft, 253 F.3d at 67. user access, cannot be provided to Non- incorrect. The concept of non- Thus, the Court of Appeals’ decision Microsoft Middleware Products. Non- discriminatory includes the concept of does not require that Microsoft respect Microsoft Middleware Products can non-derogatory; Microsoft cannot user’s default choices in all have exclusive agreements with OEMs present a choice that is derogatory circumstances. The issue of whether covering all the most significant means toward the Non-Microsoft Middleware Microsoft simply could have no default of promoting their products—through Products without also by definition settings at all was, however, not before desktop icons, the Start Menu, and discriminating against that Product. the Court and accordingly the Court did being set as the defaults. The only not address it. exception to this exclusivity of visible 2. Obligation To Provide Automatic 196. Section III.H.2 of the RPFJ means of end-user access would be a Invocations and Exceptions nevertheless requires Microsoft to listing of the non-Microsoft Middleware a. Obligations To Provide Automatic implement and respect default settings Products in the Add/Remove utility, Invocations in some circumstances. These which has never been Microsoft’s means 193. Section III.H.2 addresses circumstances are limited to situations of promoting usage. situations where Microsoft must create where the Microsoft Middleware 190. Furthermore, should Microsoft the ability to designate programs for Product would launch in a separate Top-Level Window and display either wish to promote its Microsoft automatic invocation, commonly Middleware Products, it is constrained (i) all of the user interface elements, or referred to as default settings. Many by other provisions in the decree, (ii) the Trademark of the Microsoft commentors point out that there will be particularly provisions regarding Middleware Product. These limitations few situations where Microsoft is exclusive or fixed percentage are tied to the Court of Appeals’ obligated to provide a default setting. agreements with OEMs. See discussion opinion, which supported Microsoft’s They say that Microsoft easily will be of Section III.G. As an example, position that it did not have to respect able to evade this provision,198 simply Microsoft could not reach an agreement default settings where Windows by embedding its Microsoft Middleware with an OEM that required the OEM to functionality enabled users to move Products in other portions of the set the Microsoft product as the default seamlessly from one function to another Windows Operating System Product or on 100 percent of the OEM’s machines. in the same window. Microsoft, 253 Non-Microsoft Middleware Products do other Microsoft Middleware Products. F.3d at 67. not face this constraint. Additionally, Similarly, some commentors suggest 197. Moreover, these limitations are because OEMs are free to remove that Microsoft could engineer its designed to ensure that access to Microsoft icons and free to negotiate middleware to launch without using all defaults exists whenever the alternative exclusivity agreements with of the ‘‘Top-Level Window’’ Microsoft product would be launched as competitors, Microsoft will have to components or with making the the full ‘‘product’’ (e.g., Internet compensate OEMs for any promotional slightest variation on the user interface, Explorer as the Internet browser), rather agreements regarding its icons, in and not have to create any defaults. than when just a portion of the addition to conforming its agreements Commentors further argue that the product’s underlying functionality is with the other provisions of the RPFJ. existence of defaults should not depend launched to perform functions in 191. A few commentors raise on the existence or behavior of Windows itself (such as code also used concerns that ‘‘particular types of Microsoft’s Middleware Products. by Internet Explorer being used to functionality’’ and ‘‘non- 194. Additionally, some commentors display part of the Windows user discriminatory’’ are not defined and point out that OEMs will be required to interface), or otherwise where the end could be used by Microsoft to support the Microsoft Middleware user might not necessarily be aware that unreasonably exclude competitors.196 Products regardless of whether they he or she is using a specific Microsoft Functionality is intended only to have end-user access removed, because Middleware Product. capture broad categories of products and Microsoft is allowed to hard-wire their 198. One of the most important not to be used to discriminate against products in some cases.199 More functions of this Section III.H.2 is to Non-Microsoft Middleware Products. specifically, these commentors argue provide certainty and a bright line Thus, for example, Microsoft may that this situation will create an regarding when Microsoft is obligated to reserve a particular list for multimedia insurmountable disparity between the provide and respect a default setting. players, but cannot specify either that Microsoft and Non-Microsoft Previously, Microsoft was under no the listed player be its own Windows Middleware Products, because the obligation to provide for automatic Media Player, or that the player be Microsoft product will always be invocations of competing products in capable of supporting a particular available and will always launch in any circumstances; Microsoft at its proprietary Microsoft data format. Such some situations, whether the end user option provided for automatic a non-generic specification, which has selected them or not or is even invocations in some circumstances and would have the effect of restricting the aware that the product is installed. not in others. Although commentors display of competing Non-Microsoft 195. The Court of Appeals’ decision allege that there are numerous cases Middleware Products, would not be must be the starting point for any where Microsoft will not have to non-discriminatory and therefore would discussion of default settings and of the provide a default setting, the RPFJ does be prohibited under Section III.H.1. ability of Microsoft to override user provide a clear line and a requirement, 192. Commentors also suggest that the choices. There were no instances in that did not exist before, that in some portion of Section III.H.1 that requires which the Court of Appeals found that cases defaults must exist and must be Microsoft to offer ‘‘an unbiased choice respected. with respect to enabling or removing 197 Maddux ¶ 24. 199. Several commentors allege that access’’ would nevertheless permit 198 AOL 49; AOL, Klain 6; Litigating States, Ex. Non-Microsoft Middleware Products are A 10; Pantin III.24; Realnetworks 14, 17, 23; CCIA Microsoft to include derogatory 55; KDE 14–15. subject to a requirement that the end- 199 Litan 45; ProComp 57–58; CCIA 55; AAI 15; user confirm his/her choice, but the 196 CFA 98; Maddux ¶ 23; Clapes 9. Litigating States 10. Microsoft Middleware Product is not,
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making it effectively harder for users to III.H.3 and numbered ‘‘1’’ and ‘‘2,’’ but clause.204 Concern also is raised that choose Non-Microsoft Middleware which by their plain language Microsoft is not required to document Products.200 This is incorrect. Section unmistakably modified Section III.H.2 the ‘‘reasonable technical requirement’’ III.H.1 clearly states that Microsoft must (‘‘Notwithstanding the foregoing, in advance in MSDN.205 Several give end users ‘‘a separate and unbiased Section III.H.2 . . .’’), have been moved commentors predict extreme and drastic choice’’ with respect to altering default to Section III.H.2 for clarification and results from the example of ActiveX.206 invocations in Section III.H.2. Section have been renumbered (a) and (b). 206. Again, this exception appears in III.H.2 of the RPFJ provides that 203. Exception (a) allows a Windows the RPFJ because the Court of Appeals Microsoft shall ‘‘[a]llow . . . Non- Operating System Product to invoke a held that Microsoft was allowed to Microsoft Middleware Products (via a Microsoft Middleware Product when it override a user’s choice when it had mechanism which may, at Microsoft’s would be invoked solely for use with a ‘‘valid technical reasons.’’ Microsoft, option, require confirmation from the server maintained by Microsoft outside 253 F.3d at 67. The Court of Appeals end user) to designate a Non-Microsoft the context of general web browsing. pointed to three specific examples Middleware Product to be invoked in Commentors allege that Microsoft can where features of a Windows Operating place of that Microsoft Middleware use the exception to communicate System Product depended on Product (or vice versa).’’ The directly with its own competing functionality not implemented by parenthetical ‘‘or vice versa’’ applies to middleware in the form of web based Navigator, and Microsoft was permitted the entire phrase, meaning any services such as Passport, MSN, .Net to override Navigator in those cases. The mechanism which requires confirmation and Hotmail and to override the explicit Court of Appeals did not find any when switching in one direction will choices made by consumers and violation associated with these actions, also require it in the other direction. OEMs.202 At least one commentor including no violation regarding 200. To respond to the concerns misreads this exception to infer that any whether information was disclosed to raised by commentors and to clarify that web server running Microsoft software Navigator to allow it to implement the Microsoft must be unbiased with respect is covered.203 functionality. Given this holding, the to Microsoft and Non-Microsoft 204. Turning again to the Court of inclusion of an exception that permits products under Section III.H.2, this Appeals decision, this exception stems Microsoft to override a user’s choice provision was revised to expressly state from the holding that the Windows Help when it has ‘‘valid technical reasons’’ that such mechanisms and confirmation system was allowed to override a user’s was appropriate. messages must be unbiased. The revised browser choice. Microsoft, 253 F.3d at 67. The current Windows Help system, 3. Microsoft’s Ability To Change language of Section III.H.2 in the SRPFJ Configurations provides: as well as other parts of the Windows interface, rely on interoperating with 207. Many commentors have Allow end users (via an unbiased servers maintained by Microsoft. The significant concerns about Microsoft’s mechanism readily available from the desktop or Start menu), OEMs (via standard ‘‘maintained by Microsoft’’ language in ability to offer to alter a user’s or OEM’s OEM preinstallation kits), and Non-Microsoft exception (a) is specifically designed to configuration, as described in Section Middleware Products (via a mechanism catch servers actually under Microsoft’s III.H.3.207 Some commentors argue that which may, at Microsoft’s option, require control, and not to include servers that Microsoft should not be able to confirmation from the end user in an are merely running a Microsoft product, ‘‘encourage’’ users to switch back to unbiased manner) to designate a Non- such as Internet Information Server Microsoft Middleware that has been Microsoft Middleware Product to be invoked (IIS). Microsoft is only allowed to use replaced by a third-party application. in place of that Microsoft Middleware Concerns also are raised that Microsoft’s Product (or vice versa) . . . [Emphasis this exception outside the context of added] general web browsing, such as the presentation of the choice could include Windows Help system or similar derogatory comments about competing This modification makes clear the systems, not in situations where a user products, and that the RPFJ contains no parties’ intention that the mechanism has knowingly launched a browser to requirement that the request to the user available to end users, as well as any view web pages. This exception is be objective or non-discriminatory, or confirmation message to the end user, similar to the limitations in the main that the function not delete non- must be unbiased with respect to paragraph of Section III.H.2 that limit Microsoft code or change user defaults. Microsoft and non-Microsoft products. automatic invocation to those situations Commentors express the view that a 201. This modification also addresses where a user has launched, in essence, significant number of users likely would any concern that the phrase ‘‘at the ‘‘full product.’’ switch just to get rid of the annoying Microsoft’s option’’ could be read to 205. Exception (b) allows a Windows messages. Others suggest that the fact allow Microsoft to take biased action Operating System Product to invoke a that Microsoft is permitted to seek against competing products. Further, it Microsoft Middleware Product when a confirmation from the end user for an addresses concerns that Microsoft’s designated Non-Microsoft Middleware automatic alteration of the OEM presentation of the confirmation Product fails to implement a reasonable configuration after 14 days significantly message could include derogatory 201 technical requirement that is necessary devalues the desktop. At least one comments about competing products. for valid technical reasons to supply the commentor argues that OEMs do the b. Exceptions to the Obligation To end user with functionality consistent ‘‘initial boot’’ before shipping a PC and Provide Automatic Invocations with a Windows Operating System hence the 14-day period could have 202. In addition, the SRPFJ’s two Product. Several commentors argue that 204 exceptions to Section III.H.2, which Microsoft will have exclusive control NetAction 14; Maddux ¶ 27; Gifford 4, Giebel over when it must respect defaults 1; Miller 3; Akin 3; Hammett 2; Youngman 4. were previously listed after Section 205 through manipulation of the Pantin III.26. 206 ‘‘reasonable technical requirement’’ SBC 59; CCIA 56; Schneider 2. 200 AOL, Klain 6; CFA 98–99 (‘‘consumer must 207 Litan 45; RealNetworks 16; Henderson 9; CCIA choose the Non-Microsoft product twice to make it 57; CCIA, Stiglitz & Furman28; KDE 16; AAI 17– the preferred option’’); RealNetworks 18; Miller 3; 202 RealNetworks 17–18; CCIA 56; Maddux ¶ 27; 18; Maddux ¶ 26; AOL, Klain 6; CFA 99; SBC 56; Clapes 9–10. Giannandrea 2; Gifford 4. Litigating States, Ex. A 10; ProComp 63; SILA 18; 201 Maddux ¶ 25; Pantin III.24. 203 SBC 58; Harris 7, 8. Pantin III.25; Gifford 4; Giannandrea 3.
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largely expired by the time the user effects, Section III.H.3 was designed implement Section III.H simply allows boots the PC for the first time. always to require confirmation from the Microsoft more time to cement its 208. In response to some of the user, and to be unbiased with regard to control over the operating system.211 concerns raised regarding Section Microsoft and Non-Microsoft products. Some commentors compare the 12- III.H.3, the RPFJ has been modified. The The United States does not agree with month delay to the less than 2 months following additional sentence now the commentors who argue that it took Microsoft to remove the icons for appears in SRPFJ Section III.H.3: ‘‘Any Microsoft should be prohibited from Internet Explorer after the Court of such automatic alteration and ever offering this kind of utility as part Appeals’ decision.212 confirmation shall be unbiased with of its operating system. 208 214. Section III.H takes effect with the respect to Microsoft Middleware 211. A number of comments criticize earlier of the release of Service Pack 1 Products and Non-Microsoft the 14-day delay.209 The 14-day delay, for Windows XP, currently scheduled Middleware.’’ This sentence clarifies the after a new personal computer is booted for August 2002, or November 6, 2002. parties’ intention in drafting the RPFJ up before any automatic alternation may The reason for this delay was to allow that Microsoft may not alter a occur, was determined to be a Microsoft sufficient time to modify its configuration based on whether the reasonable compromise between the Windows Operating System Products to products are Microsoft or Non-Microsoft need to use desktop icons to promote be in compliance with the specific products. Nor may Microsoft present a Non-Microsoft Middleware, and the provisions of Section III.H. Section III.H biased confirmation message, for needs of users who would prefer to be requires Microsoft to make numerous instance a message that is derogatory presented with the choice of moving changes to Windows 2000 and Windows with respect to Non-Microsoft products. unused icons to a folder. A significant XP. For instance, a mechanism must be Similarly, automatic alterations may not factor in this analysis is that there are created that allows end users and OEMs be based on a trigger or rule that is many ways of promoting Non-Microsoft to enable and remove end-user access to biased against Non-Microsoft Middleware, of which the desktop is Microsoft and Non-Microsoft Middleware or in favor of Microsoft only one. Non-Microsoft Middleware Middleware Products that is non- Middleware Products. may be installed in the Start Menu, for discriminatory with regard to those 209. Several commentors were instance, or in the quick launch bar or products and that presents a separate confused regarding the ‘‘Clean Desktop system tray. It may also be set as a and unbiased choice. As noted above, Wizard,’’ referenced in the CIS (at 48), default and automatically invoked in the current Add/Remove utility in and its relation to Section III.H.3. The certain instances. It may be promoted in Windows XP is biased: it lists the ‘‘Clean Desktop Wizard’’ is a utility in the initial boot sequence or set to launch Microsoft Middleware Products in a Windows XP that offers users the ability automatically on connection or separate window labeled as system to move unused or infrequently-used disconnection to the Internet. And, of components. Moreover, the current desktop icons into a folder on the course, should the user click on the Add/Remove utility includes only a desktop. The ‘‘Clean Desktop Wizard’’ is desktop icon, the ‘‘Clean Desktop subset of the Microsoft Middleware the only function in Windows XP that Wizard’’ would not consider it an Products and does not remove all of the performs an automatic alteration of a unused icon and it would not be required means of end-user access, but configuration of icons, shortcuts or affected. Or, should the user respond only some limited subset of icons. menu entries. Furthermore, Section that it does not want the ‘‘Clean Desktop 215. Additionally, in accordance with III.H.3 forbids Microsoft from altering Wizard’’ to move unused icons into a Section III.H.2, Microsoft must evaluate how a Windows Operating System folder, they will not be moved. Finally, every invocation of a Microsoft Product performs automatic alterations even if the user responds affirmatively Middleware Product and determine if it except in a new version of a Windows to the ‘‘Clean Desktop Wizard’’ ’s falls under Section III.H.2, whether it Operating System Product. Thus, the prompt, the icons merely will be moved falls under exception (a) or (b), and ‘‘Clean Desktop Wizard’’ is the only into a folder, not removed. whether there is already a default functionality that currently falls under 212. One commentor argues that setting. If there is not a default setting, Section III.H.3, and it must remain the Microsoft frequently could create ‘‘new or if in some cases the Windows only such functionality until a new versions’’ of its Windows Operating Operating System Product does not version of a Windows Operating System System Products for the sole purpose of respect the default, then the Windows Product. The ‘‘Clean Desktop Wizard’’ creating new mechanisms to remove Operating System Product must be only affects icons on the desktop, is competing icons.210 The United States altered. unbiased with respect to Microsoft and finds it unlikely that Microsoft would go 216. Commentors who point to the Non-Microsoft icons, and is unbiased to the lengths required to release a new relatively small amount of time between with regard to the messages presented to version of its operating system just to the Court of Appeals’ decision and the user. It takes no action without remove icons, given that any such Microsoft’s limited allowance of confirmation from the user, and it can mechanism must be unbiased with flexibility as evidence that the delay in be turned completely off by the user so regard to Microsoft and Non-Microsoft Section III.H is excessive are comparing that it never runs again. products. Historically, Microsoft has very different situations. Microsoft 210. Microsoft designed this utility released versions of its operating made an extremely limited offer to because it believed some users prefer a systems on the order of years apart, and OEMs to alter end-user access to less cluttered desktop and would at much longer intervals than its Internet Explorer in the summer of appreciate a utility that would monitor releases of middleware. 2001. Similarly, Microsoft’s addition of which icons have been recently used, Internet Explorer to the Add/Remove and offer to move the unused icons into 4. Timing Issues utility was not complete and did not a folder. The United States agrees that 213. Some commentors argue that the remove many of the means of end-user some users would appreciate this 12-month delay before Microsoft has to access. To comply with the RPFJ, both utility. The United States also believes, however, that some users would not. To 208 SBC 57. 211 Litan 47; CCIA, Stiglitz & Furman 28; Maddux offer choices to users and to remove the 209 Drew 1; Thiel 2; Miller 3. ¶ 21 (suggests 3 months); Giannandrea 1–2. potential for significant anticompetitive 210 AAI 18. 212 ProComp 65; CCIA, Stiglitz & Furman 28.
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in terms of the required means of end- the Court enter the decree on May 6, of a Windows Operating System user access and the number of Microsoft 2002, then the provision will become Product, in every place where a Middleware Products at issue, requires effective no later than six months after Microsoft Middleware Product is considerably more effort. In addition, the entry of the decree (precisely the invoked so as to require a default setting Microsoft’s offer in the summer of 2001 same time period contained in the IFJ). under Section III.H.2, the Windows did not contain any changes regarding 220. The possibility that the provision Operating System Product will be automatic invocations, which can will become effective six months after modified so as to create and respect the require considerably more work than the decree is entered is identical to the default setting. However, once that the creation of a revised Add/Remove timing in the IFJ, which required that setting is created, for instance for a utility. the removal of end-user access would default browser or a default media 217. Another commentor argues that occur six months after entry. Moreover, player, any competing product may Microsoft has no incentive to offer the the IFJ had no provisions at all register itself for the default. Moreover, Windows XP Service Pack until regarding the creation and respect for if any version of a Microsoft December 2002, that the 12-month delay default settings. Thus, the IFJ would Middleware Product can be invoked, renders the provision meaningless for a have possibly required less with the then the setting must be created and fifth of the lifespan of the decree, and same amount of delay. respected. To be specific, if seven that the provision is therefore 221. Finally, to argue that the timing months prior to the last beta test release meaningless as a vehicle for restoring of the Litigating States’ proposals is of Windows XP, Windows Media Player competition. 213 The same commentor superior is to ignore the reality of the 8 does not exist, but Windows Media argues that, in contrast, the interim litigation schedule. Even assuming the Player 7 exists, and the Windows conduct provisions in the IFJ were shorter of the two proposed litigation Operating System Product can invoke superior because they required the schedules, the Litigating States’ trial version 7 as well as version 8, then the removal of end-user access within six will not end before June 2002. default must be created. Thus as a months of the entry of the Final Assuming that the Court issues its practical matter, when a default setting Judgment. 214 ruling immediately, which is highly is created for media player, it is created 218. Many aspects of this comment unlikely given the complexities of the for the whole category of media players, are erroneous. First, the deadline for case, the earliest the Litigating States’ not just specific versions. compliance is November 6, 2002, not provision on removing end-user access 224. One commentor maintains that December. Moreover, Microsoft has a would be applicable is December 2002. Section III.H.3 requires vendors of strong incentive to release Service Pack To argue that the RPFJ is ‘‘meaningless competing middleware to meet 1 for Windows XP, because it is well- as a vehicle for restoring competition’’ ‘‘reasonable technical requirements’’ known in the industry that the first because of the timing of Section III.H seven months prior to new releases of Service Pack to an operating system when, in fact, the RPFJ will with Windows, yet it does not require release fixes many of the bugs in the absolute certainty be in effect before the Microsoft to disclose those requirements original release. More specifically, many Litigating States’ remedy, is to argue in advance. 217 This comment corporations do not consider upgrading that there is no possibility of an incorrectly commingles the seven- until the first Service Pack is released. effective remedy. That argument simply month timing requirement with Windows XP, based on the NT code is wrong. exception (b) to Section III.H.2. The base and being the upgrade to Windows 222. Other commentors allege that the seven-month timing requirement relates 2000, is aimed directly at corporations requirement that the Microsoft solely to the issue of which Microsoft as well as consumers, unlike releases Middleware Products must exist seven Middleware Products exist at a certain such as Windows Millennium and other months before the last beta test version time; it does not have anything to do operating systems based on the ‘‘9x’’ of a Windows Operating System Product with whether any Non-Microsoft code. In order to serve the corporate is a loophole easily exploited by Middleware Products meet certain audience at which Windows XP is at Microsoft. 215 These commentors suggest technical requirements. The seven- least partially directed, release of the that specific products, such as Windows month timing requirement determines first Service Pack is critical. Thus, the Media Player 8, were not in existence at when a default setting is required to United States remains convinced that the requisite time and therefore are not exist; exception (b) concerns the limited Microsoft has a strong incentive to subject to Section III.H. At least one circumstances where, given that the release the first Service Pack for XP as commentor proposes that the whole default setting exists, the Windows quickly as possible. The United States is timing paragraph be deleted. 216 Operating System Product may aware, however, that the Service Pack 223. The timing paragraph is nevertheless ignore a designated Non- has slipped from a planned late spring necessary to give Microsoft sufficient Microsoft Middleware Product. release to an August 2002 release. time to design, implement and test the 219. Additionally, it is important to F. Commingling of Operating System Windows Operating System Product, Code and Middleware Code realize that the 12-month period started particularly the requirement for on November 6, 2001, and the five-year automatic invocations, in order to 225. Sections III.C and III.H of the life span of the decree begins when the comply with the decree. Without the RPFJ remedy Microsoft’s decree is entered, which will be at some timing requirement, Microsoft anticompetitive commingling of browser point after March 6, 2002. Thus, even if conceivably could be required to and Windows operating system code by the Court enters the decree on March 6, redesign its products constantly. requiring Microsoft to redesign its 2002, the maximum amount of time the Moreover, it is important to understand Windows Operating System Products to delay can ‘‘cut into the life of the how the requirement for automatic permit OEMs and end users effectively decree’’ is eight months, not twelve. If invocations will work in practice. Seven to remove access to Microsoft the Court waits to enter the decree, the months before the last beta test release Middleware Products (Section III.H.1) overlap decreases. For example, should and to allow competing middleware to 215 RealNetworks 16–17; Henderson 6; CCIA 56; be featured in its place (Section III.C). 213 SBC 60. PFF 21; Harris 7–8; Schulze 2. 214 SBC 61–62. 216 Pantin III.27. 217 Kegell 5.
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Section III.H also requires Microsoft to 228. The United States has, 229. The reason for the United States’ create a mechanism that permits rival throughout the remedy phases of this consistent position is that, under the middleware products to take on a case (including before the District Court facts proven at trial in this case, the default status that will, if the consumer in June 2000), stated consistently that it competitive significance of Microsoft’s chooses, override middleware functions did not seek to require Microsoft to commingling is the exclusion of Microsoft has included in the operating remove commingled code from competing middleware products caused system in many cases (Section III.H.2). Windows. The United States’ remedy by the visible presence and usage of 226. A number of commentors assert briefs in the June, 2000 proceeding Microsoft’s Middleware Product, not by that, in spite of these provisions, the made clear our view that the the mere presence of the underlying RPFJ is deficient because it does not competitive problems created by code. The Court of Appeals concluded contain an express prohibition on Microsoft’s bundling of middleware that Microsoft’s commingling had an Microsoft ‘‘commingling’’ the code of would be addressed adequately by anticompetitive effect and constituted Middleware Products in the same files ensuring the ability to remove end-user exclusionary conduct because as the code for the operating system. 218 access, and not the ability actually to commingling ‘‘deters OEMs from pre- They note that the Court of Appeals remove code: installing rival browsers, thereby upheld the District Court’s liability Microsoft suggests that Section 3.g.’s reducing the rivals’ usage share and, determinations regarding both requirement of removal of ‘‘end user access’’ hence, developers’ interest in rivals’ Microsoft’s elimination of the Add/ dramatically increases the scope of what is a APIs as an alternative to the API set Remove capability for its browser and ‘‘Middleware Product.’’ But only if a product exposed by Microsoft’s operating first meets the definition of ‘‘Middleware its commingling of browser code and Product’’ is Microsoft required to provide the system.’’ Microsoft, 253 F.3d at 66. The operating system code. But the Court of means of removing access to it. . . . Court of Appeals relied upon and Appeals did not hold that commingling Similarly, Microsoft’s statement that features upheld the District Court’s findings, of code alone, without regard to any like the user interface, HTML Help, and which reflect a concern primarily with anticompetitive effects it might have in Windows Update would be ‘‘precluded’’ the confusion and exclusion caused by a particular case, is anticompetitive or because they ‘‘are dependent on Internet the visible presence of Microsoft’s illegal. In fact, the United States Explorer’’ is erroneous. Section 3.g. requires middleware and rival middleware.223 challenged, and the Court condemned, that OEMs and end users be able to remove access only to the middleware product—in For example, in describing Microsoft’s Microsoft’s practice of commingling this case the browser—not to APIs or code. initial commingling in Windows 95, the operating system and Internet Explorer See Felten Declaration ¶¶ 92, 94; Findings District Court found: browser code for a specific reason: ¶¶ 183–185.’’221 Although users were not able to remove all because the commingling in that Plaintiffs’ Reply Memorandum In of the routines that provided Web browsing instance had the purpose and effect of Support of Proposed Final Judgment at from OSR 2 and successive versions of preventing OEMs and end users from 62 (filed May 17, 2000) (emphasis Windows 95, Microsoft still provided them removing access to the browser from added).222 with the ability to uninstall Internet Explorer Windows. by using the ‘‘Add/Remove’’ panel, which 227. Some comments suggest that the strong during the interim conduct remedy period of was accessible from the Windows 95 lack of a ban on commingling in the the IFJ as it is under the RPFJ. desktop. The Add/Remove function did not RPFJ retreats from the position on 221 Professor Felten stated in part in the cited delete all of the files that contain browsing commingling that the United States took remedy declaration: specific code, nor did it remove browsing- in the prior remedy proceeding and that To comply with the product Binding provision, specific code that is used by other programs. the District Court adopted in the IFJ. Microsoft’s future Windows Operating System The Add/Remove function did, however, Products must allow OEMs and end users ready remove the functionalities that were These commentors assert that the IFJ means for removing End-User Access to any actually prohibited Microsoft from Middleware Product. I will use the term provided to the user by Internet Explorer, commingling code for middleware with ‘Unbinding’ to refer to the development of the including the means of launching the Web code for the operating system. 219 In fact, means of removing End-User Access to a Bound browser. Accordingly, from the user’s product. Declaration of Edward Felten (‘‘Felten perspective, uninstalling Internet Explorer in however, the IFJ’s anti-binding Decl.’’) ¶92 (filed April 28, 2000)(emphasis added). this way was equivalent to removing the provision, Section 3.g, only required 222 Various commentors also seek to draw that Microsoft make available a version contrasts between the RPFJ and the so-called Internet Explorer program from Windows 95. of Windows in which ‘‘all means of end- ‘‘Mediator’s Draft #18’’ from the Spring 2000 mediation process with Judge Posner. See e.g., Findings of Fact, ¶ 159 (emphasis user access’’ to Microsoft Middleware AOL‘‘ 17 & n.14. Such attempts at comparison or added). The District Court went on to Products could be removed by OEMs or contrast are fundamentally flawed and therefore of find that, even with commingling of end users. IFJ § 3.g.i (emphasis no value in assessing the RPFJ. First, that mediation code, ‘‘[i]f OEMs removed the most added). 220 process was and remains confidential; there has been no authentication of any of the documents visible means of invoking Internet now available publicly that purport to represent 218 Explorer, and preinstalled Navigator AA1 13–14; AOL 2–3, 17–24; CCIA 45–46; mediation drafts. Second, the draft in question is with facile methods of access, Sen. Kohl 4; Litan 42–45; ProComp 31–33; itself styled as a ‘‘Mediator’s Draft;’’ there is no RealNetworks 20–21; SBC 46; TRAC 9. basis on which to conclude, other than Microsoft’s purpose in forcing OEMs to 219 AOL 17, 20; SBC 45. unsubstantiated newspaper articles cited in the take Internet Explorer—capturing 220 Some commentors suggest the reason the IFJ comments, that it reflects an actual proposal browser usage share from Netscape— did not require actual removal of middleware code approved or submitted by any party or that any would be subverted.’’ Id. ¶ 203. from Windows was because the IFJ’s conduct party ever was willing to agree to it. Third, restrictions were intended to be merely transitional, purported settlement positions from early 2000 223 See, e.g., Findings of Fact, ¶159 (‘‘the inability until the breakup of Microsoft could be effectuated. indicate nothing about the adequacy of the RPFJ to remove Internet Explorer made OEMs less As a result, the argument appears to go, the anti- today. The litigation was at a fundamentally disposed to pre-install Navigator . . . Pre-installing binding provision did not need to be as extensive different stage. The District Court had issued more than one product in a given category . . . can or invasive as it would have been in the absence extensive Findings of Fact that highly favored the significantly increase an OEM’s support costs, for of a structural remedy. But the commentors cite no United States’ presentation of evidence, but the the redundancy can lead to confusion among novice support in the Plaintiff’s prior remedy submissions District Court had not yet issued its Conclusions of or the IFJ itself for this claim. In fact, the need to Law, let alone had the Court of Appeals reviewed users. In addition, pre-installing a second product remedy Microdoft’s integration of middleware in and modified the District Court’s liability in a given software category can increase an OEM’s Windows in a non-removable way was just as determination. product testing costs.’’).
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230. In spite of this clear basis for the but also upon third parties that already the tying claim and was part of the District Court’s and Court of Appeals’ have designed software to rely on the attempted monopolization claim, conclusions, some commentors assert present operating system code. A flat neither of which was sustained by the that the mere fact of commingling itself prohibition on commingling in this Court of Appeals. Requiring Microsoft deters OEMs from installing rival particular case, without due regard to completely to disintegrate middleware middleware.224 Other commentors the competitive impact of that functions from the operating system ignore the basis of the courts’ commingling, therefore likely would be might have been a more appropriate commingling analyses and argue that harmful, not helpful. remedy for those claims, had they been the competitively significant component 233. Some commentors point out that, sustained, than for the more limited of Microsoft’s integration is the resulting even if end-user access to a Microsoft claim of commingling of the browser presence of middleware APIs on every Middleware Product has been removed and operating system code. In that PC on which Windows is installed, by an OEM or end user pursuant to sense, these commentors seek relief that whether or not end-user access to the Section III.H.1, that product may still exceeds the bounds of the monopoly middleware product has been removed launch in certain default situations maintenance finding that is the sole and, from the user’s standpoint, that addressed by Section III.H.2 of the RPFJ, basis for relief at this stage of the case. product is no longer present.225 They and therefore unacceptable end-user Consistent with its position throughout argue that Microsoft’s ability to obtain, confusion will persist even after the the remedy phase of this litigation, the through integration of middleware into access-removal remedy.228 But this United States’ concern with Windows, ubiquitous distribution of its argument overlooks the Court of commingling is appropriately and fully APIs without regard to the presence or Appeals’ decision, which held that addressed by the remedies proposed in absence of access to the product, will be certain instances of Microsoft’s ‘‘hard- the RPFJ. competitively determinative, and that wiring’’ its browser so that it would 236. Finally, at least one commentor no rival middleware producer can launch in particular situations even complains that the RPFJ is deficient overcome Microsoft’s advantage and where the user had designated another because it does not require Microsoft to persuade developers to write to its browser as the default were not license to OEMs versions of Windows products.226 Usage is only a means to an unjustifiably anticompetitive. Microsoft, from which the means of end-user end, they argue, with the end being the 253 F.3d at 67. access have been removed at lower widespread presence of APIs on PCs. 234. A number of commentors argue royalty rates than the version of 231. These theories of competitive that, even with the ability to remove Windows that includes full access to harm advanced by the commentors are access to Microsoft Middleware, Microsoft Middleware Products.232 not based on the facts proven by commingling Middleware code with There is no basis for such a provision plaintiffs at trial, reflected in the District Windows in a way that is non- under the Court of Appeals’ ruling in Court’s findings, and upheld by the removable actually diminishes the value this particular case. First, the Court of Court of Appeals. The basis for and worsens the performance of Appeals indicated that the question of commingling liability, and remedy, in Microsoft’s products, by causing whether Microsoft price bundled, that this case is the presence, from the user’s decreased reliability or increased is, charged more for Windows and IE perspective, of the product, and susceptibility to security risks.229 As together than it would have charged for consequent confusion and other one commentor correctly notes, Windows alone, has not yet been deterrents to installation of additional, however, this impact of commingling on answered.233 Second, the Court of rival middleware products; the mere the quality of Microsoft’s products was Appeals noted that it had ‘‘no warrant presence of APIs is not enough. Indeed, not an apparent basis for the Court of to condemn Microsoft for offering either although Microsoft argued vigorously in Appeals’ sustaining the liability IE or the IEAK [Internet Explorer its defense during the liability phase determination for this conduct.230 Administration Kit] free of charge or that removing end-user access Rather, the exclusionary character of even at a negative price.’’ 234 amounted to no more than ‘‘hiding’’ the commingling in a non-removable middleware, an act of no competitive fashion formed the basis for the court’s V. Retaliation Against ISVs or IHVs significance, that argument was never ruling. Microsoft, 253 F.3d at 66.231 (RPFJ § III.F) accepted. 235. In arguing for complete removal 237. Section III.F of the RPFJ prohibits 232. Thus, a ban on commingling of middleware code from the operating Microsoft from retaliating against an ISV without regard to its competitive system, some commentors seek to or IHV, or entering into agreements that significance, as many commentors extend the findings on commingling to condition the grant of consideration to appear to seek, would impose a wholly a more direct attack upon Microsoft’s an ISV, based on the firm’s refraining unnecessary and artificial constraint on practice of providing middleware from developing or other involvement software design that could have adverse functions in the Windows operating with software that competes with implications for consumers.227 system. That practice was the subject of Microsoft Platform Software or software Moreover, changes to the operating that runs on such a competing platform. system that would be required to 228 AAI 15–16. The provision provides limited implement such a blanket prohibition 229 CCC 22; Elhauge 1–2; Sen. Kohl 4. exceptions. likely would have adverse effects not 230 Elhauge 6. only upon Microsoft and its customers 231 Moreover, as Professor Felten testified in his A. Comments on Section III.F.1 prior remedy declaration, requiring that end users and OEMs be able to remove end-user access to 238. Section III.F.1 prohibits 224 AOL 22–23; Litan 45. Microsoft Middleware Products would itself result Microsoft from retaliating against any 225 Litan 44; RealNetworks 20–21. in improvements in the efficiency and reliability of ISV or IHV because of its development, 226 AAI 14–O15; AOL 21–22; CCIA 49–51; Litan Window. Felten Decl. ¶ 97 (‘‘Section 3.g would usage, distribution, promotion, or 44; ProComp 61–62. require Microsoft to undo the illegal product 227 Some comments correctly note that a flat ban Binding in which it has already engaged, and to on commingling might prevent Microsoft from refrain from further Binding of Middleware 232 SBC 48–49. SBC notes that IFJ § 3.g.ii adding new, innovative features to Windows, a Products to Operating Systems. This will lead to contained a such a provision. Id. result that would not be in the public interest. improvements in the efficiency and reliability of 233 253 F.3d at 96. Economides 9; Johnson 3–4. Windows.’’). 234 Id. at 68.
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support of any software that competes III.F.1’s prohibition against retaliation. or the Court of Appeals said about the with a Windows Operating System First, commentors contend that the ban lack of competitive effect of those Product or a Microsoft Middleware should cover threats of retaliation by actions negates the truth of their factual Product or software that runs on any Microsoft rather than only acts of findings on them. 239 such competitive software. retaliation. But because the RPFJ 244. Fourth, commentors suggest the 239. Some commentors question the prohibits retaliation itself, any threat of prohibition should ban retaliation appropriateness of any anti-retaliation retaliation is necessarily empty—and, if related to a broader class of software provision. One expresses skepticism anything, likely to encourage reporting than that contemplated in Section that any injunctive provision can of perceived and ambiguous ‘‘threats.’’ III.F.1.244 They argue that Microsoft effectively constrain Microsoft’s The United States therefore believes that should be prohibited from retaliating behavior and recommends the prohibiting threats is unnecessary. In a against ISVs’ and IHVs’ actions with imposition instead of a structural related vein, one commentor contends regard to any products or services that remedy.235 The United States believes that the ban should cover ‘‘coercion that an injunction against retaliation short of an agreement,’’ apparently compete with any Microsoft products or effectively can deter Microsoft from meaning instances in which firms services. This expansion is unnecessary anticompetitive behavior of the kinds undertake voluntary actions to prevent to achieve the goal of the RPFJ, which found illegal by the Court of Appeals. Microsoft from becoming displeased.240 is to ensure that firms can freely choose The United States continues to believe Such a provision would be to promote the popularization of that its decision not to seek structural inappropriately vague, making the operating systems or middleware that relief in the current proceeding is legality of Microsoft’s actions dependent might ultimately threaten Microsoft’s appropriate in light of that appellate in part on the perceptions of the operating system monopoly by lowering ruling.236 Injunctive relief cannot turn ‘‘coerced’’ ISV or IHV. the applications barrier to entry. The back the clock, but it can meet the 242. Second, a commentor suggests RPFJ does so by protecting ISVs’ and relevant remedial goal of restoring that Section III.F.1 should prohibit IHVs’ right to distribute or otherwise competitive conditions in the market.237 Microsoft from threatening or bringing promote ‘‘any software that competes 240. One commentor objects to the suit for infringement of Microsoft’s with Microsoft Platform Software or any language used in Section III.F.1. It intellectual property portfolio.241 The software that runs on any software that contends that ‘‘retaliate’’ is left United States disagrees. The purpose of competes with Microsoft Platform undefined and that the RPFJ addresses the RPFJ is to allow competitors Software.’’ ISVs’ and IHVs’ activities only retaliation that occurs ‘‘because of’’ freedom to develop and market their with respect to Windows applications or a firm’s acts with competing software, own software to challenge Windows, Microsoft hardware, to take two leaving Microsoft free to argue in the not to allow them to appropriate examples raised by the commentors, are future that some given act does not Microsoft’s intellectual property.242 unlikely to affect the barrier to entry qualify as retaliation and was not 243. Third, several commentors that protects Windows and so are caused by the other firm’s acts.238 But suggest Section III.F.1 should ban outside the appropriate scope of the retaliation is not an unfamiliar, retaliation against firms other than ISVs RPFJ. and IHVs; Litigating States’ Proposal § 8, ambiguous, or technical term. It carries 245. Fifth, a commentor suggests that for instance, additionally would bar acts the clear meaning of taking adverse the RPFJ should prohibit Microsoft from of retaliation against IAPs, ICPs, OEMs, actions that the commentor retaliating against firms that make a or Third-Party Licensees.243 Such recommends. Moreover, the good faith complaint against Microsoft additions are unnecessary. The RPFJ commentor’s preferred alternative to for violating the RPFJ but whose ‘‘because of’’—‘‘based directly or already does ban retaliation by Microsoft against OEMs, in Section complaint is ultimately either not indirectly,’’ the language used in IFJ brought forward to the court for action § 3(d) and in the Litigating States’ III.A. And Section III.G bans the kinds of pressure that Microsoft actually used or is ruled by the court not to be a Proposal § 8—puts the same, violation.245 The RPFJ does, in fact, give appropriate, obligation to show that against IAPs and ICPs in the past, and would be most likely to use again in the firms such protection: Section III.A.3 some adverse action by Microsoft (OEMs) and Section III.F.1.b (ISVs and toward an ISV or IHV was spurred by future absent the RPFJ. In covering ICPs, IHVs) explicitly prohibit Microsoft from the ISV’s or IHV’s prior behavior. the RPFJ in fact goes beyond the Court retaliating against firms for ‘‘exercising Indeed, without an obligation to show of Appeals’ ruling, which found that any of the options of alternatives such adverse action, retaliation could be ‘‘the District Court’s findings [with provided for under this Final improperly read to cover withholding respect to the deals with ICPs] do not Judgment,’’ including the right of any benefit in response to an undesired support liability.’’ Microsoft, 253 F.3d at complaint guaranteed by Section IV.D.1. action. For example, if Microsoft 71. The District Court did make factual decided for valid business reasons that findings about what Microsoft did to the 246. Finally, several commentors it no longer wanted to engage in a ICPs, and nothing that the District Court suggest that Section III.F.1 should particular transaction, it could be explicitly prohibit Microsoft from accused of retaliating. 239 Palm 14; ProComp 34. retaliating against firms that have 241. Commentors suggest several 240 ProComp 34. participated or cooperated with the increases to the breadth of Section 241 Red Hat 7–8, 10–13; see also the discussion of Government in this litigation.246 For a the concerns of the open source community, below. 242 On a side note, the commentor is mistaken in discussion of the merits of including a 235 Relpromax 17–18; Economides 12 (disagrees asserting that Section III.F.3 expressly permits provision that prohibits retaliation for with this concern). Microsoft to sue for infringement if an ISV or IHV participation in this litigation, see 236 ACT 25, 29 (Section III.F adequately forbids takes any of the actions protected from retaliation Section XI(G) below. retaliation against ISV’s and IHVs). under Section III.F.1. Red Hat 7. Section III.F.3 237 Sun 15–16. simply says that Microsoft may enforce agreements 238 SBC 96–97; CCIA 87 (addressing only specific or intellectual property rights so long as by doing 244 SBC 97; Pantin III.17; CCIA 86; PFF 18–19; type of retaliation, e.g., Microsoft’s threat to so it does not violate any provision in the RPFJ. Akin 3. discontinue porting Office to Mac OS unless Apple 243 Litigating States, Ex. A 13–14; SBC 95–96; 245 Harris 6. stopped supporting Netscape). Pantin 14–15. 246 SBC 99; Litigating States, Ex. A 16.
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B. Comments On Section III.F.2 reason.249 There is a necessary trade-off reached with a competitor or 247. Section III.F.2 prohibits in an injunctive provision, and in competitors. exemptions from such a provision, agreements relating to Windows C. Comments On Section III.F.3 Operating System Products that between specificity and generality. The 252. Section III.F.3 simply states that condition the grant of Consideration (a more specific the provision about the nothing in Section III.F shall prohibit defined term in the RPFJ that behavior that is permitted or prohibited, Microsoft from enforcing any property encompasses both monetary and the greater the opportunity for the right or any provision of an agreement nonmonetary benefits) on an ISV’s affected firm to tailor anticompetitive with an ISV or IHV that is not refraining from developing, using, activities to avoid court supervision. The exemption in Section III.F.2, with inconsistent with the RPFJ. distributing, or promoting the same 253. Several commentors apparently kinds of software addressed in Section its reliance on general but established legal terms such as ‘‘reasonable,’’ misread Section III.F.3 as introducing a III.F.1—software that competes with a loophole or somehow granting Microsoft Windows Operating System Product or ‘‘reasonably necessary,’’ and ‘‘bona fide,’’ allows the United States and the rights and powers that it does not now a Microsoft Middleware Product or have.252 Section III.F.3 merely states software that runs on any such court to consider the substance and not the mere form of Microsoft’s future with clarity the intended limits of the competitive software. A limited remainder of Section III.F. exception permits Microsoft to enter agreements with ISVs. Absent this such agreements if they are ‘‘reasonably limited exception, Section III.F.2 would VI. Exclusionary Agreements (RPFJ necessary to and of reasonable scope prohibit otherwise lawful § III.G) and duration in relation to a bona fide collaborations, with no legal basis in the 254. Commentors raise a variety of contractual obligation of the ISV to use, findings of this case. concerns about Section III.G, which distribute or promote any Microsoft 250. One commentor objects that prohibits Microsoft from entering into a software or to develop software for, or Section III.F.2, which begins with the variety of exclusionary agreements. The in conjunction with, Microsoft.’’ words ‘‘Microsoft shall not enter into objections generally fall into two 248. Several commentors argue that any agreement,’’ grandfathers any categories: concerns about omissions the language of this exception is vague existing agreements that would from Section III.G, and concerns about and subject to abuse by Microsoft, otherwise be impermissible.250 It is Section III.G’s exceptions. allowing it to prevent ISVs from correct that Section III.F.2 only applies A. Omissions entering partnership and other to agreements signed after the date of agreements with rival firms.247 entry of the RPFJ. This limitation should 255. At least one commentor Microsoft, however, may only enter have little impact, however, because expresses concern that Section III.G agreements that limit the ISV’s activities Microsoft must regularly rewrite its does not contain language similar to with rival software to the extent that agreements with ISVs in order to Section 3.h (‘‘Agreements Limiting those limitations are reasonably related encourage them to write to and Competition’’) of the Initial Final to a bona fide contractual relationship redistribute Microsoft’s newest APIs and Judgment, and so would permit between Microsoft and the ISV. It is technologies. Microsoft to seek to enter market important to protect ISVs’ opportunity 251. Finally, at least one commentor allocation agreements like those to engage in legitimate, procompetitive Microsoft proposed to Netscape and expresses concern that Section III.G arrangements with Microsoft. For Intel.253 Although Section III.G does not does not contain language similar to example, Microsoft could enter into an cover such agreements, Section III.F.2 Provision 3.h (‘‘Agreements Limiting agreement that provides an ISV with does. Competition’’) of the IFJ, and so would funds for the promotion of Microsoft 256. Some commentors object that the permit Microsoft to seek to enter market software and prohibits the ISV from RPFJ does not contain a provision allocation agreements like those it spending those funds to promote rival prohibiting Microsoft from granting proposed to Netscape and Intel.251 software. In contrast, contrary to the The consideration to a third party for concerns of one commentor, Microsoft commentor’s concern is addressed not agreeing not to use or distribute non- could not enter into an agreement that in Section III.G, but here in Section Microsoft products or services, a provides an ISV with assistance in III.F.2, which does in fact substantially provision that the United States argued promoting a Microsoft product on prohibit agreements that limit for in the earlier remedy proceeding and condition that the ISV not also competition. Under its terms, Microsoft which was included in the IFJ may not ‘‘enter into any agreement distribute, use, or promote a rival (§ 3.e.i).254 In a similar vein, one of the relating to a Windows Operating System product, because such a limitation same commentors objects that RPFJ Product that conditions the grant of any would not be reasonably related to the Section III.G.2, which prohibits Consideration’’ on an ISV’s refraining ISV’s obligation to promote the Microsoft from granting placement in 248 from various forms of involvement with Microsoft product. Windows to an IAP or ICP on condition software that runs on, or itself is, 249. One commentor argues that the that it refrain from distributing certain software that competes with Microsoft language of the exception in Section competing software, reflects phrasing Platform Software. To the extent that III.F.2 is no more precise than a simple supported by Microsoft and opposed by any agreements that limit competition statement of the antitrust rule of reason, the United States in the previous are not covered by Section III.F.2, they and, because it offers no guidance to the proceeding.255 Since the time of the can of course be addressed by other Court about how to distinguish between June 2000 IFJ, of course, the Court of means: Microsoft could be prosecuted, a ‘‘bona fide contractual obligation’’ and Appeals has ruled on liability— an anticompetitive exclusionary at minimum under Sherman Act § 1, for requirement, may establish a rule even any market allocation agreement that it 252 SBC 98; also see the discussion in Section more permissive than the rule of III.F.1, supra. 249 Litan 47–48; see generally CCIA 88; Elhauge 253 SBC 98–99. 247 SBC 98; CFA 97; Maddux ¶ 1; Pantin III.17; 12. 254 SBC 105–06; 152; RealNetworks 30–31; Harris CCIA 82; Akin 3. 250 Harris 6. 7; Clapes 7. 248 AAI 26–27, 35–36. 251 SBC 98–99. 255 SBC 106–07, 153.
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narrowing the District Court’s ruling 260. At least one commentor misreads impossible for Microsoft to seek—much and vacating the IFJ itself. The language the language of Section III.G.1, asserting less get—any form of exclusive of RPFJ Section III.G does prohibit the that the provision permits Microsoft to distribution, promotion, use, or support kinds of agreements—e.g., between demand distribution of its own software on all of a third party’s products, no Microsoft and IAPs—that the Court of at what Microsoft deems to be a matter how much Microsoft is willing to Appeals found to be unlawful.256 commercially practicable level.260 The pay. Microsoft cannot, for instance, pay 257. Several commentors contend representation of ‘‘commercial an ICP to make its content available in that, unlike the Litigating States’ practicability’’ by a third party a format readable only by Windows Proposal (§ 6), RPFJ Section III.G covers contained in Section III.G.1 does not, Media Player, because it is logically Microsoft’s contracts with only named however, refer to its distribution of impossible for that ICP to represent that categories of trading partners and may Microsoft software, but of non-Microsoft it could also simultaneously make that omit others who are important, e.g., software. content available only in a format large corporate end-user purchasers.257 261. Nor does Section III.G.1 give readable only by some non-Microsoft Section III.G.1 does, however, cover Microsoft an affirmative right to demand media software. contracts between Microsoft and any that third parties carry its products, as 264. Commentors also raise issues IAP, ICP, ISV, IHV, or OEM. Section another commentor claims.261 The about Section III.G’s exemption for III.G.1 thus achieves its desired goal of provision merely describes the terms certain joint venture and joint ensuring that Microsoft cannot use that Microsoft is permitted to offer to a development or services arrangements, exclusive agreements to tie up key third party. Moreover, the provision under which a third party can be channels of distribution for competing does not give Microsoft any power to prohibited from competing with the middleware and operating systems— affect the circumstances that determine object of the joint arrangement for a indeed all channels of distribution that the acceptable terms: Microsoft cannot reasonable period of time. were discussed at trial.258 End users, force or require a third party to make a 265. One commentor in this group including corporate end users, will be representation about the commercial complains that the standard enunciated able freely to choose the software practicalities that it faces. in Section III.G for an agreement to products they wish to use. 262. Some commentors contend that qualify for this exemption is nothing third parties are likely to make empty more than a restatement of the B. Exemptions representations to Microsoft in exchange traditional antitrust rule of reason.265 258. Commentors raise several issues for preferential treatment. That is, a This contention, however, overlooks the regarding two exemptions in Section third party like an OEM is more likely exemption’s careful limitations. The III.G. The first concerns the to say that it could carry competing exemption applies only to bona fide ‘‘commercially practicable’’ exemption products than actually carry those joint ventures and to other joint to Section III.G.1; the second concerns products, because it would not want to agreements for certain specific the joint venture exception that applies distribute two similar products on a productive activities, and only those in to all of Section III.G. particular computer that it sells.262 But which both Microsoft and the other 259. Section III.G.1 does not apply to this criticism misses the fact that the party contribute significant resources. agreements if Microsoft obtains in good OEM may well choose to offer the non- Further, these commentors overlook that faith a representation from the Microsoft product on, for example, 50% nothing in the Court of Appeals’ contracting third party that it is of its product line, and the Microsoft decision warrants denying Microsoft the ‘‘commercially practicable’’ for it to product on the other 50%, thus allowing ability to enter into joint arrangements, provide equal or greater distribution for the consumer to choose freely among which may have procompetitive competing non-Microsoft software, differentiated computer/software benefits for the market. whether or not it actually distributes bundles. The United States believes 266. The requirement that a joint that non-Microsoft software.259 that, contrary to the concern raised by development or services agreement at least one commentor, this provision must create either a new product, 256 One commentor’s concern appears to reflect a will prevent Microsoft from service, or technology, or a material misunderstanding of the purpose of Section III.G.2. Observing that the provision prohibits Microsoft guaranteeing that rival technology will value-add to one that already exists 263 from granting placement to an IAP or ICP on the not become broadly available. addresses the concerns raised by several condition that the IAP or ICP refrain from activities Further, the ‘‘good faith’’ requirement commentors that Microsoft could use with any software ‘‘that competes with’’ Microsoft ensures both that Microsoft cannot make Section III.G to block competition with Middleware, the commentor questions whether the provision would have protected Netscape’s a representation of commercial joint activities that create nothing more Navigator during the period before Microsoft practicability a standard part of its than routine alterations to Microsoft or introduced Internet Explorer. See PFF 19–20. By license agreements and that Microsoft non-Microsoft products.266 implication, the commentor questions whether could not rely on this exemption where 267. Some commentors question Section III.G.2 adequately will protect future whether Microsoft could manipulate its nascent middleware. But Section III.G.2. prohibits it knows that a representation of certain conditioned contracts; if Navigator did not commercial practicability is not interpretation of, for instance, compete with IE because IE did not exist, then legitimate. ‘‘significant developer or other Microsoft would have no reason to give an IAP 263. A number of commentors resources’’ in order to invoke the benefits on the condition that the IAP not use contend that Microsoft will be able to exemption to cover activities that are Navigator. And that is what the historical record 267 shows: Microsoft did not impose the unlawful IAP obtain representations of commercial not truly joint. What constitutes a contracts in the early, pre-IE days of Navigator, but practicability from third parties simply ‘‘significant’’ resource is not spelled out rather started to impose them in late 1996 at a time by paying them sufficiently.264 Section in the RPFJ because it is a familiar term when Microsoft was trying to build IE’s usage share. III.G.1, however, makes it logically and concept in antitrust enforcement. See Findings of Fact, ¶¶ 256–62. The current wording of Section III.G.2 adequately prohibits For example, the Antitrust Guidelines Microsoft from taking action against threatening 260 CFA 97. products. 261 SBC 152. 265 Litan 48. 257 SBC 104–05, 151–52; CCIA 59 n.12. 262 AAI 26; Harris 7. 266 CCIA 88–89; AOL 36; AOL, Klain 5. 258 Economides 11. 263 Pantin 16. 267 CFA 98; Litigating States, Ex. A 12 (point 14); 259 SBC 107; Litigating States, Ex. A 12 (point 14). 264 CCIA 89. RealNetworks 30–31.
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for Collaborations Among Competitors in from a third party.’’ 271 The exception Operating System Product.272 Some issued jointly by the Federal Trade permits Microsoft, in licensing new misunderstand the interaction between Commission and Department of Justice technology from an ISV for the Windows Operating System Product in April 2000 describe the contribution incorporation into a Microsoft product, and Microsoft Middleware definitions, of ‘‘significant capital, technology, or to ensure that the ISV will not also arguing, for example, that interfaces other complementary assets’’ as a license the same technology to a between Internet Explorer and a hallmark of efficiency-enhancing competitor who hopes to ‘‘free ride’’ on Windows Operating System Product are collaborations between firms. (FTC/DOJ Microsoft’s popularization of the not covered if Microsoft chooses to label Antitrust Guidelines for Collaborations technology. It therefore provides Internet Explorer as part of Windows. Among Competitors, 8). Microsoft with appropriate incentives to This is incorrect. These comments fail 268. The United States, of course, invest in such popularization. If to realize that a product can be both retains power to evaluate and seek Microsoft entered into an agreement included in a Windows Operating enforcement of the RPFJ against sham with an ISV, or other third party, in System Product and still have code that joint arrangements. Microsoft cannot, as which the licensing-in of such qualifies as Microsoft Middleware. It some commentors suggest, take the intellectual property is nothing more does not matter if Microsoft labels Internet Explorer as part of Windows; identical distribution agreements found than a pretext for otherwise what matters is that there is a separate unlawful at trial and exempt them from impermissible exclusionary terms, the distribution of Internet Explorer, and Section III.G merely by characterizing United States would review the that the interfaces between this separate the agreements as ‘‘joint’’ activities.268 legitimacy of such an agreement under distribution and a Windows Operating As the Court of Appeals found Section III.G. System Product must be disclosed. For (Microsoft, 253 F.3d at 72), Microsoft’s VII. Disclosure Provisions (RPFJ example, Internet Explorer 6.0 is exclusionary agreements with ISVs, to §§ III.D, III.E) distributed separately and included in take just one example, had no Windows XP. Under the RPFJ, the code procompetitive justification; they A. Disclosure of APIs (RPFJ § III.D) that is distributed separately is cannot be considered legitimate joint 271. Many commentors raise issues Microsoft Middleware regardless of activities to produce new or improved whether Microsoft also calls Internet products, technologies, or services, and concerning the disclosure of APIs in RPFJ Section III.D. The issues will be Explorer a part of Windows. Concerns so would not be exempted from Section that Microsoft can relabel code as being III.G. discussed in the following categories: First, issues concerning the products part of Windows and thus evade the 269. Another commentor notes 269 between which the APIs are disclosed disclosure provisions are unfounded; it that the United States objected in June will be discussed. Next, API issues, is the separate distribution that matters, 2000 to Microsoft’s proposal for a joint- focusing on the substance of the not the Windows label. venture exception to Section 3.h of the disclosure, and the definitions of ‘‘API’’ 274. Another commentor argues that Initial Final Judgment(‘‘Ban on and ‘‘Documentation,’’ will be Microsoft can evade disclosure by Agreements Limiting Competition’’). discussed. Third, timing issues, removing the APIs from a Windows The exception in RPFJ Section III.G, 273 including analysis of the definition of Operating System Product. This is however, is narrower than the broad ‘‘Timely Manner,’’ will be addressed. illogical. If the APIs are not in exception Microsoft proposed, and it is Windows, then they cannot be used by tailored to permit only joint activities 1. Product Issues any software, whether that software be that are genuinely procompetitive, those Microsoft Middleware or competing that are not mere shams for market 272. Section III.D calls for certain products. At a basic level, it is allocation agreements but require firms disclosures between Microsoft important to remember that Microsoft legitimately to share significant Middleware and a Windows Operating chooses which APIs to develop and resources to create new or improved System Product. Many commentors make part of Windows in the first opportunities for consumers. A non- argue that the definitions of Microsoft instance. Microsoft controls which compete clause with a legitimate joint Middleware and Windows Operating software products it develops and venture is not, contrary to one System Product can be evaded easily; which it does not, and Section III.D is commentor’s view, necessarily that products other than Microsoft about disclosure of certain APIs within inappropriate merely because Microsoft Middleware should be included; or that those products. is one of the parties to the joint products other than Windows Operating b. Products Other Than Microsoft venture.270 Both the United States and System Product should be included. Middleware the courts consistently have noted that Each of these will be addressed in turn. such procompetitive joint ventures do For a discussion of Microsoft 275. Some commentors argue that exist and that Microsoft should be Middleware itself, see Section III(B) Section III.D should require Microsoft to permitted to engage in them, see, e.g., above. disclose interfaces between Windows IFJ § 3.a.ii (exception for ‘‘bona fide c. Microsoft’s Ability To Manipulate the Operating System Products and joint development efforts’’). products other than Microsoft Definitions To Avoid Disclosure 274 270. Finally, some commentors raise Middleware. Some argue that all similar concerns about whether 273. Several commentors state that Microsoft applications that run on Microsoft could abuse the exception in the API disclosure provisions are Windows, for instance, Office, should Section III.G for agreements ‘‘in which completely within Microsoft’s control Microsoft licenses intellectual property and that Microsoft can evade the 272 Litan 51; NetAction 12; ProComp 42–43; CFA provisions simply by labeling Microsoft 96; RealNetworks 11; CCIA, Stiglitz & Furman 30; CCIA 63. 268 ProComp 67–88; SBC 53; Maddux, Point 20; Middleware as part of a Windows 273 AAI 20. Harris 6. 274 Alexander 3, 4; Carroll 4; Johnson 5; Gifford 269 SBC 107. 271 SBC 153; RealNetworks 31; Pantin 17–18; 5, 9; Litan 51; Kegel 18; Pantin 12; PFF 20; 270 Pantin 17. Giannandrea 5; Harris 6. ProComp 38; CCIA 62.
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be covered.275 Others argue that outweighs Microsoft’s natural incentive commentors go farther and propose that software that never has been distributed to disclose them—namely, where Microsoft be required to define the APIs separately should be covered. Still Microsoft’s own middleware is that a competing operating system must others phrase the argument in terms of competing with rival middleware that provide to run Windows applications, disclosing ‘‘all Windows APIs.’’ 276 threatens the applications barrier to or to implement a ‘‘Windows Others find the limitation to Microsoft entry. Application Environment’’ on other Middleware to be appropriate.277 279. Commentors who posit that operating systems.284 276. Disclosure of the interfaces ‘‘Windows APIs’’ should be disclosed 283. The violations proven and between all Microsoft applications that fail to recognize the need for a clear line upheld in this case focused on run on Windows Operating System between which facets of Windows are middleware as the mechanism that Products is considerably broader than disclosed and which are not. Windows, threatened to lower the applications the violations found by the Court of like most software, is comprised of barrier to entry and therefore make other Appeals would justify, for several modular blocks of code that ‘‘interface’’ operating systems better substitutes for reasons. First, the word ‘‘applications’’ to one another. Disclosing every Windows. The intent of Section III.D is does not have a specific meaning, and interface in Windows is to disclose most to ensure that future middleware threats could refer to almost any software code. of the source code. ‘‘Windows APIs’’ is will have the information about The term is not limited to software of simply not a defined set of APIs that Windows they need in order not to be any particular size or purpose and could appropriately can be subject to disadvantaged relative to Microsoft’s be interpreted to include the smallest disclosure. own middleware. That is, the disclosure pieces of software. Nor does the term 280. Some commentors argue that is not intended to permit have any relation to whether the limiting disclosure to APIs used by misappropriation of Microsoft’s software exposes any APIs or could ever Microsoft Middleware forces other intellectual property for other uses. be used as Platform Software itself. applications merely to follow in the Rather, the focus of the remedy, as of Thus, for instance, a clock, a solitaire footsteps of Microsoft products and the Court of Appeals’ ruling, remains 280 program, and Microsoft’s Flight discourages new products. To the restoring the competitive conditions to Simulator and Age of Empires games all contrary, there is no requirement that permit nascent threats to emerge. would be included. The cost to any Non-Microsoft Middleware use the Microsoft of hardening and same APIs as the Microsoft Middleware; 2. API Issues documenting the interfaces between all nor is there any indication that the only a. Definition of ‘‘API’’ way to accomplish a particular function these pieces of software would be 284. Several commentors criticize the substantial, and the United States does will be to use the Microsoft Middleware APIs. For instance, early web browsers definition of ‘‘API.’’ Significantly, one not see how it would increase materially commentor points out that the the ability of competing middleware to such as Mosaic in 1994 clearly did not have to use the same APIs as Internet definition only includes Microsoft APIs, threaten Microsoft’s operating system rendering the other definitions that use monopoly. Explorer, because Internet Explorer did not exist. Yet Mosaic was developed the term API potentially meaningless.285 277. As phrased by one commentor, Specifically, the definitions of Non- the goal is to ‘‘allow competitive and gained widespread popularity, all by using the thousands of Windows Microsoft Middleware, Non-Microsoft products to interoperate with Microsoft Middleware Product and Operating software on an equal basis as Microsoft’s APIs that were already published. 278 System arguably fail to function as own products.’’ The United States c. Products Other Than Windows intended if the definition of ‘‘APIs’’ is views Non-Microsoft Middleware as Operating System Products limited to Microsoft APIs. This competing for usage with Microsoft 281. Some commentors argue that definition, as originally drafted, was Middleware, and thus this provision Section III.D should require Microsoft to intended to apply to Section III.D, and seeks to ensure that Non-Microsoft disclose the interfaces between the definition of API has been modified Middleware will not be disadvantaged. Microsoft Middleware and products in the SRPFJ to reflect the intention of The United States believes that the most other than Windows Operating System the parties in drafting this definition. competitively significant APIs are those Products.281 Specifically, some opine The RPFJ’s definition of API has thus used by the competing products, not that interfaces to other devices, such as been inserted directly in Section III.D. A those used by completely different types handhelds or set-top boxes, should be generic definition of API that is not tied of software, such as games. covered. These comments are addressed to Microsoft products has been inserted 278. Moreover, as some commentors under Section III.E. as definition VI.A in the SRPFJ. The recognize, Microsoft already discloses 282. Other commentors argue that the meaning of API in the definitions of thousands of APIs and has a strong disclosure should be to the benefit of 279 Non-Microsoft Middleware, Non- incentive to disclose APIs. competing operating system vendors.282 Microsoft Middleware Product and Microsoft’s disclosure of APIs is what For instance, some commentors argue Operating System is now defined allows applications to be written to the that the disclosure should be for any according to this generic definition, Windows platform, and creates and purpose, and not just ‘‘for the sole thereby resolving any concerns about sustains the applications barrier to purpose of interoperating with a their reliance on an API definition that entry. Section III.D is designed to Windows Operating System is specifically tied to Microsoft require disclosure of APIs in those cases Product.’’ 283 Some focus on the products. In the SRPFJ, the revised where Microsoft may have a strategic potential use of these APIs by other sections are as follows (new language interest in withholding APIs that operating system developers. Several underlined):
275 KDE 13. 280 CCIA 62; ProComp 38; CFA 96. Section III.D. Starting at the earlier of the 276 AAI 19; CCIA 62; CCIA, Stiglitz & Furman 29; 281 Litigating States, Ex. A 8; Palm 6–7; Pantin release of Service Pack 1 for Windows XP or SIIA 31–32. 12–13; ProComp 39; AOL 39–40; CCIA, Stiglitz & 12 months after the submission of this Final 277 Economides 11. Furman 43. 278 ProComp, Arrow A–29. 282 Giannandrea 2; Moglen 3–4. 284 CCC 11; Kegel 14–18. 279 CCIA 60–61. 283 Moglen 2; Kegel 8; Maddux ¶ 11; ProComp 39. 285 AAI 34.
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Judgment to the Court, Microsoft shall other way around.288 For instance, one examples of the type of information that disclose to ISVs, IHVs, IAPs, ICPs, and commentor argues that the ‘‘Play All’’ might be provided in different OEMs, for the sole purpose of interoperating and ‘‘Burn CD’’ interfaces in Windows circumstances. Some interpret the list as with a Windows Operating System Product, XP should be disclosed.289 These requiring the specified information in via the Microsoft Developer Network concerns are more appropriately all circumstances; for instance, that for (‘‘MSDN’’) or similar mechanisms, the APIs and related Documentation that are used by addressed under the default provisions every interface a reference Microsoft Middleware to interoperate with a in Section III.H. The disclosure implementation and algorithms must be Windows Operating System Product. For provisions in Section III.D and the disclosed. This was never the intent of purposes of this Section III.D., the term APIs default provisions in Section III.H the definition, as any quick review will means the interfaces, including any address different aspects of the show, because some of the listed items associated callback interfaces, that Microsoft relationship between Microsoft only make sense for certain types of Middleware running on a Windows Middleware and a Windows Operating interfaces. The ambiguity and lack of Operating System Product uses to call upon System Product. In simple terms, when clarity on this point was one of the that Windows Operating System Product in Microsoft Middleware calls upon reasons the definition was changed. order to obtain any services from that functionality in a Windows Operating Windows Operating System Product. In the 289. The controlling parts of the IFJ’s case of a new major version of Microsoft System Product for services, that technical information definition were Middleware, the disclosures required by this interface is subject to analysis under intended to be ‘‘all information Section III.D shall occur no later than the last Section III.D (one can think of this as regarding the identification and means major beta test release of that Microsoft middleware ‘‘calling down’’ into the of using APIs . . . that competent Middleware. In the case of a new ver sion of operating system for functionality). On software developers require.’’ The intent a Windows Operating System Product, the the other hand, when a Windows behind the previous definition was to obligations imposed by this Section III.D Operating System Product invokes a ensure that if a competent software shall occur in a Timely Manner. Microsoft Middleware Product or a Non- developer required it, it had to be Section VI.A. ‘‘API’’ means Microsoft Middleware Product to provided, whether that be a reference application programming interface, perform a function, those invocations implementation, an algorithm, or any including any interface that Microsoft is are analyzed under Section III.H (one other facet of the interface. obligated to disclose pursuant to III.D. can think of this as an operating system 290. In the RPFJ, the first sentence of 285. Commentors argue that the ‘‘calling up’’ to the middleware for the definition of Documentation reads definition of API (now as contained in functionality). The specific functions of ‘‘all information regarding the Section III.D) is too narrow.286 In ‘‘Play All’’ and ‘‘Burn CD’’ in Windows identification and means of using APIs particular, several argue that it should XP are examples of the latter, not the that a person of ordinary skill in the art include file and document formats. As former. Similarly, issues of requires to make effective use of those the CIS explained, ‘‘interfaces’’ is used ‘‘hardwiring’’ are more appropriately APIs.’’ The phrase ‘‘competent software broadly to include any interface, addressed under Section III.H.290 developer’’ from the IFJ definition has protocol or other method of information b. Definition of ‘‘Documentation’’ been replaced with ‘‘a person of exchange used when Microsoft ordinary skill in the art’’ because the Middleware calls upon a Windows 287. Some commentors note that, in latter is clearer and more easily Operating System Product. CIS at 33–34. contrast to the IFJ, there is no definition enforced, but the general intent is the One commentor argues that this means of ‘‘technical information’’ and that same: if the information is needed by a that APIs simply are the interfaces instead the RPFJ uses the term person of the requisite skill, it must be between two products.287 In general, ‘‘Documentation.’’ The commentors provided. this is correct ‘‘ the definition was believe that the IFJ’s definition of 291. The Documentation term also designed to be read broadly to include technical information was superior or was defined to accommodate the RPFJ’s that Documentation should be separation of API disclosure and any way in which Microsoft 291 Middleware calls upon the services of a broader. Despite the many comments Communications Protocol licensing into Windows Operating System Product. on this issue, the United States believes two separate provisions and the greater Thus, whatever Microsoft Middleware the definitions are very similar and specificity given to the API definition uses to request services from a Windows produce largely similar results. To the (now as used in Section III.D). Operating System Product, whether it extent there are differences, the United Additionally, the second sentence of States believes they are due largely to includes something that could arguably Documentation was added to clarify the problems and ambiguity in the IFJ’s be called a ‘‘file format’’ or not, is the level of specificity, precision and detail technical information definition. to be provided. However, the second subject of disclosure. To the extent that 288. The IFJ’s definition of technical sentence does not change the meaning these comments actually relate to information was ‘‘all information of the first sentence; ‘‘all information whether applications such as Office regarding the identification and means . . . that a person of ordinary skill in should be considered Microsoft of using APIs and Communications the art requires to make effective use’’ Middleware, those concerns are Interfaces that competent software of the APIs must be disclosed. addressed above in the discussion of developers require to make their 292. One commentor argues that Products Other than Microsoft products running on any computer Microsoft should not be allowed to Middleware. See also Section VII(E) interoperate effectively with Microsoft disclose via MSDN because Microsoft below. Platform Software running on a Personal allegedly has made its websites 286. Some commentors believe that Computer.’’ There then followed a list of APIs should include calls from a incompatible with non-Microsoft web browsers.292 Taking the opposite Windows Operating System Product to 288 Kegel 18; SIIA 30–31. Microsoft Middleware, instead of the 289 RealNetworks 27. approach, another commentor argues 290 Palm 10 (hardwiring); AOL, Klain 4 that Microsoft only should be allowed to 286 Kegel 5, 8, 12; Maddux ¶ 12; Litigating States, (handwiring). Ex. B 31; Carroll 2, 4, 5; Johnson 2, 5–6l SBC 78; 291 Litigating States, Ex. A 7, 9, Ex. B 36; Pantin 292 Maddux ¶ 13 (Microsoft should be required to KDE 13; Pantin 30. 12; SIIA 29–30; SBC 79; RealNetworks 15; CCIA 70– publish on Slashdot (slashdot.org) and Freshmeat 287 ProComp 46. 71; PRoComp 47; AOL, Klain 5. (www.freshmeat.org).
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disclose via MSDN.293 MSDN at present security concerns. When technical competing software developers from is widely used by developers who wish issues, such as whether Microsoft has developing on other platforms. Another to develop for Microsoft platforms, and disclosed all required APIs, are brought suggestion is that Microsoft be required it is an efficient mechanism for to the attention of the Technical to announce the subject matter of its distributing disclosures to developers, Committee it is expected that they will patents, such that developers can tell although other efficient mechanisms consult the source code as necessary to which interfaces can be used without could also be developed. resolve any issues. Additionally, unlike risk of patent infringement. These issues 293. A few commentors raise the secure facility, the Technical are addressed in Section XII(E) below. concerns regarding completeness— Committee supports anonymous 3. Timing Issues either that there is no incentive for the complaints and can work with an Documentation to be complete or industry participant without their 299. Several commentors raise issues accurate, or that there is no way to tell identity being disclosed to Microsoft. concerning the timing of the API whether it is sufficient.294 The United Under the prior provision only disclosures. These issues can be divided States believes that the enforcement ‘‘qualified representatives’’ had access, into three categories: when the first mechanisms of the RPFJ are sufficient to and the process of becoming a disclosures shall occur; when address this issue. In particular, as ‘‘qualified representative’’ could have disclosures will be triggered by a new discussed below, the Technical required disclosure of the version of Microsoft Middleware; and Committee will have full access to the representatives’’ identity to Microsoft. when disclosures will be triggered by a source code and any other necessary 296. Moreover, it is important to note new version of a Windows Operating information to resolve disputes that the stated purpose of the ‘‘secure System Product. concerning sufficiency of facility’’ provision was to facilitate a. First Disclosures: Windows XP Documentation. compliance and monitoring. The United Service Pack 1 or No Later Than 294. Finally, some commentors argue States believes that compliance and November 2002 that the Litigating States’ definition of monitoring assessments are best 300. The RPFJ calls for API disclosure technical information is superior. The performed by the United States, with to occur first at the earlier of the release Litigating States’ definition contains one assistance from the Technical of Service Pack 1 for Windows XP or 12 striking change from the IFJ definition: Committee. To allow competitors source months after the submission of the RPFJ it requires information on implementing code access to facilitate compliance and to the court, i.e., November 6, 2002. the APIs as well as on using them. The monitoring is to place an inappropriate Currently, Service Pack 1 is scheduled addition of this word appears to require responsibility on competitors, who to be released in August 2002. Several Microsoft to provide information on might have reasons to place their own commentors argue that there is no how to implement functions in third- interests above those of the U.S. public generally. Accordingly, the RPFJ calls reason for this delay, and that the APIs party products, such as how to should be released immediately, or at implement the APIs, not so they can be for source code access to be available to the Technical Committee and the any rate sooner than November 2002.298 used by the middleware, but so that 301. This delay was necessary to those interfaces can be offered to others. United States and puts the responsibility for compliance and allow Microsoft time to stabilize, modify This appears to be aimed at allowing as needed, test and document the competing operating system vendors to monitoring on the United States. 297. Additionally, the removal of the disclosed interfaces. This is not a trivial clone Windows APIs. The Litigating task. Interfaces that were designed to be States’ definition extends well beyond secure facility provision does not change the amount of required used by only a certain small number of remedying the violations that the Court other pieces of code are not designed, of Appeals sustained. disclosure under Section III.D. Disclosure still must be sufficient to tested, or documented to the level that c. Source Code Access provide ‘‘all the information . . . that a Microsoft customarily provides for person of ordinary skill in the art published interfaces. Interfaces must be 295. Commentors raise several issues stabilized, in that they must be fixed at regarding disclosure of source code. requires to make effective use of those [disclosed] APIs.’’ This can include a configuration that can be maintained. First, the United States does not agree The interfaces will need to be modified that an appropriate remedy in this case reference implementations or any other disclosure required to meet the to add error correction or other requires Microsoft to disclose and functions to handle unexpected publish all of its source code for requirement. If the documentation provided by Microsoft is not sufficient, behavior. The interfaces must be tested Windows Operating System Products, to work with a great many other because that would be a then it must be revised until it satisfies the requirement. The United States applications and system configurations. disproportionate appropriation of Finally, the interfaces must be 295 maintains that it, with assistance from Microsoft’s intellectual property. documented to accurately describe what Several other commentors complain that the Technical Committee, remains best suited to address these issues, for the interfaces do and how to use them. the RPFJ provides no access to source If any of these steps are not performed, code for competitors, as was previously instance through RPFJ’s voluntary dispute resolution procedures. or not performed well, then third-party contained in the interim conduct products might find the interfaces to be remedies in the form of a ‘‘secure d. Intellectual Property Issues unreliable and therefore unusable. facility’’ provision.296 Instead, source 298. A few commentors raise 302. In general, there is a trade-off code access is granted to the Technical concerns that Microsoft is permitted to between immediate publication of Committee, accomplishing the same retain certain intellectual property interfaces and delayed publication of enforcement purpose without the same rights over its interfaces.297 These interfaces with a higher degree of commentors argue, for instance, that 293 Pantin 11–13. Microsoft still can patent or have other 298 SBC 81; Kegel 7–8; Sen. Kohl 5; Litan 57; 294 Johnson 6; Novell 18. Maddux ¶ 10; Litigating States, Ex. A 8–9; Palm 13; 295 Maddux ¶ 12. exclusive legal rights that prevent ProComp 51–52; Alexander 2; AAI 23; CCIA 83; 296 Litigating States’ Proposal § 4; Litan 53; CCIA CCIA, Stiglitz & Furman 30; CFA 96; RealNetworks 70. 297 KDE 13; Waldman 5; Kegel 8. 29–30.
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certainty that the interfaces will be well- harden, test, and document the APIs. release provides a reasonable trade-off tested and documented. The United The Litigating States’ remedy hearing is between timely disclosure to ISVs and States believes that the appropriate expected to take a minimum of 12 the need for Microsoft to finish the balance is to publish the interfaces with weeks from the beginning of trial on development of the APIs. Windows XP Service Pack 1. One of the March 11, 2002 through closing c. Triggered by New Version of rationales for choosing Service Pack 1 is arguments. Even assuming the Court Windows Operating System Product: that a majority of corporate users, and rules within 30 days, the decree would Timely Manner (RPFJ § VI.R) even some consumers, prefer to wait to not be entered until July 2002. Microsoft purchase until the first Service Pack of undoubtedly would argue for a stay 307. A number of commentors a new operating system is released. This pending appeal and possibly appeal all question Section VI.R’s definition of is because the first Service Pack fixes the way to the Supreme Court. In light ‘‘Timely Manner,’’ the term that defines many of the ‘‘bugs’’ or unintended of such unavoidable litigation risks and when Microsoft must meet its disclosure behavior of a new operating system. In delays, the United States believes the obligations under Section III.D. See addition, many more applications are certainty of disclosure occurring RPFJ § VI.R. In the RPFJ, ‘‘Timely updated or modified to be compatible between August and November 2002 is Manner’’ is defined as ‘‘the time that with a new operating system after its acceptable and indeed preferable. Microsoft first releases a beta test initial release. For corporate users, there version of a Windows Operating System is often a significant lag time of at least b. Triggered by New Version of Product that is distributed to 150,000 or a year between when they begin testing Microsoft Middleware: Last Major Beta more beta testers.’’ Some comments and working with a new operating Test Release address the numerical threshold of system and when it is deployed or 305. The meaning of ‘‘new major ‘‘150,000 . . . beta testers.’’ Other ‘‘rolled out’’ to corporate users. All of version’’ is covered above in the comments address timing—Microsoft’s these factors contributed to the decision discussion of Microsoft Middleware. ability to control when it reaches this to focus on Service Pack 1 as striking Section III.D calls for disclosures to threshold. the correct balance for timing of the occur no later than the last major beta 308. Several commentors contend that interface disclosure. test release of the new major version of 150,000 beta testers is too high a 303. Commentors raise concerns that the Microsoft Middleware. Based on threshold to trigger Section III.D’s the delay allows Microsoft time to data available to the United States, the disclosure requirement, arguing that for modify the interfaces and put ‘‘key last major beta test release for various past Windows Operating System interfaces’’ into the operating system. Microsoft Middleware Products has Products, Microsoft may have Part of this concern stems from a occurred anywhere from two to seven distributed 150,000 beta copies but misreading of the Windows Operating months prior to the commercial release probably did not ever distribute them to System Product and Microsoft of the product, with the majority being 150,000 individual beta testers. These Middleware definitions. This confusion three to four months prior. While some commentors therefore are concerned is addressed in discussion of those commentors are unfamiliar with the that the threshold will never be reached, definitions. See Section III(H) above. term,299 the phrase ‘‘last major beta test’’ resulting in no required disclosure Because Microsoft Middleware must be has a specific meaning to Microsoft in before a new Windows Operating distributed separately, by definition terms of its testing and release schedule. System Product is released.301 there will be a set of interfaces between 306. Commentors argue that this is 309. The parties’ intention in drafting the Microsoft Middleware code and the insufficient notice for new APIs, and this definition was not to distinguish Windows Operating System Product— some argue that disclosure should be between beta copies and beta testers the interfaces are between the bits of provided as soon as Microsoft with respect to the 150,000 requirement. code that are distributed separately and developers receive the information.300 The parties originally chose the 150,000 what comes in the box labeled As a practical matter, such early beta tester distribution level based on Windows. It is possible that Microsoft disclosure is not feasible. The time the approximate current MSDN could move code around between the when a Microsoft developer first subscription base. In response to the operating system and the Microsoft receives information about a new API foregoing concerns about the definition Middleware. But it is important to keep may be considerably before the API is of Timely Manner, however, the United in mind that one of the main reasons the finalized, tested and documented. Such States has proposed, and Microsoft and code is distributed separately is to information may be in the form of an the Settling States have agreed, to provide more frequent updates of the informal e-mail or a hallway modify the definition in Section VI.R of Microsoft Middleware than the conversation. In fact, the Microsoft the SRPFJ to read: operating system, and to distribute the developer may have to make numerous ‘‘Timely Manner’’ means at the time Microsoft Middleware to the large changes to her own product as the API Microsoft first releases a beta test version of installed base of existing Windows is changed. Alternatively, the Microsoft a Windows Operating System Product that is users. To start hiding interfaces would developer may be part of the testing made available via an MSDN subscription involve a large backward compatibility offering or of which 150,000 or more beta cycle and may be required to work copies are distributed. problem, involving changes to the extensively with the Windows operating system as well as Microsoft Operating System Product developer to This modification clarifies the parties’ Middleware code. write the interface. To release APIs intention that Timely Manner should be 304. Finally, it is worthwhile to before they are finalized will not be triggered by the distribution of 150,000 examine the timing of the expected first efficient. The United States believes that or more beta copies, regardless of disclosure under the Litigating States’ requiring the API to be fully published whether those copies are distributed to proposed remedy. The Litigating States’ and documented at the last beta test individuals who are considered ‘‘beta proposed remedy does not have any testers.’’ Moreover, the inclusion of delay before the first disclosures, which 299 ProComp 48. distribution via an MSDN subscription means they could occur potentially as 300 AAI 22; Litan 50; Kegel 7–8; Pantin 12; soon as a Litigating State’s judgment NetAction 10, 13; Alexander 3; Novell 19; Maddux 301 AOLl, Klain 14; AAI22; ProComp 48; SIIA 31; was entered, giving Microsoft no time to ¶ 14; SBC 81–82; CFA 96. Litan 50; CCIA 84; CFA 96; Giannandrea 7.
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offering as a trigger for this definition have to occur when the Windows Middleware Product. As explained in ensures that, even if the level of MSDN Operating System Product is released. more detail elsewhere, see Section III(H) subscribers decreases substantially, it And, as discussed above, Microsoft above, software code can be both will still trigger Microsoft’s disclosure cannot put third-party developers at a Microsoft Middleware and part of a obligations under Section III.D. substantial disadvantage without Windows Operating System Product. Therefore, although this modification impairing the attractiveness of its new 316. Moreover, Windows Operating clarifies, and in fact may slightly Operating System Product to consumers System Products such as Windows XP broaden, Microsoft’s disclosure by reducing the range of available also contain functionality often obligations, it does not substantively applications and middleware. Microsoft associated with Microsoft server differ from the RPFJ’s definition of certainly has no incentive to send a new operating system products, such as Timely Manner. operating system into a market in which Internet Information Services (IIS). As 310. A number of commentors there are no applications available that long as these functionalities are contend that Microsoft may in the future are certified as compatible with it. On included natively in a Windows choose to distribute to fewer beta testers the other hand, premature disclosure of Operating System Product, any and thereby evade its disclosure APIs—before Microsoft has had Communications Protocols used by obligations.302 Microsoft, however, adequate opportunity to test and finalize these functionalities to communicate to continues to have a strong incentive to an API—actually could hurt ISVs that a Microsoft server operating system beta-test extensively any forthcoming wrongly rely on an interface that product must be licensed. Some of these Windows Operating System Product to ultimately is not implemented. Communications Protocols will capture ensure favorable consumer reaction, and peer-to-peer communications, a concern the United States believes it is not B. Disclosure Of Communications raised by one commentor.307 realistic to suggest that Microsoft will Protocols (RPFJ § III.E) 317. Another commentor argues that diminish its beta-testing to avoid the 313. Section III.E requires Microsoft licensing should be provided for RPFJ’s disclosure requirements. If on a continuing basis to make available products that are not part of a Windows Microsoft’s beta-testing practices change to third parties, through licensing on Operating System Product, particularly materially after imposition of the RPFJ, reasonable and non-discriminatory Microsoft Office.308 Such licensing is the United States would consider terms, the Communications Protocols outside the scope of this case and the whether the change warrants a possible that are implemented natively, without Court of Appeals’ ruling. The ability of contempt action. additional software, in a Windows Office, which is not part of the desktop 311. Several commentors express Operating System Product and are used PC monopoly, to communicate with concern that triggering disclosure under by a Microsoft server operating system Microsoft server products, which are Section III.D pursuant to the Timely product to interoperate or communicate also not part of the client PC monopoly, Manner definition will permit with the Windows Operating System is not an appropriate subject for Microsoft’s own applications and Product, without the addition of other injunctive relief, given that Microsoft’s middleware developers to continue software to the client computer. In liability was based solely on receiving access to APIs and related general, the comments raise questions maintenance of the desktop PC Documentation before third-party about which software products or monopoly. developers receive access, thereby features are covered by this provision, d. Microsoft Server Operating System giving Microsoft’s developers a head what protocols are covered, the meaning Product start in writing new applications and of ‘‘interoperate,’’ and timing issues. middleware.303 Some note that the slow 318. Many comments observe that the release of Windows 95 APIs to Netscape 1. Product Issues phrase ‘‘Microsoft server operating is precisely how the district court found 314. Several comments raise concerns system product’’ is undefined, and that Microsoft retaliated against about which software products on the therefore might be narrowly interpreted Netscape for refusing Microsoft’s market client or server are covered. These to exclude many Microsoft server 309 division proposal in 1995.304 In the comments suggest that the terms used in products. The RPFJ’s phrase extreme, at least one commentor Section III.E are undefined and ‘‘Microsoft server operating system contends that Microsoft could delay insufficient, and that the licensing product’’ was a change from the disclosure until after the deadline for should apply to a broader range of November 2, 2001 Proposed Final third-party developers to demonstrate to products on both the client and server. Judgment (‘‘November 2 PFJ’’), which Microsoft that their own products are read ‘‘Windows 2000 Server or products compatible with the operating system a. Windows Operating System Product marketed as its successors installed on and so qualify for a logo or other 315. Many comments argue that the a server computer.’’ The intent and certification of compatibility.305 term ‘‘Windows Operating System effect of this change was to broaden the 312. Several factors should mitigate Product’’ does not encompass Microsoft coverage of this provision. The previous these concerns. Microsoft simply cannot Middleware Products such as Internet language referred only to a specific delay the disclosure of information to an Explorer, and thus there is no required Microsoft product, Windows 2000 310 ISV until well after the release of a new licensing of Communications Protocols Server, and its successors. And Windows Operating System Product, as between IE and Microsoft server although it was intended to encompass it did against Netscape in 1995 operating system products.306 This is all software functionality that was (Findings of Fact, ¶ 91), because incorrect. Section III.E encompasses shipped within the Windows 2000 disclosure in a ‘‘Timely Manner’’ would Communications Protocols used Server product, including such software natively by any portion of a Windows as IIS and Active Directory, arguably it 302 ProComp 48; Palm 13; SIIA 31; Novell 19; Operating System Product, including Relpromax 12; RealNetworks 12. 307 any software that can also be considered Alexander 003. 303 Henderson 6–7; Novell 19; Litan 50; Palm 13; 308 KDE 10–11. CFA 96; CCIA 84–85; AAI 22; Litigating States, Ex. Microsoft Middleware or a Microsoft 309 ProComp 54; SIIA 34; CFA 96–97; CCIA 69– A 7–9; Alexander 3. 70; AAI 37. 304 AOL, Klain 14; Litigating States, Ex. A 7–8. 306 AAI 36–37; SBC 72–73; Giannandrea 4; 310 See
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might not have extended to other direct threats from operating system 2. Communications Protocols, products in the Windows 2000 Server competitors. The licensing in Section Disclosure And Licensing product family, such as Windows 2000 III.E is limited to being ‘‘for the sole 326. Several comments raise issues Datacenter Server or Windows 2000 purpose of interoperating with a regarding ‘‘Communications Protocols’’ Advanced Server. The November 2 Windows Operating System Product’’ as used in Section III.E, as well as language also appeared not to cover any because the purpose is to enable server- related issues concerning the substance new server products that Microsoft may based middleware threats to of the licensing. These comments develop that were not successors to interoperate with Windows Operating include questions about the definition Windows 2000 Server. System Products. Several commentors of Communications Protocols, the 319. By contrast, the RPFJ covers argue that the licensing should be ‘‘natively’’ requirement, the meaning of every Microsoft product that is now or unrestricted and not for any particular ‘‘interoperate,’’ and whether Microsoft in the future could be a server operating purpose, but this would not be can evade the provision by moving system product. It still includes consistent with the theory of the case Communications Protocols to other Windows 2000 Server, but now also and the rationale behind client-server products. These issues concern the indisputably includes Windows 2000 disclosures.313 Datacenter Server and Windows 2000 substance of what will be licensed for 323. Rather, the intent of Section III.E Advanced Server. Moreover, the decree use by third parties, not the server and is to ensure that ISVs and others will now includes the .Net Servers,311 a client software products between which have full access to the communications much broader class of server products. the Communications Protocols operate. protocols that a Microsoft Windows By using the terms in their common and Operating System Products uses to a. Definition of ‘‘Communications normal sense, rather than tying them to interoperate or communicate natively Protocols’’ (RPFJ § VI.B) specific products, the phrase with its own server operating system 327. Some comments criticize the intentionally was given a broader products. Much Non-Microsoft definition of ‘‘Communications meaning. 320. Furthermore, ‘‘Microsoft server Middleware, including the Netscape Protocols,’’ opining that it (1) does not operating system product’’ still includes browser and Java Virtual Machines, encompass certain types of information all software code that is identified as depend on content, data, and transmission, (2) addresses formats but being incorporated within the product applications residing on servers and not semantics, and (3) fails to address and/or is distributed with the product, passing over networks such as the more than predefined tasks, or does not Internet or corporate networks. Under adequately define sub-elements, such as whether or not its installation is 316 optional or is subject to supplemental Section III.E, this Non-Microsoft ‘‘formats.’’ Several comments appear license agreements. This includes, for Middleware will have the opportunity to focus on the previous definition in instance, functionality such as Internet to interoperate with a Microsoft server the November 2 PFJ, or perhaps even in operating system product in the same the June 2000 IFJ, and not the RPFJ Information Services (a ‘‘web server’’) 317 and Active Directory (a ‘‘directory way as Microsoft Middleware. definition. 328. The RPFJ broadly defines server’’). f. Server-to-Server Communications Communications Protocols as the set of e. Non-Microsoft Client Operating 324. Some commentors argue that rules for information exchange to Systems Section III.E should be extended to accomplish predefined tasks between a 321. Some comments argue that cover communications solely between Windows Operating System Product Section III.E should also cover licensing one server and another server.314 Pure and a Microsoft server operating system of communications protocols for use server-to-server interoperability issues, product connected through any type of with non-Microsoft client operating however, are well beyond the scope of network, including but not limited to, a systems, for example in enabling the case. As noted above, there is no local area network, wide area network, interoperability between a Microsoft record proof in this case that Microsoft or the Internet. The definition includes server and a Linux desktop operating has monopoly power in server markets. both the rules for information exchange system.312 Interoperability and Inter-computer communications that do and transmittal (‘‘format, timing, communications between a Microsoft not implicate Microsoft’s desktop sequencing and error control’’) as well server and non-Microsoft client operating system monopoly are properly as the meaning of the information platforms, however, was an issue outside the scope of the RPFJ. contained within the protocol (‘‘semantics’’). By definition, outside the scope of the litigated case. g. Other Devices There has been no proof in this case that Communications Protocols must be Microsoft has a monopoly in server 325. Some commentors argue that predefined tasks, because if the tasks operating system products, or that communications between a Windows were not predefined, the client and communications difficulties between Operating System Product and other server would not know how to perform non-Microsoft platforms and Microsoft devices, such as handheld devices, them or communicate about them. Every servers somehow played a role in the should be included in Section III.E.315 protocol at any layer of the maintenance of Microsoft’s desktop For all of the reasons discussed above communications stack that is monopoly. Thus, the RPFJ properly does concerning server-to-server implemented natively in a Windows not reach questions of interoperability communications, and communications Operating System Product and that is between Microsoft servers and non- to non-Microsoft client operating used to interoperate with a Microsoft Microsoft platforms. systems, communications to devices server operating system product must be 322. Nor is it appropriate for the such as handhelds are outside the scope made available for license by third remedy to focus on competing operating of the case. systems vendors, given that the focus of 316 CCIA 69; ProComp 53; SIIA 33; AOL, Klain 9; Alexander 4; Giannandrea 4, 6; CCC 17–18; Maddux the case was on middleware threats, not 313 Moglen 2–3; Kegel 15; Maddux ¶ 16. ¶ 17. 314 AOL, Klain 9–10; SBC 76. 317 AOL, Klain 9 (limited to Windows 2000 311 See
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parties. This definition is sufficiently Section III.I), any Communications Protocol d. The Meaning of ‘‘Natively’’ broad to capture all native that is, on or after the date this Final communications from a Windows Judgment is submitted to the Court, (i) 334. Section III.E requires Microsoft to Operating System Product to a Microsoft implemented in a Windows Operating license the Communications Protocols server operating system product. System Product installed on a client ‘‘used to interoperate natively (i.e., computer, and (ii) used to interoperate, or without the addition of software code to b. The Meaning of ‘‘Interoperate’’ communicate, natively (i.e., without the addition of software code to the client the client operating system product) 329. Several comments note that the operating system product) with a Microsoft with a Microsoft server operating system word ‘‘interoperate’’ in Section III.E. is server operating system product. (New product.’’ One commentor raises not defined and argue that this will language underlined.) concerns regarding the change in the allow Microsoft to evade this ‘‘natively’’ requirement from the By adding ‘‘or communicate’’ after provision.318 Specifically, one November 2 PFJ to the November 6 ‘‘interoperate,’’ the parties have added commentor points to Microsoft’s RPFJ, suggesting that the RPFJ no longer further clarity to this provision. This definition of ‘‘interoperate’’ proffered in covers Communications Protocols revision clarifies the parties’ intent in the pending European Union implemented on a server.322 This is investigation of Microsoft and contend drafting Section III.E, thus removing any potential for confusion or ambiguity incorrect. The parenthetical expression that that definition and associated that begins with ‘‘i.e.’’ is an explanation declarations are different and arguably regarding the scope of this provision as it relates to the meaning of of the word ‘‘natively,’’ and nothing narrower than the intended definition in else. Section III.E.319 ‘‘interoperate.’’ 335. The November 2 PFJ stated ‘‘used 330. The United States is aware of 332. Section III.E will protect Microsoft’s submissions to the European opportunities for the development and to interoperate natively (i.e., without the Union concerning the definition of use of Non-Microsoft Middleware by addition of software code to the client ‘‘interoperate’’ and has discussed this ensuring that competing, non-Microsoft or server operating system products).’’ issue at length with Microsoft with server products on which such The parenthetical expression explained respect to this provision. Microsoft and Middleware can be hosted and served that the word ‘‘natively’’ meant the the United States believe they have a will have the same access to and software that is included with the meeting of the minds regarding the opportunity to interoperate with Windows Operating System Product meaning of ‘‘interoperate’’ in Section Windows Operating System Products as and the Microsoft server operating III.E and its effect in that provision. If do Microsoft’s server operating system system product without the addition of a communications protocol is products. This is not to say that all any other products or software code. implemented in a Windows Operating competing servers will behave exactly 336. In the November 6 RPFJ, the System Product installed on a client identically to Microsoft servers, because phrase was changed expressly to remove computer and used to ‘‘interoperate, or the competing implementations will the requirement for ‘‘native’’ operation differ. However, as to the communicate, natively’’ with a on the server. This was done by Communications Protocols themselves, Microsoft server operating system removing the words ‘‘or server.’’ The the competing servers will have the product, then it must be disclosed. RPFJ reads ‘‘i.e., without the addition of ability via license to appear identical to Nonetheless, to alleviate concerns software code to the client operating a Microsoft server operating system stemming from Microsoft’s submissions system product.’’ This change means product. to the European Union, the United that the native requirement is only on States and Microsoft have agreed to a c. License for Use the Windows Operating System Product limited modification in Section III.E. on the client. In other words, ‘‘natively’’ 333. Several commentors point out 331. The United States believes that, now simply means all software code as used in the RPFJ, Section III.E clearly that there is no discussion of disclosure in Section III.E and that lack of implemented in a Windows Operating reflects the parties’ intention that this System Product on the client. For the provision will allow for the possibility disclosure may defeat the purpose of the license.320 Because the Communications server side, it no longer matters if of seamless two-way interoperability software code is added from some other between Windows Operating System Protocols must be licensed ‘‘for use’’ by third parties, the licensing necessarily product. When combined with the Products and non-Microsoft servers. change to the broader ‘‘Microsoft server Although the United States believes the must be accompanied by sufficient meaning of ‘‘interoperate’’ is clear, in disclosure to allow licensees fully to utilize all the functionality of each web server or Active Directory directory server and response to the public comments, the Internet Explorer or other functionality in the United States has proposed, and Communications Protocol. Simply put, Windows Operating System Product; between Microsoft and the Settling States have Microsoft is not permitted to design server networking services such as Windows server interoperability between its server message block protocol/common Internet file agreed, to supplement the term system protocol, and the Windows Operating ‘‘interoperate’’ with ‘‘or communicate,’’ operating system products and its Windows Operating System Products in System Product; and between server-hosted code so that Section III.E in the SRPFJ now and a runtime environment in the Windows reads: a way that cannot be replicated under Operating System Product, such as Java virtual license by third parties whose products machines or Microsoft’s common language runtime. Starting nine months after the submission replace functionality on either the It also permits interoperability between Microsoft of this proposed Final Judgment to the Court, server or client side of the servers and the digital rights management and other security mechanisms utilizing Microsoft’s Microsoft shall make available for use by communication.321 third parties, for the sole purpose of inter implementation of Kerberos in the Windows operating or communicating with a Windows Operating System Product, subject to a narrow 320 Operating System Product, on reasonable and Litigating States, Ex. A9. exception in Section III.J.1.a, permitting limited 321 withholding of information necessary to protect non-discriminatory terms (consistent with The CIS sets forth some non-exhaustive examples where Communications Protocols must be particular installations (e.g., keys and tokens made available to permit seamless interoperability, particular to a given installation). See CIS at 38–40; 318 CCIA 69; SIIA 34; Sn 26–30; Palm 10. including the Communications Protocols used see also discussion of Section III.J.1.a, infra. 319 Sun 28–29. between Microsoft Internet Information Services 322 SBC 70–72.
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operating system product,’’ discussed Operating System Product as of Microsoft’s protocols are protected above, the net result is a significant November 6, 2001 are expressly intellectual property. expansion of the disclosure and covered—including Windows 2000, 342. Still others argue that the nine- licensing obligation from the November Windows XP Home, and Windows XP month delay cuts heavily into the five- 2 PFJ to the RPFJ. Professional. This language simply year term of the RPFJ.328 This criticism 337. Currently, the only way ensures that if Microsoft for whatever is largely incorrect in that the nine Microsoft can avoid licensing under this reason changed the Communications months began running as of November provision is to implement new protocols Protocols between the time the RPFJ 6, 2001, meaning that the disclosure and (i.e., not in use on November 6, 2001), was submitted to the Court and the licensing must occur by not later than and then not implement those new effective date of this Section III.E nine August 6, 2002. Thus, licensing is in protocols in any Windows Operating months later, the changed fact likely to begin shortly after the System Product. These new protocols Communications Protocols would not decree’s 5-year term begins to run upon would have to be distributed with other be outside the scope of the provision. entry by the Court. products or reach the desktop in some Thus, all Communications Protocols in 343. Lastly, at least one commentor fashion other than by inclusion in a existence on November 6, 2001 must points out that there is no timing Windows Operating System Product. still be covered on August 6, 2002, the requirement after the initial licensing Because these Communications latest date on which they must be begins, and argues that Microsoft is Protocols would in effect be completely available for use by third parties, under no obligation to offer separate from the desktop operating regardless of whether Microsoft has Communications Protocols for license in system monopoly, they are correctly not 329 changed them in the interim. a prompt manner. To the contrary, encompassed within Section III.E, the lack of a specific timing trigger despite several comments to the 340. Several comments also raise requires Microsoft to make continuing contrary.323 concerns about the initial nine-month and rolling offers to license as new delay before the Communications Communications Protocols are e. Licensing On ‘‘Reasonable And Non- Protocols are licensed.326 The purpose Discriminatory Terms’’ implemented in Windows Operating of this delay is to allow Microsoft to System Products. In many other 338. Section III.E allows Microsoft to identify the Communications Protocols provisions of the RPFJ there are a license its Communications Protocols and define a licensing program so that variety of specialized triggers; the on reasonable and non-discriminatory they can be made available for use by absence of one here is not accidental. terms consistent with Section III.I. third parties. Unlike its APIs for its Several commentors argue that Windows Operating System Products, C. Compulsory Licensing (RPFJ § III.I) Microsoft should not be able to charge for which Microsoft has always had an 344. Section III.I requires Microsoft to a royalty for its Communications extensive disclosure program via the offer necessary licenses for the Protocols.324 Allowing Microsoft to MSDN, Microsoft historically has intellectual property that Microsoft is charge a royalty is appropriate. licensed or disclosed relatively few of required to disclose or make available Historically, Microsoft has been less its Communications Protocols. And under the RPFJ.330 The goal of this willing to disclose Communications unlike the APIs that must be disclosed Section is to ensure that Microsoft Protocols than APIs, and when it does if they are used by Microsoft cannot use its intellectual property license Communications Protocols, it Middleware, which is a relatively finite rights to undermine the competitive charges a royalty or otherwise receives set of products, Communications value of its obligations in Sections III.D Consideration. It has designed and Protocols must effectively be available and III.E, while at the same time to developed its Communications for license by third parties if they are permit Microsoft to take legitimate steps Protocols with the expectation that they implemented natively in a Windows to prevent unauthorized use of its would not be given away. Operating System Product and they are intellectual property. 3. Timing Issues used to interoperate or communicate 345. Several comments address with any Microsoft server operating Section III.I. One group of commentors 339. Comments raise two basic issues suggests that permitting Microsoft to with respect to the effective date for system product, including cases where extra software code is added to the charge a ‘‘reasonable’’ royalty for implementation of the requirements of licenses to its intellectual property is Section III.E. A few comments misread server operating system product. This inappropriate.331 Another group of Section III.E as excluding Windows opens up what is potentially a very commentors takes issue with Section 2000 and Windows XP, on the broad universe of new disclosure and III.I.3’s restrictions on sublicenses.332 erroneous assumption that only server licensing obligations for Microsoft. Many commentors raise concerns operating system products or Microsoft needs time to set up programs relating to Section III.I.5 and Microsoft’s communications protocols that come to meet these obligations. ability to require a cross-license of into existence after November 6, 2001 341. One commentor points out that certain intellectual property rights are covered.325 To the contrary, Section the time to negotiate the required pursuant to that subsection.333 Several III.E covers in part ‘‘any license may provide even further Communications Protocol that is, on or 327 delays. Although this might be true 328 CCIA 83–84. after the date this Final Judgment is in some cases, the effect is lessened here 329 Litan 53. submitted to the Court, (i) implemented because of the requirement that 330 See e.g., RPFJ §§ III.D and III.E. in a Windows Operating System Microsoft license on reasonable and 331 SBC 85–86; Litigating States, Ex. A 15; CCIA Product installed on a client computer. non-discriminatory terms. The license 81; Sun 35; Giannandrea 5; Moglen 2; Waldman 4. ...’’ In other words, Communications provision is reasonable because 332 AOL, Klain 7; CCIA 81; Moglen 2; Protocols implemented in any Windows Giannandrea 5; Harris 8. 333 Henderson 8; SBC 87–88; CFA 88; ProComp 326 Palm 13; Litan 57; Litigating States, Ex. A 8– 51; AOL, Ex, B. at 7; SIIA 36–37; Litigating States 323 ProComp 52–53; Harris 6. 9; RealNetworks 29; Maddux ¶ 15; CCIA 83–84; Sun 15; AAI 28–29; CCIA 81–82; Sun 38; RealNetworks 324 Thomas 4–5; Waldman 5; Maddux ¶ 16. 36. 29; Giannandrea 5; Alexander 3; Harris 8; Maddux 325 ProComp 55; Giannandrea 1; SIIA 35. 327 Sun 36–37. ¶ 10.
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commentors also argue, to varying 348. The United States does not be likely to preclude sublicensing in degrees, that the scope of Microsoft’s believe that the scaled-back liability that such circumstances. intellectual property rights should be the Court of Appeals upheld justifies 351. In general, the United States limited.334 requiring Microsoft to give away its recognizes that Microsoft has a valuable intellectual property. To the legitimate interest in limiting its 1. Reasonable And Non-Discriminatory extent that Section III.I.1 of the RPFJ intellectual property licensing to those Royalty permits Microsoft to charge a reasonable licenses that are properly related to the 346. Subsection III.I.1 requires that royalty for intellectual property rights terms of the RPFJ. Subsection III.I.3 is any licenses granted pursuant to this provided under other provisions of the designed to address this issue by Section be made on reasonable and non- RPFJ, the United States believes that the permitting Microsoft to preclude the discriminatory terms, and then permits terms of the RPFJ strike the appropriate assignment, transfer or sublicensing of Microsoft to charge a reasonable royalty balance between mandating that rights granted by Microsoft pursuant to in connection with licenses it grants Microsoft provide certain licenses and Section III.I, provided that Microsoft’s pursuant to Section III.I. One not frustrate the interoperability preclusion is reasonable and non- commentor contends that Microsoft provisions of the RPFJ, while still discriminatory as required by should not be permitted to charge any permitting Microsoft to charge a subsection III.I.1. This provision does royalty at all, and that permitting it to reasonable and nondiscriminatory not permit Microsoft to restrict the right do so in effect rewards Microsoft for royalty for access to its intellectual to sublicense where doing so would be maintaining illegally its operating property. unreasonable, discriminatory, or system monopoly.335 otherwise would be inconsistent with 347. One commentor asserts that 2. Restriction On Sublicenses the terms of the RPFJ. See Section III.I.4. royalty-bearing licenses are 349. Several commentors suggest that 3. Cross-Licenses anticompetitive in the context of this the restrictions on sublicenses 352. A number of commentors suggest remedy because such licenses give contained in Section III.I.3 are Microsoft the opportunity to use a that Section III.I.5 of the RPFJ, which inappropriate.339 These comments ‘‘royalty charge’’ to control crucial permitted Microsoft to require cross- suggest that the restriction on technical information. This licenses from persons or entities who sublicenses may have the effect of commentor 336 wished to take advantage of the notes that in June 2000, inhibiting the ability of ISVs, IHVs, when litigating the IFJ, the United States disclosure provisions of the RPFJ if such IAPs, ICPs, or OEMs to partner with licenses were necessary for Microsoft to rejected Microsoft’s contention that it other entities. In particular, two should be permitted to charge a provide the disclosures, was commentors suggest that the restriction inappropriate.342 The United States and reasonable royalty for the APIs, on sublicenses could in practice Communications Interfaces, and Microsoft have agreed to delete this preclude a licensee of Microsoft’s subsection from the RPFJ. See U.S. Technical Information (as such terms technology under the RPFJ from were defined in the IFJ).337 See Memorandum at 10–11; SRPFJ § III.I.5. reselling or distributing the products The purpose of Section III.I.5 was to Summary Response to Microsoft’s that it develops using Microsoft’s Comments on the Proposed Final enable Microsoft to fully comply with licensed technology.340 Another Judgment at 14 (June 5, 2000). Under the the terms of the RPFJ without creating commentor suggests that not allowing RPFJ, disclosure of APIs in the manner infringement liability based on actions sublicenses under certain circumstances that Microsoft typically does it (e.g., taken in order to comply with those (e.g., where the licensee is involved in through MSDN and not via a license) terms. an acquisition) is a form of would not implicate Section III.I and discrimination.341 4. Scope of Intellectual Property Rights would occur at no cost.338 350. These comments misconstrue the 353. Several commentors make 334 Kegel 8; Maddux ¶ 9. purpose and effect of the restriction on suggestions concerning Section III.I that 335 Sun 35–36. sublicenses contained in Section III.I.3. generally relate to the scope of 336 SBC 85–86. First, entities to which a licensee of Microsoft’s intellectual property rights. 337 SBC 86. Microsoft’s technology under the RPFJ One commentor suggests that Microsoft 338 The other allegedly inconsistent prior wishes to sell or distribute products should be required ‘‘to clearly announce statements cited by this commentor (SBC 86) do not using that licensed technology would which of its many software patents withstand scrutiny. These statements concerning 343 royalty-free licenses all were made in the narrow not need a sublicense to Microsoft’s protect the Windows APIs . . ..;’’ context of providing divested entities access to intellectual property. Similarly, the Another commentor objects to the necessary technical information. See United States United States does not believe that a portion of Section III.I.2 that clarifies Reply Memo at 27–29 (discussing Western Electric the scope of any license granted under for the proposition that was precedent to support sublicense would be required in the the United States’ divestiture request; relying on circumstances of an acquisition and, Section III.I and expressly provides that AT&T as an example of a prior structural remedy even if one were, that Microsoft would ‘‘the scope of any such license . . . shall in a monopolization case that did not involve not confer any rights to any Microsoft mergers); United States v. Western Elec. Co., 569 F. penalties for misuse of patents and violation of the intellectual property rights infringed Supp. 1057, 1118 (D.D.C. 1983), aff’d sub nom. 344 California v. United States, 464 U.S. 1013 (1983) antitrust laws, but rather to check the intrusion of by’’ the licensee’s technology. This (discussion of royalty-free licenses centered around advantages thereby gained into the mechanics of commentor suggests that Microsoft effectuating the divestiture of the Regional Bell competition in the lamp industry.’’). Here, the should be precluded from bringing United States does not believe that the Operating Companies and ensuring that the infringement suits against an entity that divestitures did not result in ‘‘balkanized regional circumstances support royalty-free licensing. networks’’ and ‘‘fragmentation’’ to the ‘‘detriment of Compulsory licensing, but with a reasonable all users’’); United States v. General Electric, 115 F. royalty, will be sufficient to achieve the remedial 342 Henderson 8; SBC 87–88; CFA 88; ProComp Supp. 835, 844 (D. N.J. 1953) (‘‘General Electric’s goal of ensuring access to necessary information for 51; AOL Ex. B at 7; SIIA 36–37; Litigating States 15; attempt to maintain control over the lamp industry interoperability. AAI 28–29; CCIA 81; Sun 38; RealNetworks 29; has been largely by way of extending its basic 339 AOL, Klain 7; CCIA; Moglen 2; Ginnandrea 5; Giannandrea 5; Alexander 3; Harris 8; Maddux ¶ patents on lamps and lamp parts. To compel the Harris 8; Pantin 22. 10. completely free use of these patents is not to impose 340 Giannandrea 5; Harris 8. 343 Kegel (unpaginated). upon General Electric and other defendants 341 Pantin 22. 344 Red Hat 11–12.
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licenses Microsoft intellectual property III.J has two subsections. The first them, they can be used to compromise under the RPFJ, even when that licensee defines situations in which Microsoft the security of the system. These infringes other Microsoft intellectual has no obligation under the RPFJ to software keys can be thought of as being property to which the entity does not make disclosures that are otherwise similar in some ways to regular keys: have a license.345 Finally, one required by the RPFJ. The second having the key to the front door commentor expresses skepticism that permits Microsoft to withhold security- compromises the house’s security, and Microsoft actually would license the related information from certain persons keeping control of the keys is critical to intellectual property that is required for or entities. keeping the house secure. interoperation and suggests that 361. Sometimes software systems are 1. Limitation on Obligations to Microsoft should be required to license built not around keys but around Document, Disclose or License all of its intellectual property rights.346 keeping actual parts of the system 354. The United States believes that 358. Section III.J.1 identifies two hidden or unknown. Continuing with preventing Microsoft from protecting its situations in which Microsoft is not the house analogy, this is similar to intellectual property is unwarranted and obligated to document, disclose or keeping the existence of the door a inappropriate. Allowing competitors to license certain materials to third parties. secret, but once you know where the expropriate Microsoft’s intellectual The first situation is where the door is and what it does, you do not property in order to compete with disclosure would compromise the need a key. Sometimes such systems are Microsoft would deter Microsoft from security of a particular installation or referred to, unfavorably, as employing investing in innovation and group of installations of anti-piracy, ‘‘security through obscurity.’’ Many simultaneously deter rival developers anti-virus, software licensing, digital software systems employ combinations from coming up with different, new, rights management, encryption, or of these security techniques. potentially better technologies to build authentication systems. These situations 362. The intent of Section III.J.1 is to into their own products. Nothing in the include but are not limited to the allow Microsoft to keep secret those solutions suggested by these disclosure of keys, authorization tokens pieces of security-related systems the commentors would benefit consumers. or enforcement criteria. disclosure of which would compromise 359. Many commentors complain that particular installations or groups of 5. Comparison to Litigating States’ this provision is too broad and will installations. The phrase ‘‘particular Proposal allow Microsoft to withhold security- installations’’ is designed to indicate 355. Provision 15 of the Litigating related APIs and Communications end-user installations or a specific, States’ Proposal is a corollary to—and Protocols.348 Commentors argue that narrowly-prescribed subset of substantially the same as—Section III.I such APIs and Communications installations. It does not mean, for of the SRPFJ. The major differences Protocols are critically important to instance, all the installations that use between them are (a) Provision 15 many middleware applications and that Windows Media Player, nor does it provides for a royalty-free license, while this provision amounts to exempting mean all the installations that use the RPFJ permits Microsoft to charge a from coverage by the RPFJ software and Windows Media Player in conjunction reasonable and non-discriminatory services that are the future of with the Secure Audio Path royalty; and (b) Provision 15(b) provides computing. Other commentors point out functionality. Moreover, the disclosure that licenses granted pursuant to it that the CIS language is significantly actually must compromise the security ‘‘shall not be conditional on the use of more defined and specific than the of the particular installation. The any Microsoft software, API, RPFJ. Still other commentors point to disclosure cannot be withheld simply Communications Interface, Technical specific protocols that the CIS says will because Microsoft prefers that others not 347 have it, or because it is valuable. Thus, Information or service.’’ be provided, such as Secure Audio Path for instance, if Microsoft previously has 356. As set forth above, the United and Kerberos, and argue that withheld an algorithm or format used in States believes that it would be notwithstanding the CIS, Section III.J.1 its Communications Protocols for inappropriate and unwarranted to actually exempts those protocols. Still business reasons, but the security of the require Microsoft to license its others point out that ‘‘layers of system actually is dependent on other intellectual property at no cost. In protocols’’ is significantly broader than features such as keys, then Microsoft addition, the United States and the user-specific data described in the has no authority to withhold the Microsoft have agreed to delete the CIS. cross-license provision of Section III.I. disclosure or format. 360. Secure software systems can be 363. Some commentors suggest that Finally, the Litigating States’ Provision designed in many different ways, and at 15(b) appears to be an attempt to the CIS differs from the language of the any given time, is often some critical RPFJ. The United States believes that preclude Microsoft from using the information can compromise that granting of licenses pursuant to the the CIS reflects the parties’ agreement as security. For instance, secure software to the meaning of the RPFJ, including November 2, 2001 Proposed Final often uses the term ‘‘keys’’ to refer to Judgment as leverage to induce certain Section III.J.1. Moreover, the United specific data that is used to authenticate States agrees with the many types of entities to use other Microsoft or authorize a user to perform certain software. Section III.G of the RPFJ commentors who note that security- functions. Often the keys, or other user- related features will be critically similarly prohibits this type of conduct specific data, must be kept secure by Microsoft. important to Non-Microsoft because, if unauthorized people have Middleware, and that overbroad D. Security Carve-Outs (RPFJ § III.J) withholding of security-related 348 AAI 22; AOL 40–41; AOL, Klain 7–8, 10; 357. Many commentors argue that the Catavault 12–13; CCIA 16, 72–77; CCIA, Stiglitz & information could limit drastically the security provisions in RPFJ Section III.J Furman 30; CFA 99; Elhauge 12; Red Hat 25–28; ability of such products to pose threats are inappropriate or overbroad. Section SBC 88–89; SIIA 35–36; Sun 32–33; Alexander 3; to the operating system monopoly. Giannandrea 4; Gifford 5; Harris 8–9; Johnson 8; Section III.J.1, however, is not overly Moglen 4–5; Waldman 6; KDE 14; Litan 52; 345 Id. Litigating States, Ex. A 16, Ex. C 18; Nader/Love 2– broad. 346 Maddux ¶ 9. 5; Maddux ¶ 30; NetAction 11; Novell 20–21; 364. The second situation under 347 Litigating States’ Proposal § 15(b). ProComp 49–50, 55. Section III.J.1 in which Microsoft is not
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obligated to document, disclose or they have a history of engaging in integrity of the systems under test, and license is when Microsoft is so directed unlawful conduct related to computer cannot relate to any other business- by a governmental agency of competent software, do not have any legitimate related factors. Finally, some jurisdiction. One commentor argues that basis for needing the information, or are commentors argue that it is this provision appears to be a ‘‘big using the information in a way that inappropriate for this testing to be at the brother type deal between government threatens the proper operation and licensee’s expense rather than at and Microsoft to suppress information integrity of the systems and mechanism Microsoft’s expense. The United States from the public.’’ 349 Another to which they relate. understands that with other third-party commentor notes that this restriction is 368. With regard to requirement (a) testing programs in the software written more broadly than the CIS’s concerning software piracy, some industry, the cost usually is borne by ‘‘lawful orders’’ language.350 This commentors argue that it unjustly could the organization submitting the section is appropriate and important for exclude any company that ever has been program. The United States sees no public security purposes, and limited to sued for patent infringement and lost. reason to deviate from that practice. cases in which a government agency of The requirement was not intended to competent jurisdiction directs Microsoft extend this far, because legitimate E. Disclosure of File Formats not to document, disclose or license businesses do lose patent lawsuits on 371. Many commentors argue that specified information. occasion. Rather, application of this Microsoft should be required to disclose requirement is to be guided by the file formats.353 Some of these 2. Conditioning Licenses on Certain phrase ‘‘history of software commentors make the request generally, Requirements counterfeiting or piracy’’ and will not be while others make reference to specific 365. Section III.J.2 allows Microsoft to interpreted to extend to otherwise file formats such as those for Microsoft condition the license of security-related reputable companies that are involved Office programs (e.g., Word, Excel, APIs, Documentation or in intellectual property disputes. Outlook).354 A file format, generally Communications Protocols on four 369. Many commentors focus on speaking, is the structure of a file, requirements. These four requirements requirements (b) and (c) and argue that showing how the file organizes and for the licensee are: (a) No history of they improperly will exclude the entire stores data. File formats can be either software counterfeiting or piracy or open source movement and require proprietary or open. File formats are willful violations of intellectual start-up companies to submit their sometimes associated with three-letter property rights; (b) a reasonable business plans to Microsoft. First, it is file extensions at the end of a file name; business need for the information for a appropriate to note that the ‘‘open for instance, ‘‘file.wpd’’ is usually a file planned or shipping product; (c) meets source movement’’ is not composed of in Word Perfect format, while ‘‘file.doc’’ reasonable and objective standards for a single type of organization or software is usually a file in Microsoft Word the authenticity and viability of its developer. Rather, large companies such format. business; and (d) programs verified by a as IBM are strong supporters of products 372. File formats are covered to a third party to ensure compliance with such as Linux and of other open source limited extent under Sections III.D and Microsoft specifications for use of the solutions. Smaller companies such as III.E, which deal with disclosure and information. Red Hat are also reputable firms focused licensing. Section III.D calls for the 366. Many commentors argue that the on the open source movement. The disclosure of APIs that Microsoft provisions of Section III.J.2 can be used United States expects that such firms Middleware uses to call on a Windows by Microsoft to withhold unfairly will have little trouble satisfying Operating System Product, while information from competing companies, requirements (b) and (c). That is not to Section III.E calls for the licensing of and in particular from open source say that all open source organizations, certain Communications Protocols developers.351 One commentor, in or individual developers, will be able to implemented in a Windows Operating contrast, finds that Microsoft’s pass these requirements. The United System Product and used to legitimate security concerns, which the States believes that Microsoft has a communicate natively with a Microsoft commentor argues are shared by all of legitimate interest in protecting the server operating system product. To the its major business rivals, are addressed security of its systems and that extent either the APIs or appropriately under Section III.J.2, and requirements (b) and (c), properly Communications Protocols encompass therefore the restrictions of Section interpreted, are a reasonable balancing ‘‘file formats,’’ then those structures are III.J.1 are unnecessary.352 of Microsoft’s interests and the needs of covered. 367. As was explained in the CIS, the competition. 373. However, the major comments requirements of this subsection cannot 370. Finally, requirement (d) allows concerning file formats request be used as a pretext for denying Microsoft to condition the granting of a disclosure of the file formats of disclosure and licensing, but instead are license on the submission of any Microsoft products such as Office. limited to the narrowest scope of what computer program using the licensed Office does not meet the definition of is reasonable and necessary. These API, Documentation or Communications Microsoft Middleware, and so it does requirements focus on screening out Protocol to third-party verification. not fall under Section III.D. Nor is Office only individuals or firms that should Some commentors incorrectly have read implemented natively in a Windows not have access to or use the specified this requirement to mandate the Operating System Product, so it does security-related information because submission of the computer program to not fall under Section III.E. Thus, the Microsoft. To the contrary, this file formats for Office will not be 349 Alexander 3. requirement is structured specifically so disclosed or licensed pursuant to the 350 Harris 9. that Microsoft will not be able to gain RPFJ. 351 AAI 23; CCIA 77–81; CFA 100; Henderson 7– access to another’s intellectual property. 374. Commentors argue that the file 8; Red Hat 28–29; SBC 88–91; SIIA 36; Alexander Rather, an independent third party will formats for Office should be disclosed 3; Giannandrea 4–5; Carrol 2; Harris 9; Moglen 4– test and verify the computer program 5; Waldman 6; KDE 12; Sen. Kohl 3; Litan 52; Litigating States, Ex. A 16–17; Nader/Love 2–5; against specifications provided by 353 Kegel 8; Naver/Love 1; Pantin 12; SBC 79; CCC Maddux ¶ 31; Pantin III.33–34; ProComp 50–51. Microsoft. These specifications must 21; Johnson 2; Alexander 5; Carroll 4; Maddux ¶ 14. 352 AOL 41–42 relate to the proper operation and 354 CCC 17; SIIA 38, 39.
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because Office is a significant part of the Microsoft a reasonable opportunity first consensual resolution of issues arising applications barrier to entry that to cure violations of Sections III.C, III.D, under some of the provisions governing protects the Windows monopoly. III.E, and III.H (see RPFJ § IV.A.4)— Microsoft’s relations with third parties, Disclosure of the file formats would which is intended to encourage the without the necessity of prosecutorial or allow other office productivity voluntary remediation of alleged judicial intervention. Section IV.A.4 applications, such as word processors, violations by Microsoft—the United expressly prohibits Microsoft from using to exchange files with Office. Allowing States retains the full ability, in its efforts to cure as a defense to the exchange of files would allow appropriate instances, immediately and enforcement actions designed to punish consumers to change word processors, directly to request that the Court bring violations (such as willful violations and potentially change operating to bear its full arsenal of enforcement subject to criminal contempt 357), or systems, without concern that they and declaratory construction powers on systematic violations that may require any alleged violations or interpretative could not exchange files with the additional prospective RPFJ disputes. dominant applications in Office. modifications in order to prevent 375. The scope of the case as decided A. The Enforcement Powers of Plaintiffs recurrences. by the Court of Appeals does not extend and the Court to non-middleware or to Office or other B. The Technical Committee applications that are not distributed 378. Section IV.A grants the United with Windows. Whatever impact States (and the Settling States 381. In addition to all traditional generally the disclosure of file formats collectively) all of the investigatory and decree enforcement rights and powers, might have on the applications barrier enforcement powers customarily found the RPFJ adds a number of additional to entry that protects Windows, such in antitrust final judgments in cases mechanisms to assist in achieving and disclosure was not among the conduct brought by the United States in recent maintaining compliance short of formal charged as illegal by the plaintiffs or decades. See, e.g., AT&T, 552 F. Supp. litigation. These additional mechanisms upheld by the Court of Appeals, nor is at 230–31 (‘‘Visitorial Provisions’’). The provide unprecedented enhancement to it of the same type or class as RPFJ grants Plaintiffs the power to the United States’ traditional Microsoft’s attack on potentially inspect Microsoft documents and enforcement powers. The most threatening middleware. Thus, it would computer source code, to interview or important of these mechanisms is the depose Microsoft employees, and to be inappropriate for file formats for Technical Committee (TC). The TC, require the production of written Office to be part of the remedy. which remains under the control of the reports, in the form of interrogatory VIII. Enforcement responses or otherwise. See RPFJ United States, itself has broad § IV.A.2. Plaintiffs may seek any information-gathering powers to 376. Numerous comments criticize monitor Microsoft’s compliance, various aspects of the compliance and appropriate orders relating to the enforcement of the RPFJ, including the evaluate third-party complaints, and enforcement procedures set forth in propose ways to cure violations. The Section IV of the RPFJ. Many of these ability to file petitions for orders to show cause why Microsoft should not TC’s ongoing monitoring duties will comments take issue with the help ensure that Microsoft remains composition and duties of the Technical be held in criminal or civil contempt, petitions for injunctive relief to restrain compliant with its obligations under the Committee (‘‘TC’’) (RPFJ § IV.B) and the RPFJ, and that if it fails to comply, supplemental dispute resolution or prevent violations, motions for declaratory judgment to clarify or violations promptly will be detected provisions (RPFJ § IV.D), some interpret particular provisions, and and brought to Plaintiffs’ attention. The suggesting that the enforcement scheme motions to modify the RPFJ. See RPFJ TC, however, is not a law enforcement should be based on an entirely different, § IV.A.4. body. Rather, traditional prosecutorial more draconian, model. In several cases, 379. Likewise, the Court retains full these comments misunderstand the powers remain with the United States jurisdiction to issue orders necessary to and plaintiff States, while traditional purposes underlying the RPFJ’s construe, carry out, modify, and enforce supplemental enforcement mechanisms. compulsory, remedial, and enforcement the RPFJ, and to punish violations powers remain with the Court. In others, they imply that the RPFJ thereof. See RPFJ §§ IV.A.4, VII. The somehow dilutes the United States’ and Court’s inherent powers include the 1. Technical Committee Powers the Court’s traditional judgment power to construe or modify the decree, 382. Because several comments construction and enforcement powers, to compel Microsoft’s compliance or or that Microsoft arguably has an undue criticize the powers of the TC as 355 remedy noncompliance through civil amount of control over the process. contempt, and to punish willful non- These allegations are meritless. compliance through criminal contempt. 357 The RPFJ’s discussions of additional factors such as ‘‘systematic’’ or ‘‘knowing’’ violations are 377. The additional monitoring and See McComb v. Jacksonville Paper Co., dispute resolution mechanisms of the not intended to change the scienter or other 336 U.S. 187, 191–95 (1949); 18 U.S.C. elements that must be shown in actions to enforce RPFJ are intended to enhance the 401(3). Nothing in the RPFJ diminishes the RPFJ through contempt charges. See, e.g., likelihood of efficient resolution of any of these rights and powers. United States v. NYNEX Corp., 8 F.3d 52, 54–55 compliance issues that may arise, 380. Some comments criticize the (D.C. Cir. 1993) (setting forth the elements of without undue delay or the necessity of contempt, applied to antitrust decree). In particular, provision in Section IV.A.4 that allows it is clear that a party to a decree may be found extensive prosecutorial or judicial Microsoft a reasonable opportunity to guilty of criminal contempt if its contumacious involvement. They in no way prohibit cure alleged violations of Sections III.C, behavior was ‘‘willful.’’ Willful intent for purposes or impede traditional judicial D, E, and H before Plaintiffs may seek of contempt may be shown by proof that a construction or enforcement of the RPFJ. defendant ‘‘acted with deliberate or reckless an enforcement order, as simply giving disregard of [its] obligation under the’’ order. With the limited exception of giving Microsoft a mechanism for delay.356 To United States v. Young, 107 F.3d 903, 909 (D.C. Cir. the contrary, the limited opportunity to 1997); see also United States v. Greyhound Corp., 355 CCIA 89–92; AOL 50–53; ProComp 75–77; 508 F.2d 529, 532 (7th Cir. 1974) (in context of Litan 54–55; RealNetworks 31–32; Red Hat 30–31; cure is intended to encourage rapid, antitrust decree, holding that willful element can be Nader 5; Waldman 5, Sen. Kohl 5; SBC 111–13, proven by evidence of either deliberate or reckless 157–58. 356 AAI 42; Maddux ¶ 35. conduct).
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inadequate,358 a detailed explanation of 385. Some comments criticize the TC’s procedures and substantive powers the TC’s powers is in order. The TC has restriction on direct use of the TC’s make eminent sense. a number of purposes. reports and conclusions in enforcement 387. Some comments question why 383. First, the TC provides in-depth, actions.361 This direct use restriction the TC is not given an explicit mandate ongoing monitoring of Microsoft’s has two purposes: First, by ensuring that to also have business or legal expertise activities as they relate to compliance Microsoft’s and third parties’ to facilitate the review of Microsoft’s with the RPFJ. This will permit rapid communications will not be used non-technical business or legal detection and reporting of potential directly against Microsoft, the TC will decisions.363 The RPFJ sets forth a violations to the United States and the benefit from heightened candor and baseline of technical expertise because plaintiff States, after which Plaintiffs information disclosure by Microsoft it is essential that the TC have ‘‘experts can, in the exercise of their employees and others. Second, and in software design and programming,’’ prosecutorial discretion, bring such equally important, the TC cannot be to do its job. RPFJ § IV.B.2. Nothing in enforcement action as is appropriate to expected to develop evidence for use in the RPFJ, however, limits the expertise the situation. As part of this function, adversary proceedings with the of TC members, staff, and consultants to the TC has broad powers to obtain necessary level of rigor that law only these areas. In short, the TC can information from Microsoft. The TC enforcement or legally trained personnel and should have available to it expertise may require Microsoft to make available could muster. Those criticizing the broader than purely technical matters records and documents, and to provide restriction on direct use of the TC’s and will be expected to address and physical access to Microsoft facilities, output overlook the fact that Plaintiffs report on business and other issues that systems and equipment. Microsoft must remain free to make full derivative use come to its attention in connection with also make its personnel available for of all the TC’s work in enforcement— its monitoring of Microsoft’s compliance interviews on essentially the same terms such as pursuing leads to build solid with the RPFJ. Furthermore, the United as they are available to the United States enforcement actions based on States, the plaintiff States, and the Court and plaintiff States in their enforcement admissible evidence. In this sense, the routinely confront complex economic investigations and actions.359 The TC TC’s work will prove invaluable. and business strategy issues, and clearly even has the right to unfettered access 386. A second purpose of the TC is to have the capability to address such to Microsoft’s software source code, facilitate the resolution of potentially issues as they affect enforcement subject only to standard confidentiality complex and technologically nuanced matters. protections. See RPFJ § IV.A.8. disputes between Microsoft and others 384. The TC has the authority to over the practical workings of the RPFJ. 2. Composition and Control of the receive and evaluate complaints from The TC is not intended to have Technical Committee third parties, from Microsoft’s independent enforcement authority; that 388. Some comments take issue with Compliance Officer, and from Plaintiffs. authority remains with Plaintiffs and the manner in which the TC will be RPFJ §§ IV.A.8.d; D.4.a, b. The TC may the Court. See CIS at 55.362 Rather, the constituted, object to Microsoft playing keep the identity of complainants TC has a ‘‘dispute resolution’’ role, any role in selecting its members, and anonymous, and Microsoft will not have intended to facilitate the rapid, generally imply that the TC will lack the right under the RPFJ to obtain the consensual resolution of issues where independence.364 Many of these identity of the complainant. This should possible. As noted above, the TC comments fail to appreciate that encourage information flow to the TC, complements, but does not supplant, Plaintiffs, not Microsoft, control the TC. even from those who might fear Plaintiffs’ and the Court’s traditional 389. The TC is composed of three Microsoft retaliation. RPFJ § IV.D.4.e. methods and powers of decree members who are to be ‘‘experts in Further, the TC has an obligation to enforcement. It is thus intended to software design and programming.’’ report to Plaintiffs, both at regular provide an additional mechanism for RPFJ § IV.B.2. Plaintiffs and Microsoft intervals and immediately upon the efficient voluntary resolution of will each nominate one member, who discovery of an apparent violation. RPFJ what otherwise could be time- must meet strict conflict-of-interest §§ IV.A.8.e, f. Finally, the TC has the consuming, costly, and frustrating standards, to ensure that they perform right to report back to third parties who disputes to all concerned. Viewed in their duties in a ‘‘fair and unbiased have made complaints or inquiries as to this light, rather than as being a manner’’ (RPFJ § IV.B.2), and have the how they might be resolved with surrogate prosecutor or judge, both the right to object to the other’s proposed Microsoft, subject only to the TC’s appointee. Any unresolvable disputes overall confidentiality obligations. See parties. E.g., Gifford 5; Gianndrea 6. This will about TC membership are decided by 360 prevent third parties from using the TC as a way RPFJ §§ IV.8.f, 8.c, 9, 10. to in essence improperly expand Microsoft’s the Court, which retains the ultimate disclosure obligations under the RPFJ. For example, ability to appoint the members. After 358 CCIA 89–92; AOL 50–52; ProComp 75–77; the TC will have access to all of Microsoft’s source the first two members are appointed, Litan 54–55; RealNetworks 32; Palm 15–16; Red Hat code, including source code for software products they will propose a third member; again, 30–31; Nader/Love 5; Waldman 5; Sen. Kohl 5; not directly at issue in the case, and will be able TRAC 9–10; Drew 1; Young 3; Clabaugh 1; to evaluate all APIs, even those not necessarily the Court will decide disputes and Schulken 2. related to middleware. If the TC was free to disclose approve or reject this member. See RPFJ 359 One comment erroneously implies that such items to third parties, it would in essence § IV.B.3. Having all parties play a role in permitting Microsoft to have counsel present when permit the wholesale looting of Microsoft’s selecting the TC ensures that it will not its employees are questioned by the TC somehow intellectual property, thus changing the would allow Microsoft to thwart the discovery of fundamental nature of the carefully limited, have an overall bias for or against one violations. See Nader/Love 5. To the contrary, this negotiated settlement that led to the submission of party. Furthermore, there remain right is also present in conjunction with informal the RPFJ to the Court. safeguards against bias even after the TC interviews or ‘‘on the record’’ depositions by 361 CCIA 91; AOL 51; Litan 55; ProComp 76; is chosen. If, for example, the TC Plaintiffs; is a standard part of all such provisions Harris 10; Gifford 5; Alexander 4; Waldman 5; in antitrust consent decrees in recent years; protects Clapes 19; Godshall 2; Hammett 1. member nominated by Microsoft fails to against impermissible ex parte contacts; and 362 As one commenter supporting the RPFJ noted protects Microsoft’s legitimate privileges and basic in observing that the TC will ‘‘also have the authrity 363 CCIA 90; Red Hat 30. principles of due process. [sic] to resolve disputes about Microsoft’s 364 Nader/Love 5; Litan 55; AOL 51; Alexander 4; 360 As some comments point out, the TC cannot compliance,’’ ‘‘this panel should not be used as a Gifford 6; Young 3; Morrissey 2; Clabaugh 1; share confidential Microsoft information with third regulatory body.’’ Economides 11. Cheetham 1; Spotswood 1; Akin 4; Godshall 1–2.
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behave in an unbiased manner or consistently with the purposes of the IFJ, but that the United States believes otherwise does not act in accord with RPFJ. RPFJ § IV.B.4. The TC files its are either unnecessary or more the purposes of the RPFJ, the United reports with Plaintiffs, not Microsoft. effectively addressed in the manner States has the right to insist that the RPFJ § IV.B.8.e, f.367 The hiring of proposed in the RPFJ. For example, the member be replaced (RPFJ § IV.B.5); additional staff or consultants by the TC Litigating States’ Proposal establishes a Microsoft, however, has no is subject to approval by Plaintiffs; Compliance Committee (‘‘Committee’’), corresponding right. Microsoft is entitled only to prior notice the only responsibility of which appears 390. Further, as noted critically by a of such hiring, and is obligated to pay to be appointment and removal of the few comments,365 TC members are for such hires. RPFJ § IV.B.8.h. CO. The United States considered this subject to employment restrictions that Plaintiffs, not Microsoft, approve the approach but ultimately decided that an preclude them from having served as TC’s expenses. If Microsoft brings an independent Technical Committee expert witnesses in this or other cases objection to the Court concerning the would be more effective than the involving Microsoft, and impose TC’s expenses, Microsoft bears the Committee contemplated by the States. prohibitions on being employed by burden of proving that they are 396. The Litigating States also Microsoft or its competitors for a limited unreasonable, and has to pay all costs propose a confidential reporting time before, during and after their and attorneys’ fees incurred by the TC mechanism that Microsoft employees service on the TC. Such limited, by virtue of such challenge. RPFJ § IV.9. ancillary employment restriction can use to report potential violations of covenants are also intended to ensure C. Internal Compliance the decree or the antitrust laws. One that TC members will not have or 393. Several commentors expressed comment suggests that the RPFJ should develop biases, or be able to trade on their preference for the Litigating States’ explicitly permit Microsoft employees confidential, competitively sensitive Proposal regarding internal compliance to submit anonymous information to the 368 business information learned while measures. The RPFJ and the Litigating TC. The RPFJ provides the TC with serving on the TC. In appropriate cases, States’ Proposal both provide for a the ability to receive and evaluate however, these requirements may be Compliance Officer (‘‘CO’’) inside complaints, including anonymous waived by the agreement of the parties Microsoft who will be responsible for complaints, and the United States to the RPFJ. RPFJ § IV.B.2. developing and supervising internal believes that the scope of this authority 391. Microsoft is responsible for programs to ensure Microsoft’s is broad enough to protect Microsoft paying all costs of the TC. RPFJ compliance with the antitrust laws and employees in appropriate cases. §§ IV.B.6, 7, 8.h. It is wholly reasonable any final judgment. The Litigating 397. Several comments note that the that the defendant in this case, rather States’ proposal largely tracks the RPFJ Litigating States’ Proposal requires the than the taxpayer, defray the potentially with respect to the role that the CO is CO to disseminate the decree (and substantial cost of supporting the TC. supposed to play to ensure compliance related materials) to platform software Microsoft will not be able to manipulate with the terms of the decree. For developers and other Microsoft the activities of the TC through any example, both proposals contemplate employees involved in working with ‘‘power of the purse,’’ however, as it that the CO will supervise the review of OEMs, ISVs, IHVs and third-party will have the burden of demonstrating Microsoft’s activities during the term of licensees, whereas the RPFJ requires the unreasonableness of any TC the decree and will be responsible for dissemination only to Microsoft’s expense, and the Court has the authority ensuring that the relevant company officers and directors.369 See RPFJ to compel payment in the event of a representatives are aware of and have § IV.C.3; Litigating States’ Proposal § 17. dispute. RPFJ § IV.B.8.i. The TC will agreed to comply with the decree. Both Although a provision similar to the have offices on Microsoft’s corporate proposals charge the CO with similar Litigating States’ Proposal appeared in campus, RPFJ § IV.B.7, which will briefing and record-keeping duties. the IFJ, the United States ultimately greatly enhance its ability to carry out 394. There are, however, certain decided that dissemination to officers its duties; however, Microsoft cannot differences between the two proposals. and directors—who would then be exercise any control over the TC’s The RPFJ requires the CO to maintain responsible for disseminating additional activities by virtue of its location. The the procedures for submitting instructions and advice to lower-level comments expressing concern that complaints on Microsoft’s website, employees—would sufficiently ensure Microsoft somehow can control the TC, whereas the Litigating States propose that Microsoft’s policymakers, who are either through funding or geographic that the Special Master handle this responsible for establishing the strategic proximity, are unfounded.366 particular responsibility. Both and technical direction of the company, 392. Most importantly, the TC approaches achieve the same result. The are on actual notice of the RPFJ’s remains under the express control of United States, however, believes that it requirements. To require such Plaintiffs, not Microsoft. It is Plaintiffs, is more efficient for the CO, who will be procedures for all employees would be not Microsoft, that apply to the Court for a Microsoft employee and therefore in a a significant additional burden, and is the appointment of the TC members. better position effectively to monitor the unlikely materially to improve either RPFJ § IV.B.3.b, d. The United States, website, to handle this task. Microsoft’s level of compliance or its not Microsoft, contracts with the TC for 395. The Litigating States’ Proposal corporate culpability in the event of its services, and defines the basic also includes certain provisions that are violations. Although such education parameters of that agreement. RPFJ similar to provisions contained in the and certification requirements are not § IV.B.6. The United States, but not unique in antitrust decrees, many Microsoft, has the right to remove any 367 One comment (Gifford 6) questions whether, in the event of disagreement on the TC as to antitrust consent decrees entered into by TC member if it determines that the the United States, including the 1994 member has failed to act diligently and whether violations have occurred or been adequately cured, an individual member could Microsoft decree (No. 94–CV–1564), do submit dissenting views to Plaintiffs. The RPFJ does not impose any continuing education 365 Harris 9–10; Gifford 5. not require that the TC’s reports be unanimous or 366 Nader/Love 5 (suggesting that the TC might be reflect only the majority’s views and conclusions. ‘‘playing golf’’ with Microsoft executives instead of Further, there is no bar to an individual TC member 368 Palm 16. investigating anticompetitive activities); Young 3. communicating directly with Plaintiffs at any time. 369 SBC 158; Clapes 18.
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and certification requirements on the Significantly, however, the authority the was necessary, the United States has defendant whatsoever. States propose giving the special master been permitted to exercise its traditional 398. In sum, although the Litigating represents an unprecedented, radical, role as prosecutor.372 Likewise, no court States’ proposal and the RPFJ may differ and unwarranted removal of has successfully delegated its inherent to some degree in the manner in which prosecutorial discretion from the United powers of antitrust judgment they define the scope of authority and States that would weaken the enforcement as completely as proposed responsibility given to the CO, both mechanisms for compliance with the here.373 The comments supporting this proposals achieve essentially the same decree. radical deviation from established result of vigorous internal compliance 402. Both the special master and the practice cite no compelling reason for that will play a crucial role in the TC would have the power and authority such a remarkable course of action.374 effectiveness of the proposed decrees. to monitor Microsoft’s compliance with 405. Some comments express concern The United States believes, however, its obligations under the final judgment about ‘‘delay’’ occasioned by the TC that the procedures for the TC set forth and would have access to the dispute resolution process, suggesting in the RPFJ, when viewed in information, personnel, systems, that the tight time deadlines and conjunction with the responsibilities of equipment, premises, and facilities apparent binding authority of a special the TC and the United States’ existing necessary to fulfill their respective master would resolve matters more enforcement authority, provide the most responsibilities. Each would be required swiftly.375 The TC and other effective approach to enforcement. to receive complaints from a Microsoft supplemental dispute resolution Antitrust Compliance Officer, third processes, however, are not mandatory; D. Voluntary Dispute Resolution parties, and the plaintiffs; submit they in no way constrain the ability of 399. The RPFJ sets up an even more reports every six months regarding the United States and the State Plaintiffs informal, entirely optional, voluntary Microsoft’s compliance with the final from proceeding directly to court for dispute resolution mechanism that judgment; and report any non- interpretative and enforcement action permits third parties or Plaintiffs to first compliance at any time. In addition, when, in their exercise of prosecutorial submit complaints to Microsoft’s both the special master and TC would discretion, it is appropriate to do so. internal Compliance Officer, which be paid by Microsoft and would be 406. Moreover, the special master’s Microsoft then can attempt to resolve permitted to hire advisors, and such findings are neither binding nor non- within 30 days. RPFJ § IV.D.3. Some other staff as is necessary, at Microsoft’s appealable. Thus, although both comments describe this provision as expense. proposed decrees provide for a different simply a delay mechanism.370 In many 403. But the Litigating States’ review process for complaints of illegal instances, however, it will be in both proposal also calls for the appointed behavior made against Microsoft, Microsoft’s and the third party’s clear special master, with the assistance of an prompt and effective relief is no more interest to resolve issues quickly and ‘‘advisory committee,’’ to act as certain under one than the other where informally, without the expenditure of prosecutor, witness, and judge. The the parties to the complaint are time, money, and management scope of the special master’s authority unwilling to reach a resolution in the distraction attendant with more formal apparently extends without limitation to absence of a court order. In light of this, investigations and enforcement actions. all ‘‘technical, economic, business’’ and the United States, while reserving for This provision permits Microsoft and other aspects of the decree. Litigating Plaintiffs the right to seek court third parties to do so. Further, no person States’ Proposal §§ 18.d, f. The special intervention when necessary, believes is required to first submit issues to master would have unfettered discretion the model for the resolution of Microsoft’s internal Compliance to receive complaints, decide whether to complaints contained in the RPFJ best Officer—the process is entirely optional. investigate the complaints, conduct the promotes prompt and effective relief. investigation, hold hearings, make Any person concerned about delay or F. Proposed Reporting Requirements Microsoft’s good faith may complain to factual findings, and issue proposed 407. Some commentors argue that the the TC or directly to Plaintiffs. enforcement orders. Litigating States’ Proposal § 18.f. Further, the special RPFJ should include special transaction E. Proposals for a Special Master master would be bound to act within extremely tight deadlines, regardless of 372 See, e.g., United States v. Smith Int’l, 2000– 400. Some comments argue that the 1 Trade Cas. (CCH) ¶ 72,763 (D.D.C. 2000) (criminal TC should be replaced with a special the complexity of the issue, the ability and civil contempt); United States v. Microsoft master similar to that proposed in New of the parties to marshal evidence Corp., 147 F.3d 935 (D.C. Cir. 1998) (‘‘Microsoft II’’) York.371 Compare RPFJ § IV.B.8, with within an extraordinarily short 14-day (civil contempt and preliminary injunction in deadline, or the ability of the special enforcement of earlier Microsoft decree, inter alia, Litigating States’ Proposal § 18. finding nonconsensual referral to special master to Specifically, the commentors suggest master to evaluate the evidence and be abuse of discretion); United States v. NYNEX that this type of enforcement regime reach conclusions within a mandatory Corp., 814 F. Supp. 133 (D.D.C.) (criminal contempt would provide both a more effective 15-day post-hearing deadline. Id. The of AT&T decree) rev’d, 8 F.3d 52 (D.C. Cir. 1993); special master’s findings—and even its United States v. Twentieth-Century Fox Film Corp. means of ensuring Microsoft’s 1990–1 Trade Cas. (CCH) ¶ 69,060 (S.D.N.Y. 1990) compliance with the final judgment and recommendations, apparently whether (criminal contempt); United States v. Western Elec. a vehicle for the speedy resolution of accepted by the Court or not—would be Co., 1989–1 Trade Cas. (CCH) ¶ 68,421 (D.D.C. complaints from plaintiffs, state admissible in any action, and the 1989) (civil enforcement consent order to resolve allegations of AT&T decree violations in lieu of attorneys general, and independent special master expressly would be permitted to testify in any action, contempt). third parties. We disagree on both 373 Indeed, it is not clear from the Litigating counts. including apparently private litigation. States’ Proposal whether the delegation to the 401. To some degree, the RPFJ’s TC Litigating States’ Proposal § 18.h. special master of fact-finding powers its sufficiently and the States’ special master would 404. The United States is aware of no circumscribed. Cf. Microsoft II, 147 F.3d at 953–56 previous antitrust decree to which it has (mandamus appropriate for court’s overbroad perform the same functions. special master referral violative of both U.S. Const. been a party that appoints a special Art. III and Fed. R. Civ. P. 53(b)). 370 RealNetworks 32. master for general decree enforcement. 374 Novell 30; Nader/Love 5; Sen. Kohl 5. 371 SBC 112–13; AOL 51–53; TRAC 9; Novell 30; Rather, in every case in which an action 375 RealNetworks 32; ProComp 76; Litan 55; AOL RealNetworks 32; Red Hat 30–31; SBC 157. to enforce an antitrust final judgment 50–53; AAI 40–41 (generally).
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reporting requirements, as the Litigating authority should sufficiently ensure that entering consent decrees, ‘‘[t]he theory States’ Proposal does. In New York, the the United States is aware of—and able behind equitable relief is that it should Litigating States propose to mandate to seek more information about— be fashioned to fit the particular facts of government oversight of transactions transactions in which Microsoft is the case at issue.’’ Id. at IV–50. The related to the software industry and involved that might pose a competitive longer a decree’s duration, particularly other related areas by requiring threat. if it no longer fits the facts of the case, Microsoft to disclose such transactions IX. Termination the more the decree becomes regulatory to the plaintiffs, along with the type of in nature. The United States has transaction-related materials and 410. A number of comments argue imposed five-year terms in numerous information that is typically required in that the five-year term in Section V.A past decrees,381 including in industries, filings with the federal government (or seven years when including the like this one, that are characterized by under the Hart-Scott-Rodino Antitrust possible two-year extension under rapid technological change.382 In this Improvements Act of 1976 (‘‘HSR’’), Section V.B) is too short for the RPFJ to 377 case, in an evolving market, the five- where such transactions would not remedy the competitive harm. year term, particularly as augmented by 411. The five-year period provides otherwise be subject to the disclosure a potential two-year extension, is long 376 sufficient time for the conduct remedies requirements of the Act. enough.383 Because Microsoft will be 408. The United States believes that contained in the RPFJ to take effect in this evolving market and to restore eager to be released from the decree as such a provision is not an appropriate soon as possible, the prospect of an remedy for the violations found by the competitive conditions to the greatest extent possible.378 As the Court of extension should deter any violations District Court and sustained by the and provide an extra incentive to Court of Appeals. Foremost among the Appeals noted, the characteristics of the comply.384 Moreover, wholly apart from United States’ considerations when market in this case make it conducive to rapid change. See Microsoft, 253 F.3d at negotiating the RPFJ was the recognition 381 See, e.g. United States v. Delta Dental Plan of that the remedy must be consistent with 79 (‘‘So a company like Netscape Ariz., Inc., 1995–1 Trade Cas. (CCH) ¶ 71,048, 1995 the liability findings of the case, none of founded in 1994 can be by the middle WL 454769 (D. Ariz. 1995) (health care); United which relates to the use of acquisitions of 1995 clearly a potentially lethal States v. Topa Equities, ‘‘Public Comments and competitor to Windows because it can Response on Proposed Final Judgment,’’ 60 FR by Microsoft as a tool to maintain its 28,168, 28,170 (May 30, 1995) (noting that industry operating system monopoly. supplant its position in the market characteristics made quick entry likely), entered by, 409. Furthermore, but no less because of the characteristics of these 1995–2 Trade Cas. (CCH) ¶ 71,061, 1995 WL 481368 important, requiring the disclosure of markets.’’) (quoting counsel for (D. V.I. July 14, 1995); Oregon v. Mulkey, 1997–1 transactions that fall below the HSR Microsoft); id. at 49 (six years is an Trade Cas. (CCH) ¶ 71,859, 1997 WL, 599410 (D. Or. ‘‘eternity’’ in this market). To be sure, June 16, 1997) (commercial crab fishing); United threshold would require the United States v. Motor Vehicle Mfr. Ass’n, 1982 Trade Cas. States to engage in purely regulatory there is no scientific way to determine (CCH) ¶ 65,175, 1982 WL 1934 (C.D. Cal. Oct. 28, behavior without providing any the optimal term of a consent decree, 1982) (modifying judgment in decree regarding substantial likelihood of assisting in the which is the product of negotiation. The development and installation of motor vehicle United States’ position on the term of a emission control devices). remedial goal of restoring competitive 382 See, e.g., United States v. Tele- conditions to the market at issue. The decree is a matter of judgment informed Communications, Inc., ‘‘Comment and Response on United States strives to enact by experience. Ultimately, the United Proposed Final Judgment,’’ 59 Fed. Reg. 39,783, enforcement tools that are closely States concluded that a five-year term 39,784 (Aug. 4, 1994) (recognizing that the targeted to remedying the harm found (extendable by two years) is an telecommunications industry is ‘‘one that has appropriate and reasonable predictive experienced major changes in MTSD technologies and restoring competition. The that are ongoing’’); United States v. Agri-Mark, Inc., imposition of additional reporting judgment in this case. ‘‘Competitive Impact Statements and Proposed obligations on Microsoft—obligations 412. Some comments take the Consent Judgments,’’ 45 Fed. Reg. 79,186, 79,189 position that the length of Microsoft’s (Nov. 28, 1980) (arguing that ‘‘the dairy industry is greater than those deemed appropriate constantly evolving as a result of technological by Congress—would create burdens on anticompetitive conduct should have determined the length of the decree,379 changes’’). Microsoft, the potential acquired 383 We note that the suggestion of an open-ended parties, and the United States, without but that would have provided an decree, subject to review after five years (see Gifford adding a significant likelihood of unreliable measuring stick for 9; Litan 73), or contingent upon Microsoft’s market share decreasing (see Thomas 6), would create achieving any corresponding increase in evaluating the amount of time necessary to restore competitive conditions. Other undesirable uncertainty in the market and would be the detection of anticompetitive contrary to the United States’ mission to enforce the comments urge the United States merely transactions. Moreover, to the extent federal antitrust laws and to remedy specific to adopt the term length from prior that the review process unnecessarily violations thereof. recent cases, quoting the Antitrust 384 Several comments argue that the two-year delays those transactions that pose no Division Manual’s general guidance that extension does not provide a meaningful check on competitive concerns, the reporting ‘‘staff should not negotiate any decree of Microsoft’s behavior. AAI 40; Alexander 4; CCC 27; obligation runs the risk of having a CFA 84; Gifford 9; Harris 11, 14; Litigating States, less than 10 years’’ duration although negative impact on consumers. The Ex. A 17; Litan 55; Maddux ¶ 17; ProComp 76; decrees of longer than 10 years may be Schneider 1; RealNetworks 32; TRAC 11. Some United States’ standard investigative appropriate in certain argue that the United States should have included circumstances.’’ 380 Antitrust Division sanctions for violations similar to those contained 376 Specifically, the Litigating States’ Proposal in the Litigating States’ proposed remedy. SBC 157. requires Microsoft to provide 60-days written notice Manual at IV–54 (3d ed. Feb. 1998). But, The Litigating States’ proposed remedy spells out of direct or indirect acquisitions or investments by as the Manual also states at the outset a series of possible penalties that may be imposed Microsoft or any of its subsidiaries, as well as notice of its discussion of negotiating and if Microsoft violates the decree, including source of any exclusive intellectual property licenses code licensing, additional conduct remedies, and granted to Microsoft or any of its subsidiaries. The civil penalties. See Litigating States’ Proposal § 19. 377 requirement applies to transactions involving CCC 26; CCIA 83; Giannandrea 6; Litigating The Litigating States’ proposal also provides that if businesses of which Microsoft did not own 33% or States, Ex. A 18; Nader/Love; Relpromax 15; SBC Microsoft brings or threatens to bring a groundless more prior to December 1, 2001, and which fall into 157; Thomas 2, 5. claim of intellectual property infringement for the one of several categories related to computer 378 Some commentors agree with this proposed purpose of impairing interoperability of non- software and equipment, computer systems design, term. ACT 31; Economides 5–6. Microsoft products, Microsoft may be enjoined from telecommunications, and network industries. See 379 AAI 39; CCIA 83; Nader/Love 5; Pantin 28. asserting or enforcing any intellectual property Litigating States’ Proposal § 20. 380 CCIA 83 n.17; SBC 157; Young 3; Hammett 1. Continued
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seeking the two-year extension, the they are properly implemented, and it is Appeals emphasized that, when United States may seek civil and the overall impact of the various decree fashioning a new remedy, the District criminal contempt sanctions against provisions working together over the Court should bear in mind that the Microsoft and its personnel if violations course of the five-year term that will Court of Appeals had ‘‘drastically’’ of the decree warrant that action.385 See restore competitive conditions in the altered the basis of liability (Id. at 105, RPFJ § IV.A. Nothing in the RPFJ market. 107) and that the new remedy should undermines or erodes the United States’ reflect the ‘‘limited ground of liability’’ existing and powerful contempt and X. Comparing the RPFJ to the IFJ upheld on appeal. Id. at 107. enforcement authority.386 Therefore, in A. Structural Relief vs. Conduct 417. Second, if plaintiffs had pursued the event that additional steps are Restrictions structural relief on remand, Microsoft necessary to secure compliance or to would have been entitled to present 414. A number of commentors suggest punish Microsoft for violations of the evidence challenging a ‘‘wide range of that the United States should have decree, the United States will not lack plaintiffs’’ factual representations, pursued a restructuring of Microsoft the necessary enforcement tools. 389 including the feasibility of dividing 413. Some of the comments regarding into separate companies, arguing that Microsoft, the likely impact on this issue also express concern that ‘‘divestiture remains the most effective consumers, and the effect of divestiture certain key disclosure requirements may remedy for Microsoft’s wide-ranging 390 on shareholders.’’ Id. at 101. This not be triggered until as late as one year unlawful practices.’’ process not only would have been time into the term of the decree, which 415. Shortly after remand, plaintiffs consuming—both in the District Court renders those provisions effective for (the United States and all of the plaintiff and then, assuming the District Court only four years.387 At least one States) informed Microsoft and the actually ordered structural relief anew, commentor complains that Microsoft Court that, in light of the Court of again in the Court of Appeals—but also has relied upon this provision as the Appeals’ decision, they no longer would would have permitted Microsoft to basis for not yet disclosing certain seek to break up Microsoft. Joint Status introduce a plethora of new evidence. APIs.388 We note foremost that Report 2 (Sept. 20, 2001). Thus, even if Foregoing a structural remedy permitted Microsoft’s obligations under the the United States had litigated a plaintiffs to speed along the remand disclosure provisions are triggered from remedy, it would not have sought proceedings and obtain relief (1) sooner the date of submission of the RPFJ to the structural relief, just as the Non-Settling and (2) that more likely would be Court on November 6, 2001, not its States do not seek it in their litigated affirmed on appeal. entry by the Court. See RPFJ §§ III.D–E. case. The RPFJ will be in place for five years 416. This unanimity among the B. Anti-Tying Provisions from the date of entry; as such, those government parties not to seek 418. The Court of Appeals vacated commentors who claim that the divestiture reflects a sound view of the and remanded the District Court’s disclosure provisions will be in effect legal landscape created by the Court of judgment that Microsoft’s contractual only for four years have ignored the fact Appeals, which viewed structural relief tying of its Internet Explorer web that the clock is already running for in this case skeptically, at best. The browser with its Windows operating Microsoft to implement its disclosure Court of Appeals questioned whether system was per se unlawful under obligations. Moreover, although certain plaintiffs had ‘‘established a sufficient Section 1 of the Sherman Act. See U.S. disclosure provisions may not become causal connection between Microsoft’s Memorandum at 6–7, 64–66. Given the effective until up to one year after the anticompetitive conduct and its Court of Appeals’ imposition of a more submission of the decree to the Court dominant position in the [operating rigorous legal standard on this claim, (see, e.g., RPFJ § III.H), absent the system] market’’ to justify divestiture. including additional and difficult decree, Microsoft would be under no Microsoft, 253 F.3d at 106. The Court of factual proof requirements, and given obligation to provide such information. Appeals continued that ‘‘[a]bsent such the plaintiffs’ interest in achieving Giving Microsoft a limited amount of causation, the antitrust defendant’s expeditious relief in this case, plaintiffs time to implement its duties under these unlawful behavior should be remedied (including the Litigating States) made a provisions is necessary to ensure that by ‘an injunction against continuation of judgment that they would not litigate that conduct.’’’ Id. (quoting 3 Antitrust the Section 1 tying claim on remand and rights in related APIs, communications interfaces or Law ¶ 650a, at 67). The Court of Appeals so informed Microsoft on September 6, technical information. also suggested that the necessary 2001. At that point, the tying claim Contrary to these commentors’ assertions, the causation might be lacking here, noting possibility of the two-year extension of the RPFJ’s disappeared from the case. And so, requirements and prohibitions will help dissuade that even the District Court ‘‘expressly although two commentors 391 and the Microsoft from violating its terms and conditions. did not adopt the position that Litigating States urge that the Court The United States believes that this potential Microsoft would have lost its position in impose a remedy directed toward sanction, which is supplemented by its traditional the [operating system] market but for its enforcement and contempt authority, will provide banning contractual tying, there is no a significant incentive for Microsoft to comply. anticompetitive behavior.’’ Id. at 107 legal basis for a remedy on an issue 385 In addition, the RPFJ requires an independent, (quoting Findings of Fact, ¶ 411) where Microsoft was not found liable full-time, on-site compliance team that will monitor (emphasis added). Moreover, the Court and where the plaintiffs had valid compliance with the decree, report violations, and of Appeals observed that divestiture by grounds for choosing not to pursue the attempt to resolve technical disputes under the and large has been directed at ‘‘entities disclosure provisions. This ongoing supervision claim. provides added assurance that Microsoft will formed by mergers and acquisitions,’’ comply with the obligations and restrictions and told the District Court to C. Intentionally Disabling Rival imposed by the decree and that competitive ‘‘reconsider’’ whether ‘‘divestiture is Software conditions will be restored to the greatest extent appropriate with respect to Microsoft, 419. Some comments complain that possible during the five-year term of the proposed RPFJ. which argues that it is a unitary the RPFJ does not ‘‘prohibit Microsoft 386 Waldman 6–7. company.’’ Id. at 105. And the Court of from intentionally disabling or 387 CCIA 83; Elhauge 13; Sen. Kohl 5; RealNetworks 29–30. 389 PFF 24–29; Litan 65–69; ProComp 77–78. 391 SIIA 22–25; AOL 24–31; Matthewson & Winter 388 RealNetworks 30. 390 ProComp 77. 25–26.
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adversely affecting the operation of non-Microsoft middleware. The United independent applications platform; (2) competing products.’’ 392 They argue States does not believe that such actions Microsoft’s attempt to dissuade Intel that such a restriction is necessary to either should be prohibited or subject from developing NSP (video) software prevent Microsoft from thwarting ‘‘the Microsoft to any additional notice or for Windows 95; (3) Microsoft’s attempt effectiveness of the disclosure disclosure requirements. In addition, to dissuade Apple from developing requirements by altering the interfaces determining when Microsoft, as a multimedia QuickTime playback or other information on which non- corporate entity, has, or reasonably capability for Windows; (4) Microsoft’s Microsoft products rely.’’ 393 And they should have, such knowledge is agreement with RealNetworks to have correctly observe that the IFJ contained exceedingly difficult to determine. RealNetworks abandon the media an interim provision expressly 422. Moreover, the type of conduct at playback business on the Windows prohibiting Microsoft from ‘‘tak[ing] any issue (e.g., actions undertaken for the desktop; and (5) Microsoft’s offer of action it knows will interfere with or express purpose of degrading the incentives to IBM to abandon promotion degrade the performance of any non- software of a developer of software that of OS/2 and Lotus Smartsuite. Microsoft Middleware when competes with Microsoft Platform 425. The primary goal of Section 3.h interoperating with any Windows Software or software that runs on was to ‘‘prohibit naked bargains to not Operating System Product’’ without software that competes with Microsoft compete’’ in the platform space.397 The notifying the supplier ahead of time that Platform Software) would be prohibited RPFJ seeks this same goal, but also it intends to take such action and any by Section III.F of the RPFJ and/or likely expressly recognizes that under settled ways known by Microsoft to avoid or would expose Microsoft to statutory, antitrust law, agreements that limit reduce the interference with the tort, or other legal sanctions apart from competition sometimes are properly performance of the rival software.394 the RPFJ. ancillary to: (1) Pro-competitive joint One comment also criticizes the RPFJ 423. Instead of including a provision development agreements; (2) for omitting a provision similar (or similar to Section § 3.c of the IFJ or discussions relating to the coordination identical) to Provision 5 of the Litigating Section 5 of the Litigating States’ of the development of complementary States’ Proposal (‘‘Notification of Proposal, the RPFJ restrictions and products; or (3) Microsoft contracting Knowing Interference with requirements ensure ease in third-party with third parties to develop Performance’’).395 interoperability. Thus, the RPFJ requires technologies for use and distribution 420. The United States, upon re- Microsoft to disclose those APIs that its with its Windows operating system. evaluation, chose not to include a middleware products use to interoperate Rather than using broad language that provision modeled on Section 3.c of the with the operating system. See RPFJ could be construed to prohibit all IFJ because that provision could have § III.D. This disclosure will make it agreements that place limits on been read to allow Microsoft to take harder for Microsoft to interfere with competition—and risk prohibiting even steps to change its operating system in competing middleware. Further, to the those agreements that have order to interfere with the ability of rival extent that computer industry standards procompetitive justification—the United middleware to interoperate as long as are implemented in communications States therefore opted for a more Microsoft informed the third party of protocols, Microsoft must license these targeted approach in the RPFJ. Sections the change and what, if anything, could protocols (see RPFJ § III.E), including III.F.2 and III.G of the RPFJ thus are be done to fix the problem. This any modifications or alterations to designed to prevent Microsoft from effectively would have given Microsoft industry-standard protocols. When the entering into any contract relating to the a license to interfere with competing industry standard is implemented Windows operating system that middleware as long as it simply notified between a Microsoft middleware conditions consideration on an ISV not the competing developer. In addition, product, such as its Java Virtual supporting software that competes with this provision would have been difficult Machine, and the operating system, a Microsoft platform product, requiring for the United States to enforce because Microsoft must disclose that interface. any firm to promote exclusively a of the constant changes that Microsoft D. Agreements Limiting Competition Microsoft Platform Software, or makes to its operating system, which conditioning placement of an IAP or ICP while potentially procompetitive, may 424. Section 3.h of the IFJ included a on the Windows desktop on that firm have the unintentional consequence of provision relating to agreements entered refraining from supporting any product affecting a competing product’s into by Microsoft that have the effect of that competes with a Microsoft 396 interoperability. The result would have limiting competition. The United Middleware Product.398 States initially proposed this provision been unnecessary compliance disputes. XI. Other Proposed Remedies 421. Provision 5 of the Litigating in the IFJ based on Findings of Fact, States’ Proposal is similar to, though ¶¶ 80–132, which described five A. Restrictions On Software substantially broader than, Section 3.c different incidents in which Microsoft Development Tools attempted to use agreements to limit of the IFJ. Provision 5 is overbroad and 426. At least two comments express support for competing middleware: (1) sweeps in conduct that should not concern that the RPFJ does not address reasonably be considered Microsoft’s attempt to dissuade Microsoft’s alleged market power with anticompetitive. Thus, for example, in Netscape from developing a browser for respect to its line of software the normal course of the development of Windows that could serve as an development tools. One commentor its software, Microsoft may take actions apparently seeks to compel Microsoft to that have the unintended, but 396 The Litigating States proposes a very-similar provision. Section 11 of the Litigating States’ grant the commentor access to a nevertheless known, consequence of Proposal provides: ‘‘Microsoft shall not offer, agree interfering with or degrading the to provide, or provide any consideration to any 397 See Plaintiffs’ Reply Memorandum in Support performance or compatibility of some actual or potential platform software competitor in of Proposed Final Judgment at 64 (May 17, 2000). exchange for such competitor’s agreeing to refrain 398 At least two comments express concern that or refraining in whole or in part from developing, 392 the RPFJ does not contain language similar to that SIIA 8, 64. licensing, promoting or distributing any Operating of Section 3.h of the IFJ. RealNetwork 30–31; SBC 393 Palm 14. System Software Product or any Middleware 98–99. For a complete discussion of how Sections 394 IFJ § 3.c. produce competitive with any Windows Operating III.F and III.G address this concern, see Sections V 395 SIIA 64–65; SBC 45–46. System Product or Microsoft Middleware Product.’’ and VI, above.
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Microsoft partnership program that containing Microsoft redistributable product innovation that comes along would more easily allow the commentor code to other platforms, somehow will with that choice, i.e., the promotion of to incorporate development tools for its deceive ISVs into developing competition and not specific alternate platform with Microsoft’s applications that run only on a competitors, is the goal of the antitrust Visual Studio development Microsoft platform. laws and this antitrust remedy, while environment. The comment alleges that 429. Further, the remedy suggested by mandatory distribution of a particular Microsoft could apply discriminatory these comments could have the effect of product is the antithesis of this goal. criteria, denying alternate platform retarding innovation, to the detriment of Unlike the ‘‘must-carry’’ provision vendors posing a potential threat to consumers. Requiring Microsoft proposed by the Litigating States, the Microsoft’s monopoly the ability to affirmatively to support allowing affirmative requirements imposed on integrate their platform development competing platform vendors to use Microsoft and the prohibitions against tools with Microsoft’s Visual Studio Microsoft’s Visual Studio development anticompetitive conduct contained in development suite, while allowing other suite to host competing development the RPFJ, and the subsequent freedom vendors who do not pose a threat to tools or create applications for non- this structure promotes among ISVs, have that access. According to the Microsoft platforms using Microsoft- IHVs, IAPs, ICPs, and OEMs, will give comment, without a software developed redistributable code may all middleware technologies, including development environment common to create a significant disincentive for but not limited to Java, an equal the one used for the dominant Microsoft Microsoft to continue to invest heavily opportunity to succeed in the market. platform, ISVs and others would be in further development of its tools suites C. Porting Microsoft Office much less likely to write software for or redistributable code, because that alternate platforms, a circumstance that investment would redound at least in 432. Several comments suggest that would help preserve Microsoft’s part to the benefit of Microsoft’s Microsoft should be required to port or applications barrier to entry.399 competitors. Moreover, software tool continue to port its Office Suite of 427. The second comment alleges that developers would lose their incentive to software applications to competing Microsoft’s license restrictions require innovate if they were permitted simply operating systems, including but not ISVs that write software applications to free-ride on Microsoft. That result limited to the Macintosh OS, as a means that take advantage of the would not benefit either ISVs or, to erode the applications barrier to ‘‘redistributable components’’ found in ultimately, their customers. entry. 402 The Litigating States also have Microsoft’s Visual Studio development advanced this proposal, 403 but the B. Java Must-Carry suite to use such ‘‘redistributable’’ code proposal is unwarranted. only on applications written for 430. In New York, the Litigating States 433. First, the United States did not Microsoft operating system products. propose to require Microsoft to include allege that Microsoft monopolized or This comment argues that this a free copy of Sun Microsystems’ Java attempted to monopolize a software restriction prohibits, as a practical technology with all copies of its market in which Office competes, or matter, the porting of such applications Windows Operating System Products that Microsoft engaged in to other platforms, thereby increasing and Internet Browser for a period of ten anticompetitive conduct intended to the applications barrier to entry (10) years. See Litigating States’ encourage the use of Office rather than protecting Microsoft’s operating system Proposal § 13. Several comments echo rival software applications that compete monopoly. This commentor seeks this type of ‘‘must-carry’’ proposal. 401 with Office. 404 Second, the imposition elimination of this license restriction The commentors correctly note that the of such a porting requirement is from Microsoft’s Visual Studio Court of Appeals upheld Microsoft’s substantially outside the scope of the license.400 liability under Section 2 of the Sherman underlying case. 405 Any remedy must 428. The relief sought by these Act for exclusionary conduct aimed at be tailored to the violations found. See commentors would go well beyond the extinguishing the ‘‘middleware threat’’ Microsoft, 253 F.3d at 104–07. The only scope of this case. The evidence that posed by Java and other middleware. claim sustained by the Court of Appeals related to Microsoft’s misuse of See Microsoft, 253 F.3d at 75–77. The was that Microsoft illegally maintained development tools involved specific comments suggest that requiring its PC operating system monopoly by deceptive practices regarding Microsoft to distribute Non-Microsoft taking specific acts that impeded Microsoft’s own development tools for Middleware such as Java would not middleware products that had the the Java platform. Microsoft in essence only deny Microsoft the fruits of its potential to erode the applications failed adequately to disclose that its violation, but also would begin to erode barrier to entry. The Court of Appeals version of Java development tools the applications barrier to entry. did not find that Microsoft’s unlawful contained various Windows-specific 431. The United States considered a actions created the barrier to entry. The features that made it difficult to use or ‘‘must-carry’’ provision but rejected it United States crafted the RPFJ to restore port Java programs written with for at least two reasons: (1) it is not the the competitive conditions in the Microsoft tools to other Java virtual proper role of the government to bless market that were impeded by machines or operating systems. See one competitor over others, or one Microsoft’s actions, allowing Microsoft, 253 F.3d at 76–77. There is potential middleware platform over nothing in either the allegations made in others, nor is the government in the best 402 CCC 13–17; SIIA 49–51; ProComp 30; these comments or in the trial record to position to do so; and (2) mandatory ProComp, Arrow 20–21; PFF 30–31; SBC 135; suggest that Microsoft’s refusal to allow distribution of a particular product Hargraves 9; CCIA 38; CFA 11; Ltan 71–72. 403 Litigating States’ Proposal § 14, see also any competing platform vendor to likely would lead to a decrease in Litigating States, Ex. A 14–15. integrate its development tools with innovation and improvement in that 404 Indeed, the plaintiff States originally alleged Microsoft’s Visual Studio development product because its developer will have that Microsoft engaged in unlawful monopolization, suite, or its license restrictions that no incentive to make it better. The the violation of Section 2, with respect to Microsoft United States thus believes that the Office. However, the States dropped this claim prior prohibit ISVs from porting applications to the trial. promotion of consumer choice and the 405 CompTIA 19 (porting Office would interfere 399 Palm 11–12. with natural market forces); ACT 24 (porting Office 400 Kegel 9–10. 401 SIIA 49; Nader/Love 6. requirement beyond the scope of the case).
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consumers, software developers, OEMs, incorporate Microsoft or competitive point out that the Court of Appeals and others to make decisions based on middleware. found that Microsoft undermined the the competitive merit of their options. 436. The United States believes that threat posed by Sun’s Java middleware In this way, the market will determine the RPFJ adequately addresses the by deceiving ISVs into believing that whether particular products will erode restrictive and discriminatory licensing software written with Microsoft’s Java the applications barrier to entry. The practices engaged in by Microsoft and developer tools would run on platforms commentors’ and Litigating States’ found unlawful by the Court of Appeals. other than Windows (Microsoft, 253 proposal, however, goes far beyond the Thus, under the RPFJ, OEMs and end F.3d at 75–77), and they argue that violations found by imposing on the users are free to replace Microsoft Microsoft continues to adopt but subvert market a porting requirement for Office middleware, choose between competing public standards by inserting that substitutes for competition on the middleware, and, with minimal proprietary elements into the merits and preordains the market limitations, configure the desktop. 411 implementation of the Kerberos outcome. OEMs also are able to make decisions standard that is built into Microsoft about distributing and supporting non- products. D. Licensing of Predecessor Versions of Microsoft software products without 439. One commentor proposes that Windows fear of reprisal. 412 A provision Microsoft be enjoined from modifying, mandating the licensing of predecessor altering, sub-setting, or super-setting 434. A few commentors propose that versions of Windows is therefore any industry-standard communications the United States adopt the Litigating unnecessary and would do little or interface or security protocol in any way States’ remedy proposal requiring nothing to enhance these goals. that is not approved by an international Microsoft to continue to license and industry standards-setting body. 415 The E. Industry Standards support immediately prior versions of United States believes this proposal is the Windows Operating System 437. Several commentors express likely to be ineffective at promoting 406 Product. Others object to this concern that the RPFJ imposes no interoperability and unlikely to benefit proposal, arguing that it would impose requirement on Microsoft to support consumers. It would not prevent unnecessary costs on Microsoft that industry standards for Microsoft from inserting proprietary would be passed on to consumers, that interoperability. 413 By industry elements into industry standards that it would fragment the Windows standards, the commentors generally are designed to allow such extensions standard, and reduce incentives for mean industry-wide technical (for instance, the Kerberos security 407 Microsoft to innovate. The Litigating specifications for communication standard). 416 Nor would it constrain in States’ Proposal mandates support and between pieces of software. Such any way Microsoft’s actions with licensing of predecessor versions for standards often are approved and respect to industry standards like Java five years after release of a major supervised by international standards- that are not under the supervision of an Windows Operating System Product on setting organizations (e.g., the World international standards body. It would the same terms and conditions as Wide Web Consortium (W3C), which simply deter Microsoft from introducing previously offered. In addition, oversees HTML, the language used to potentially beneficial extensions to Microsoft must license and support create Web pages). In addition to these industry standards, since Microsoft Windows 98SE for three years after de jure standards, some specifications would have to work through the entry of the Final Judgment. for interaction remain under the control approval process at a standards body 435. The Litigating States cite the of the firms that invent them, but obtain before it could introduce its innovation. District Court’s findings on sufficiently wide usage to be considered 440. The Litigating States propose a discriminatory and restrictive licensing standards in a less formal sense. An range of provisions to encourage as support for this provision. The example of this less official category of Microsoft to adhere to industry provision purports to cure these standards is Sun’s Java programming standards. 417 Litigating States Provision practices by permitting customization of language. 16.a (‘‘Compliance with Standards’’) Windows (including earlier versions) to 438. Several commentors propose would require Microsoft to comply with incorporate Microsoft or competitive provisions that would constrain any standard that has been approved by middleware. Commentors assert that Microsoft’s behavior with respect to or submitted to ‘‘any organization or requiring licensing of predecessor industry standards. Generally, these group that sets standards,’’ if Microsoft versions would provide a lower-priced commentors argue the importance of publicly claims that it is compliant with operating system alternative; 408 offer a prohibiting Microsoft from corrupting or the standard. If Microsoft extends or version of Windows that has less ‘‘polluting’’ open standards by modifies that standard, it must continue Microsoft middleware and greater extending or altering them with also to implement the standard in its reliance on industry standards; 409 and proprietary code to cause them to unextended or unmodified version, provide greater incentives for Microsoft interoperate better, or solely, with until either Microsoft disclaims that it to innovate, because it would have to Microsoft software than with rival implements the standard or the standard 414 offer a substantially better operating software. The commentors correctly goes out of force at the industry body. system in order to sell new releases. 410 Microsoft may not require third parties 411 See discussion of RPFJ § III.C at Section IV(D), to use or adopt Microsoft’s version of Commentors also argue that requiring above. Microsoft to license predecessor 412 See discussion of Section III.A (Section IV(B), the standard and must support the versions would permit customization of above); see also Sections III.D. and VI.U, which nonproprietary industry version in its Windows (including earlier versions) to require Microsoft to provide actual and potential operating systems. The United States competitiors with full access to the same APIs and considered a provision substantially related information as Microsoft middleware has to 406 PFF 30; SBC 143; CCIA, Stiglitz & Furman 40– interoperate with the current, and future Windows similar to Litigating States Provision 41. operating systems, offering the potential of a 407 ACT 29; CompTIA 16. seamless fit and greater possibility for incorporation 415 SIIA 61–62. 408 PFF 30; SBC 143. of competing middleware. 416 SIIA 61–62 (Kerberos); Johnson 5 (Kerberos). 409 SBC 143. 413 SIIA 61; Novell 5; Sun 23–24. 417 Litigating States’ Proposal § 16; ProComp 35 410 CCIA, Stiglitz & Furman 40–41. 414 AAI 25; Novell 25; SBC 146; ProComp 35, 74. (referring to Litigating States’ Proposal).
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16.a for the RPFJ, but ultimately decided industry is not necessarily what a Microsoft Middleware Product as it was likely to be both unwieldy and standards body formally has adopted. described, and (2) to designate a Non- ineffective. 418 Further, and fatally for those who justify Microsoft Middleware Product to be 441. This type of standards the Litigating States’ Provision 16 as a invoked in place of a Microsoft requirement likely would prove response to Microsoft’s illegal Java Middleware Product as described. And, unwieldy because of the complexity of deception, no part of that section pursuant to Section III.H.3, Microsoft the institutions, technologies, and actually would have prohibited cannot alter those configurations behavior being regulated here. Which Microsoft from pursuing its illegal without permission from the end user. among the multitude of existing acts. 419 Throughout most of its history, G. Non-Retaliation for Participation in standards-setting bodies, or bodies that Sun’s Java has neither been a technical Litigation might be established after, and possibly standard approved by, submitted to, or because of, this decree, would be under consideration by a standard- 447. At least one comment 425 has considered legitimate under Provision setting body (the criterion for protection advocated inclusion of the Litigating 16.a? (What if Microsoft sponsors a new under Provision 16.a) nor a ‘‘variation’’ States’ proposal specifically to prohibit standards body, for instance?) Is it even from such a standard (the criterion retaliation by Microsoft against those technically possible or desirable, in all under Provision 16.b), but rather a who participated in litigation in either covered circumstances, for Microsoft to widely-used proprietary technology of the now de-consolidated actions.426 meet the requirements of the provision under the control of its owner, Sun. Such a provision is unnecessary because by supporting the industry standard of the Court retains ample authority, a technology at the same time it F. Protection for Large End Users regardless of whether such a provision supports its own extended version? 444. A few commentors lament the is included in the RPFJ, to sanction such 442. The Litigating States’ provision lack of special protection in the RPFJ for conduct if and when it arises. also is likely to be ineffective. It large end user purchasers of Microsoft 448. Thus, should retaliation of the substantially regulates Microsoft’s products. 420 These commentors express sort described by the comment arise, the speech rather than its actions. If several concerns regarding large United States may petition the Court to Microsoft publicly claims to be corporations, universities, or federal, exercise its continuing jurisdiction to supporting its own implementation of a state, or local government purchasers: issue ‘‘further orders as may be standard (e.g., ‘‘Microsoft Technology (1) Microsoft may retaliate against end necessary or appropriate to carry out or A’’) and does not publicly claim to be users purchasing competing construe this Final Judgment . . . to supporting the standard itself (e.g., middleware; 421 (2) Microsoft continues modify . . . any of its provisions, to ‘‘Technology A’’), it would be in full to charge license fees to these enforce compliance, and to punish compliance with the provision and yet purchasers for all machines capable of violations thereof.’’ RPFJ § VII. Under would not have any obligation to adhere running a Microsoft operating system (a both its inherent powers and Section VII to the ‘‘Technology A’’ standard. It is ‘‘per processor fee’’), thereby removing of the RPFJ, the Court could take difficult to see a provision that operates incentives to purchase competing whatever action is necessary to prevent, in this manner as imposing a operating systems; 422 (3) Microsoft halt, and remedy any such retaliation competitively meaningful constraint. imposes other coercive licenses directed against participants in this litigation. Moreover, to the extent that the at end users; 423 and (4) Microsoft, Further, depending on the facts of any provision regulates actions, it appears to without some restraint, can undo all of such retaliation, Microsoft also could be internally contradictory. It requires the RPFJ provisions applying to OEMs face criminal liability under a number of Microsoft, as a condition of being upon the first license renewal with an statutes. See, e.g., 18 U.S.C. 1503 permitted to introduce a proprietary end user. 424 (‘‘whoever . . . corruptly or by threats version of the standard, to implement 445. The commentors’ proposed relief or force, or by any threatening letter or the industry version until either is outside the scope of the underlying communication, influences, obstructs, Microsoft disclaims support for it or case. The United States did not allege, or impedes, or endeavors to influence, until the standard is rescinded by the or prove, that Microsoft engaged in obstruct, or impede the due governing body. But it also explicitly anticompetitive conduct involving its administration of justice . . .’’); 18 requires Microsoft’s operating systems large end user customers. Although the U.S.C. 1512 (witness tampering, to continue to support the industry United States proved that Microsoft generally). A specific anti-retaliation standard, apparently without time limit, illegally maintained its PC operating provision of the sort proposed here is as a condition of being permitted to system monopoly through actions therefore unnecessary and unwarranted. introduce Microsoft’s own proprietary directed at eliminating the middleware version. threat, it presented no evidence—and XII. Miscellaneous Comments 443. Litigating States’ Provision 16.b the District Court made no finding—that A. Microsoft’s ‘‘.Net’’ Initiative (‘‘Compliance with De Facto purchasers large and sophisticated 427 Standards’’) modifies Provision 16.a to enough to deal directly with Microsoft 449. Some comments argue that permit Microsoft, upon notification and were in need of special protection. the RPFJ fails effectively to constrain consent of the States’ enforcement 446. Nevertheless, certain provisions Microsoft’s diverse set of announced authorities, to meet its compliance of the RPFJ do apply to end users. and emerging web services initiatives, obligations by implementing a variant of Pursuant to Section III.H.1–2, end users grouped generally under the ‘‘.Net’’ 428 the standard ‘‘to the extent that industry are able (1) to configure the desktop to trademark. The comments claim that custom and practice recognizes enable or remove access to each Microsoft, having vanquished the compliance with the Standard to nascent cross-platform distributed include variations from the formal 419 Litigating States, Ex. A 15. definition.’’ The need for this provision 420 CCIA 59 n.12; Kegel 27–28; KDE 13; Novell 425 SBC 99. 26–29; CFA 90. 426 highlights the unwieldiness of Provision Litigating States’ Proposal § 9. 421 KDE 13. 427 SIIA 41–44; CFA 55–65; Palm 7–8; Catavault 16.a: what is truly ‘‘standard’’ in the 422 Kegel 27–28. 3–11; KDE 9–10. 423 Novell 26–29. 428 See generally [http://www.microsoft.com/net/ 418 CIS at 62. 424 CCIA 59 n.12. ]; Huwalt 3.
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computing threat posed by the Java Communications Protocols as provided made clear that ‘‘[w]hile we do not architecture, is now implementing its for in Section III.E of the RPFJ provides undertake to dictate to the District Court own closed system that will require a continuing obligation for Microsoft to the precise form that relief should take Microsoft operating system products on make available, through licensing on on remand, we note again that it should both the server side of the network and reasonable and non-discriminatory be tailored to fit the wrong creating the on the client side (i.e., Windows terms, the Communications Protocols occasion for the remedy.’’ Id. at 107; see Operating System Products). Under utilized by the .Net Framework to the also id. (‘‘we have drastically altered the such a scenario, argue the commentors, extent these Communications Protocols scope of Microsoft’s liability, and it is neither server nor client software are used by a Microsoft server operating for the District Court in the first instance competitors of Microsoft will be able to system product to interoperate with the to determine the propriety of a specific interoperate with the .Net technologies. Windows Operating System Product. remedy for the limited ground of The suggested remedies for this See discussion at Section III(B)(1)(d)– liability which we have upheld’’). In situation, according to the comments, (2)(e), above. The practical effect of this light of the Court of Appeals’ decision, range from mandatory transparency of provision is that, if Microsoft puts the wrong creating the occasion for all Microsoft APIs, Communications client/server interfaces for the .Net remedy—the limited ground of liability Interfaces, and other technical framework in its monopoly Windows upheld—is Microsoft’s specific information, regardless of whether the Operating System Product, these practices, and not any alleged course of disclosures touch on either Microsoft’s interfaces will be available for use by conduct undertaken to protect the desktop operating system monopoly or third parties. Indeed, the United States operating system monopoly. middleware, to mandatory porting of the understands that various Microsoft C. Restoring Java/Netscape Threats basic .Net architecture (the ‘‘.Net technologies, including the Active Framework’’) to several alternate server Directory services model, the Kerberos 455. Several commentors 431 suggest and client platforms. These criticisms security model, and the Common that the RPFJ does nothing to restore are not well taken. Language Runtime analog to Java virtual Netscape Navigator and Java as 450. First, whether .Net is, in fact, machines, are core components of the competitive threats to Microsoft. This likely to have an anticompetitive effect, .Net Framework that the comments criticism ignores what the RPFJ does do: or what its competitive significance complain about and are already covered it restores the ability of middleware, might be in general, is not yet clear. The by the RPFJ. See CIS at 37–39. including browsers like Navigator and very concept of ‘‘web services’’ is still other middleware like Java, to threaten evolving as new ways to use networking B. Course of Conduct the applications barrier to entry and the Internet are discovered. Many 453. A commentor criticizes the protecting Microsoft’s operating system parts of .Net, and even some of the United States for taking the position that monopoly. The RPFJ not only enjoins detailed plans for .Net, have not yet the Court of Appeals failed to uphold Microsoft from continuing the been released, and therefore cannot Microsoft’s course of conduct as an anticompetitive conduct that it directed fully be evaluated. Similarly, independent violation of Sherman Act against Netscape and Java but also, as announced (but not yet released) § 2.430 Yet, it is difficult to see how the detailed elsewhere, imposes affirmative alternate web services frameworks, such Court of Appeals could have made its obligations on Microsoft that will give as the multi-vendor ‘‘Liberty position any clearer: middleware providers the opportunity Alliance’’ 429 founded by Sun the District Court did not point to any series to develop as threats to Microsoft’s Microsystems, are not fully developed of acts, each of which harms competition operating system monopoly. The United and do not have actual products in the only slightly but the cumulative effect of States believes that this restoration of market. It would be difficult, if not which is significant enough to form an the opportunity for middleware of all impossible, to draw conclusions about independent basis for liability. The ‘‘course of conduct’’ section of the District Court’s types, present and future—and not the competitive impact of such pre- limited to Web browsers and Java—to nascent initiatives that have sufficient opinion contains, with one exception, only broad, summarizing conclusions. See, e.g., erode Microsoft’s operating system reliability to warrant additional Conclusions of Law, at 44 (‘‘Microsoft placed monopoly is the appropriate goal for a remedies or restrictions. an oppressive thumb on the scale of remedy in this case. 451. Second, the remedies proposed competitive fortune. . . .’’). The only specific 456. As an initial matter, some by the commentors, including acts to which the court refers are Microsoft’s comments presuppose that, had mandatory transparency of Microsoft expenditures in promoting its browser, see Microsoft not engaged in its unlawful technical information, regardless to id. (‘‘Microsoft has expended wealth and conduct, both Netscape and Java would foresworn opportunities to realize more. whether such disclosures relate to have succeeded in eroding Microsoft’s middleware or Microsoft’s operating ...’’), which we have explained are not in themselves unlawful. Because the District operating system monopoly. In fact, system, reach beyond the scope of the however, even the District Court case as sustained by the Court of Court identifies no other specific acts as a basis for ‘‘course of conduct’’ liability, we concluded that ‘‘there is insufficient Appeals. Any remedy must focus on reverse its conclusion that Microsoft’s course evidence to find that, absent Microsoft’s addressing the specific conduct by of conduct separately violates § 2 of the actions, Navigator and Java already Microsoft to impede the nascent Sherman Act. would have ignited genuine middleware threat to its operating Microsoft, 253 F.3d at 78. competition’’ in the PC operating system system. market. Findings of Fact, ¶ 411; see also 452. Third, to the extent .Net might 454. The comment disagrees that the net effect of the Court of Appeals’s id., ¶ 69 (threat posed by Netscape was implicate middleware or Microsoft’s only a ‘‘potential’’ threat); id., ¶ 77 platform monopoly as developed in this substantial narrowing of the findings of liability, including its rejection of the (Netscape and Java had ‘‘a long way to case, it can, of course, fully be evaluated go before they might imperil the within the context of the RPFJ and this District Court’s ‘‘course of conduct’’ finding, was to curtail the available case. Thus, availability of 431 ProComp 26–29; ProComp, Arrow ¶¶4, 32–34; remedies. Again, the Court of Appeals AOL 45; Elhauge 4, 10; SIIA 44–51; Litan 58–59; 429 See generally http://www.sun.com/software/ Henderson 4, 10; Litigating States, Ex. A 13–14; sunone/liberty/. 430 CCIA 39–41. CCIA 10, 35–36, 42–44; Gifford 8; Pantin 37.
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applications barrier to entry’’). And portions of the CIS contain expressions a network of open source developers, or similarly, the Court of Appeals did not of the United States’ views regarding the a marketer of open source software, adopt the view that Microsoft ‘‘would competitive significance of the RPFJ: should not be considered to meet have lost its position in the OS market ‘‘the key to the proper remedy in this Section VI.I’s definition of an ‘‘ISV’’ and but for its anticompetitive behavior.’’ case’’ (RFA No. 2); that OEMs are a so should not receive the benefits and Microsoft, 253 F.3d at 107. Thus, the crucial distribution channel (RFA No. protections given to ISVs by the RPFJ.437 emphasis that these comments place on 3); that it is critical that OEMs are free The United States believes this concern the restoration of Java and Netscape as to distribute and promote non-Microsoft is groundless. See the discussion in ‘‘threats’’ is misplaced. middleware (RFA No. 4); that Windows Section III(A), above. 457. The United States believes that license royalties and terms are complex 465. A number of commentors are the relief contained in the RPFJ, which and easy for Microsoft to use to affect concerned that Microsoft will deny applies to a broad range of middleware OEMs’ behavior (RFA No. 10), and that disclosure of APIs and Documentation functionality and not just to Web the competitive significance of (as required by Section III.D), or browsers and Java, achieves the middleware is highly dependent on licensing of Communications Protocols overriding goal that these comments certain factors (RFA No. 32). Microsoft’s (as required by Section III.E), to open also desire: the restoration of disagreement with the United States’ source developers on the grounds that competitive conditions so that opinion in these matters has no bearing the developers do not meet the consumers have choices and on the parties’ interpretation of essential ‘‘reasonable business need’’ or collectively can determine competitors’ terms of the RPFJ. ‘‘authenticity and viability of [ ] respective fates. The relief will allow for business’’ criteria of Section III.J.2.438 Navigator, Java, and other current 2. Objections to Language in the CIS As The United States believes that the middleware products to fulfill whatever ‘‘Vague and Ambiguous’’ requirements in Section III.J.2 are no capability they have as threats to 461. In response to other RFAs, broader than is necessary to prevent Microsoft’s operating system monopoly Microsoft identifies certain terms (all misuse or misappropriation of and for other new and as-of-yet used by the United States in the CIS) as intellectual property. See the discussion unanticipated forms of middleware to ‘‘vague and ambiguous’’ and objects to at Section VII(D), above. evolve as potential threats to Microsoft’s the RFAs on that basis.435 Microsoft also 466. One commentor in the open monopoly. identifies as ‘‘vague and ambiguous’’ a source community contends that the sentence in the RFA referring to Section RPFJ fails to restore competitive D. Microsoft’s Responses to the conditions because the RPFJ does not Litigating States’ RFAs III.J.1.a (RFA No. 45 (quoting terms from CIS at 39 (discussing RPFJ Section prohibit Microsoft from bringing 1. Meeting of the Minds III.J.1.a))). infringement suits to protect its 458. Two commentors say that 462. In response to concerns raised by extensive patent portfolio. The Microsoft’s responses to Requests for commentors regarding the interpretation commentor recommends requiring Admission (RFAs) in New York show of Section III.E, the United States and Microsoft to license all of its intellectual that the United States and Microsoft Microsoft have agreed to the property that would otherwise failed to reach a meeting of the minds modification of the language of Section potentially be infringed by products that on the essential terms of the RPFJ.;432 III.E described in Section VII(B) above. threaten Microsoft’s operating system Because these commentors For a discussion of the terms of Section monopoly, including competing mischaracterize Microsoft’s responses, III.J, see Section VII(D) above. operating systems, middleware, or other software and hardware.439 The United however, they mistakenly see E. ‘‘Open Source’’ Community disagreement where agreement exists. States believes that preventing Microsoft 459. The Litigating States in New 463. Commentors raise a variety of from protecting its intellectual property York propounded 51 RFAs, pursuant to concerns about how the RPFJ may affect is unwarranted and inappropriate. Fed. R. Civ. P. 36(a), some of which the ‘‘open source’’ community. Section III.I requires Microsoft to license sought Microsoft’s interpretation of the Generally, ‘‘open source’’ software is to OEMs, ISVs, IAPs, and others ‘‘any terms of the RPFJ and cited or quoted distinguished from traditional, intellectual property rights’’ necessary (and on occasion mis-quoted) the proprietary software by who writes it, for those entities to exercise any of their CIS.433 In response, Microsoft objected how (or whether) they are compensated, options or alternatives under the RPFJ. to these and other RFAs on the basis and the terms under which it is licensed But allowing rivals otherwise to that they call for a legal conclusion. The to users and other developers. Open expropriate Microsoft’s intellectual mere fact that Microsoft asserted legal source software often is written by property in order to compete with objections to this discovery carries no collections of individuals not affiliated Microsoft would deter Microsoft from significance in this case, because it does within the framework of a firm, who investing in innovation and not constitute evidence of anything at may or may not be compensated for simultaneously deter rival developers all about the meeting of the minds of the their work, and generally is distributed from inventing different, new, parties to the settlement. under licenses that grant greater rights potentially better technologies to build 460. In response to a limited number to create and distribute derivative works into their own products. Nothing in this of RFAs, however, Microsoft did deny than is typical of licenses for traditional, ‘‘solution’’ would benefit consumers. that it shares the opinion of the United proprietary software.436 The Linux 467. In a similar but less extreme vein, another commentor suggests that States as set forth in the CIS.434 But operating system, for example, is open the RPFJ should require Microsoft to list none of the selected portions of the CIS source software. which software patents protect quoted addresses an interpretation of 464. Several commentors express the terms of the RPFJ. Rather, the cited concern that Microsoft somehow may 437 Red Hat 24; AAI 37–38; CCIA 77–82; claim that an open source developer, or Waldman 5. 432 Sun 7; Litigating Sates, Ex. C at 1. 438 Red Hat 28–29; Henderson 7–8; Alexander 3– 433 See, e.g., Litigating States, Ex. C at RFAs 2, 5, 435 Litigating States, Ex. C at RFAs 34, 39, 40, 41, 4; Carroll 2–3; Harris 9; Moglen 3, 5; Waldman 6; 10, 12–13, 23, 28–35, 39–45. 42, 43, 45. Litan 52; Pantin 24–25; AAI 23; Waldman 6. 434 RFAs 2–4, 10, 32. 436 Red Hat 3–4. 439 Red Hat 7–21.
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Windows APIs, so that vendors of other ‘‘retaliate’’ against that OEM for its sublicensing of Float Technology operating systems can avoid infringing decision not to ship Windows. ...’’).446 Microsoft’s patents accidentally and 472. Certain commentors urge that the F. ‘‘Reasonableness’’ Standard reassure users that those operating RPFJ reject the reasonableness standard systems are not infringing.440 While 470. A handful of comments express and, instead, adopt bright-line avoiding infringement is a laudable concerns about the use of a prohibitions against Microsoft engaging goal, it is not the purpose of the RPFJ ‘‘reasonableness’’ standard in various in various activities.447 Such absolute to reduce the legal and technical efforts provisions of the RPFJ.443 The prohibitions might benefit Microsoft’s necessary for competitors to build commentors assert that use of a rivals, but they also would reduce products that they may lawfully market. reasonableness standard for measuring choice and thus not be in the interest of competition and consumers overall.448 468. Several commentors complain certain of Microsoft’s conduct offers little practical guidance, and injects Moreover, bright-line rules tend to that the RPFJ does not eliminate license require elaborate definitions that can terms that prohibit open source and ambiguity into the decree, rendering it virtually unenforceable.444 Commentors render an agreement unduly complex. other developers from finding ways to also assert that the adoption of a The inclusion of the reasonableness make Windows applications run on reasonableness standard turns the RPFJ standard represents a recognition of the non-Windows operating systems. The into nothing more than an admonition necessity for terms to be sufficiently issues these commentors raise appear to to Microsoft to comply with the law.445 flexible to allow for a multitude of concern both terms in the licenses for future possibilities without requiring Microsoft Office and terms in the 471. Contrary to these comments’ excess verbiage.449 licenses for Windows APIs and tools.441 assertions, measuring a defendant’s 473. Commentors are also incorrect in The Litigating States’ Provision 6.b conduct against a reasonableness their insistence that including a addresses the same point; it would standard does not render the RPFJ reasonableness standard simply engrafts prohibit agreements that ‘‘restrict impermissibly vague. Inclusion of the the rule of reason into the RPFJ,450 term ‘‘reasonable’’ is common in Microsoft redistributable code from use turning it into an instruction to antitrust decrees. See, e.g., United States with non-Microsoft Platform Software.’’ Microsoft to comply with the law— v. Enova Corp., 107 F. Supp.2d 10, 21, Such provisions are far outside the effectively to ‘‘go forth and sin no 27 (D.D.C. 2000) (defendant required to scope of this case, and in any event are more.’’ In fact, the RPFJ goes beyond use ‘‘reasonable best efforts’’ to obtain unlikely to benefit consumers. If eliminating illegal practices and approvals and ‘‘all reasonable efforts’’ to preventing recurrence of the same or Microsoft could not prevent people from maintain assets in a decree entered by expropriating and modifying its similar practices in the future. The RPFJ the Court); United States v. 3D Sys. also takes affirmative steps to restore the applications or middleware products— Corp., 66 FR 49200–01 (D.D.C. 2001) that is, its ‘‘redistributable code’’—to competitive threat that middleware (defendant to provide ‘‘reasonable posed prior to Microsoft’s unlawful turn them into complements to non- access to personnel,’’ ‘‘reasonable Microsoft operating systems, Microsoft undertakings. So, for example, Microsoft efforts’’ by trustee to sell assets); United is required to disclose and license its would have a significantly reduced States v. Premdor, Inc., 66 FR 45326–01 proprietary technology—although the incentive to invest in developing and (D.D.C. 2001) (defendant to use Court of Appeals did not sustain any marketing attractive applications and ‘‘reasonable efforts’’ to maintain assets, allegation that a failure to do so middleware for Windows users. provide ‘‘reasonable levels of constituted monopoly maintenance. 469. One comment contends that transitional support,’’ provide Microsoft should be prohibited from ‘‘reasonable access’’ to personnel, 446 Thus, for example, the defendant in United retaliating against an OEM that ships trustee to receive ‘‘reasonable States v. First Multiple Listing Service, Inc., 1998 compensation’’); United States v. WL 417, at *1–*2 (N.D. Ga. 1984), was enjoined computers loaded with only a non- from refusing to provide services to any person who Microsoft operating system, rather than Electronic Payment Servs., Inc., 1994–2 agrees to pay ‘‘reasonable set-up costs,’’ a (as in Section III.A.2) prohibited only Trade Cas. (CCH) ¶ 70,796, 1994 WL ‘‘reasonable security deposit,’’ and ‘‘reasonable and from retaliating against an OEM that 730003 at *4 (D. Del. 1994) (third-party non-discriminatory fees . . . reflecting reasonable processor is qualified if it meets expenses . . . provid[ing] for a reasonable ships a computer with Microsoft and minimum annual fee . . . [and] reflecting a non-Microsoft operating systems or one ‘‘reasonable and nondiscriminatory reasonable approximation of the cost[s].’’ The final that ships a computer that will ‘‘dual- technical, financial and operating judgment there further provided that ‘‘[n]othing in boot’’ with more than one operating criteria’’; defendant may charge this final judgment shall prohibit Defendant from (i) imposing delivery or service charges . . . reflecting 442 ‘‘reasonable set-up fees’’); United States system. Neither the District Court nor reasonable approximations of actual costs, the Court of Appeals held Microsoft v. Pilkington PLC, 1994–2 Trade Cas. including reasonable deposits for keys or books liable because it prevented OEMs from (CCH) ¶ 70,842 1994, WL 750645 at * 4 ....’’ Id. at *2. producing PCs with non-Microsoft (D. Ariz. 1994) (permitting charges of 447 See, e.g., Litan 47–49; CCIA 41–42. 448 operating systems; thus, there is no ‘‘commercially reasonable and non- See, e.g., Response to Comments on Sections discriminatory Fees for the use or III.B.2, III.F.2, III.G.2. basis for redressing such conduct. The 449 An order need not list the components of a absence of such a provision, however, is term which is understood by common parlance, not problematic. If the OEM ships no 443 See CCIA 41–42; AOL 1, Klain 8–9; Litan 47– particularly when considering the persons to whom machines with Windows, then 49; WLF 6; Waldman 4; ProComp 74–77; Sun 36– the order is directed. United States v. PATCO, 678 37. The RPFJ measures Microsfoft’s conduct against F.2d 1, 3 (1st Cir. 1982), citing Village of Hoffman presumably it ships no machines with this standard in, for example, Section III.B.2 Estates v. Flipside, 455 U.S. 489, 495 n.7 (1982) Windows applications, either; thus, (‘‘reasonable volume discounts’’), Section III.C.5 (‘‘[t]he rationale is evident: to sustain such a Microsoft would have few ways to (‘‘reasonable technical specifications’’), Section III.E challenge, the complainant must prove that the (‘‘reasonable and non-discriminatory terms’’), enactment is vague ‘not in the sense that it requires Section III.F.2 (‘‘limitations reasonably necessary to a person to conform his conduct to an imprecise but 440 Kegel 8–9. and of reasonable scope and duration’’), and comprehensible normative standard, but rather in 441 Kegel 11; Koppe 1; Tilwalli 1; Kasten 5; Section III.G (‘‘reasonable period of time’’). the sense that no standard of conduct is specified Carroll 3; Johnson 2. 444 CCIA 41–42; ProComp 74–77; Litan 49; AOL, at all’’ ’ (quoting Coates v. City of Cincinnati, 402 442 Kegel 9; CompTIA 5 (pro-settlement); Pantin Klain 8–9. U.S. 611, 614 (1971)). 5–6. 445 AOL 1; Litan 47. 450 Litan 47–49.
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Similarly, the RPFJ ensures access to, Philip S. Beck, 37. Rebecca Henderson (‘‘Henderson’’)— and use of, Microsoft’s proprietary Special Trial Counsel. MTC–00030602 server-related protocols, even though 38. Jim Herrmann (‘‘Herrmann’’)—MTC– the word ‘‘server’’ does not appear in February 27, 2002. 00010686 39. Phillip Hofmeister (‘‘Hofmeister’’)— the complaint and appears only in Appendix A MTC–00004548 passing in the Findings of Fact. An Comments Cited in the Response 40. Art Holland (‘‘Holland’’—MTC–00000643 instruction simply to obey the law 41. Joe Huwaldt (‘‘Huwaldt’’)—MTC– would have taken the form of a decree 1. Allen Akin (‘‘Akin’’)—MTC–00002904 00004162 saying only that Microsoft is enjoined 2. Mark Alexander (‘‘Alexander’’)—MTC– 42. Paul Johnson (‘‘Johnson’’)—MTC– ‘‘from future violations of the antitrust 00002572 00012543 3. America Online/Time Warner (‘‘AOL’’)— 43. KDE League, Inc. (‘‘KDE’’)—MTC– laws,’’ in stark contrast to the detailed MTC–00030615 and specific prohibitions in the RPFJ. 00028788 4. The American Antitrust Institute 44. Dan Kegel (‘‘Kegel’’)—MTC–00028571 474. Finally, commentors suggest that (‘‘AAI’’)—MTC–0030600 45. Ronald A. Klain, Benjamin G. Bradshaw, the inclusion of a reasonableness 5. Declaration of Kenneth J. Arrow, submitted Jessica Davidson Miller, A Detailed standard will require a court to interpret as Attachment to ProComp (‘‘ProComp, Critique of the Proposed Final Judgment in the RPFJ, with an attendant delay in Arrow’’)—MTC–00030608 U.S. v. Microsoft, submitted as Attachment enforcement. That a decree may require 6. Association for Competitive Technology B to AOL (AOL, Klain)—MTC–00030615 interpretation is not and cannot be a (‘‘ACT’’)—MTC–00027806 46. The Honorable Herb Kohl, U.S. Senator basis for rejection; otherwise, no decree 7. Joseph L. Bast (‘‘Bast’’)—MTC–00013362 (‘‘Sen. Kohl’’)—MTC–00030603 7. John Becker (‘‘Becker’’)—MTC–00031674 would remain. 47. Brian Koppe (‘‘Koppe’’)—MTC–00018682 8. Jim Bode (‘‘Bode’’)—MTC–00003974 48. Robert Levy (‘‘Levy’’)—MTC–00004804 G. Computers for Schools 9. Kris Brinkerhoff (‘‘Brinkerhoff’’)—MTC– 49. Scott Lewis (‘‘Lewis’’)—MTC–00026511 00013542 50. Robert E. Litan, Roger D. Noll, and 475. Many comments refer to or 9. Matthew M. Burke (‘‘Burke’’)—MTC– William D. Nordhaus (‘‘Litan et al.’’)— discuss the proposed settlement in the 00024360 MTC–00013366 private, class actions against Microsoft, 10. John A. Carroll (‘‘Carroll’’)—MTC– 51. Litigating States—MTC–00030607 whereby Microsoft would donate $1 00008557 52. Chris M. Lloyd (‘‘Lloyd’’)—MTC– billion worth of computer hardware and 11. Catavault—MTC–00033650 00011255 software to needy schools. See In re 12. Center for the Moral Defense of 53. Mike Lococo (‘‘Lococo’’)—MTC– Microsoft Corp. Antitrust Litig., 2002 Capitalism (‘‘CMDC’’)—MTC–00028833 00004717 WL 99709 (D. Md. Jan. 11, 2002) 13. Robert Cheetham (‘‘Cheetham’’)—MTC– 54. Kevin Lowe (‘‘Lowe’’)—MTC–00017163 00004982 55. Daniel Maddux (‘‘Maddux’’)—MTC– (proposed settlement in MDL No. 1332). 14. Jerry Clabaugh (‘‘Clabaugh’’)—MTC– 00021587 476. There is no relationship between 00004870 56. Frank Mathewson and Ralph A. Winter, the settlement of the United States’ 15. Tony Clapes (‘‘Clapes’’)—MTC–00004159 Microsoft’s Tying Strategies to Maintain antitrust lawsuit against Microsoft and 16. Computer & Communications Industry Monopoly Power in its Operating System, the settlement of the private, class Association (‘‘CCIA’’)—MTC–00030610 submitted as Attachment A to AOL (‘‘AOL, action against the company. Because 17. Computing Technology Industry Mathewson & Winter’’)—MTC–00030615 these comments relate to the settlement Association (‘‘CompTIA’’)—MTC– 57. John McBride (‘‘McBride’’)—MTC– of an entirely different proceeding, in 00028726 00004731 which the United States played no role, 18. Consumer Federation of America 58. Garrett McWilliams (‘‘McWilliams’’)— (‘‘CFA’’)—MTC–00028565 MTC–00019950 we do not believe these comments can 19. Consumers for Computing Choice and 59. Andrig T. Miller (‘‘Miller’’)—MTC– be appropriately construed as comments Open Platform Working Group (‘‘CCC’’) — 00003096 on the RPFJ and therefore do not MTC–00033613 60. David Mitchell (‘‘Mitchell’’)—MTC– respond to them. 20. Tim Daly (‘‘Daly’’)—MTC–00000307 00017643 477. To the extent that comments 21. Jerry Davis (‘‘Davis’’)—MTC–00004860 61. Eben Moglen (‘‘Moglen’’)—MTC– mean that the RPFJ is deficient because 22. David Demland (‘‘Demland’’)—MTC– 00027626 it does not require Microsoft to make 00007735 62. David Morrissey (‘‘Morrissey’’)—MTC– charitable donations, that cannot be a 23. Sean Drew (‘‘Drew’’)—MTC–00014368 00004525 legal basis for rejecting a consent decree. 24. Nicholas S. Economides 63. Ralph Nader and James Love (‘‘Nader/ (‘‘Economides’’)—MTC–00022465 Love’’)—MTC–00028313 Requiring charitable donations is not a 25. Einer Elhauge (‘‘Elhauge’’)—MTC– 64. NetAction and Computer Professionals proper remedy in a government civil 00027209 for Social Responsibility (‘‘NetAction’’)— antitrust case. 26. Scott Francis (‘‘Francis’’)—MTC– MTC–00030604 Respectfully submitted, 00021847 65. The New York Times (‘‘NYT’’)—MTC– Charles A. James 27. Sean Gallagher (‘‘Gallagher’’)—MTC– 00029783 Assistant Attorney General 00012695 66. Novell, Inc. (‘‘Novell’’)—MTC–00029523 Deborah P. Majoras 28. John Giannandrea (‘‘Giannandrea’’)— 67. Palm, Inc. (‘‘Palm’’)—MTC–0030613 Deputy Assistant Attorney General MTC–00030193 68. Ramon G. Pantin (‘‘Pantin’’)—MTC– Phillip R. Malone 29. Tom Giebel (‘‘Giebel’’)—MTC–00018241 00029685 Renata B. Hesse 30. Jonathan Gifford (‘‘Gifford’’)—MTC– 69. Theresa Peterson (‘‘Peterson’’)—MTC– David Blake-Thomas 00028546 00019410 Paula L. Blizzard 31. David Godshall (‘‘Godshall’’)—MTC– 70. Larry Poindexter (‘‘Poindexter’’)—MTC– Kenneth W. Gaul 00002260 00000493 Adam D. Hirsh 32. Eberhard Hafermalz (‘‘Hafermalz’’)— 71. R.D. Porcher (‘‘Porcher’’)—MTC– Jacqueline S. Kelley MTC–00009260 00015938 Steven J. Mintz 33. Wayne Hammett (‘‘Hammett’’)—MTC– 72. Vince Pratt (‘‘Pratt’’)—MTC–00004691 Barbara Nelson 00002009 73. The Progress & Freedom Foundation David Seidman 34. Derek Harkess (‘‘Harkess’’)—MTC– (‘‘PFF’’)—MTC–00030606 David P. Wales 00022874 74. Project to Promote Competition & Attorneys U.S. Department of Justice, 35. Norman Harman (‘‘Harman’’)—MTC– Innovation in the Digital Age Antitrust Division, 601 D Street N.W., Suite 00022721 (‘‘ProComp’’)—MTC–00030608 1200, Washington, D.C. 20530–0001, (202) 36. Jeffrey E. Harris (‘‘Harris’’)—MTC– 75. RealNetworks, Inc. (‘‘RealNetworks’’)— 514–8276. 00027387 MTC–00029305
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76. Red Hat, Inc. (‘‘Red Hat’’)—MTC– [Civil Action No. 98–1232 (CKK)] the second revised proposed Final 00030616 Next Court Deadline: March 6, 2002; Tunney Judgment, and (c) the Court has not 77. Ray Reid (‘‘Reid’’)—MTC–00022393 Act Hearing otherwise ordered continued 78. Relpromax Antitrust, Inc. Plaintiff United States of America compliance with the terms and (‘‘Relpromax’’)—MTC–00030631 (‘‘United States’’), the States of New provisions of the second revised 79. Declaration of Edward Roeder, submitted York, Ohio, Illinois, Kentucky, proposed Final Judgment, then all of the as Attachment to CCIA (‘‘CCIA, Roeder’’)— Louisiana, Maryland, Michigan, North MTC–00030610 parties shall be released from all further 80. P.J. Rovero (‘‘Rovero’’)—MTC–00002180 Carolina and Wisconsin (collectively, obligations under this Stipulation, and 81. SBC Communications, Inc. (‘‘SBC’’)— the ‘‘Settling States’’) and Defendant the making of this Stipulation shall be MTC–00029411 Microsoft Corporation (‘‘Microsoft’’), by without prejudice to any party in this or 82. Robert L. Scala (‘‘Scala’’)—MTC– and through their respective attorneys, any other proceeding. 00016177 having agreed to the entry of this 3. Once the requirements for 83. Joel Schneider (‘‘Schneider’’)—MTC– Stipulation, it is hereby stipulated and compliance with 15 U.S.C. 16, as set 00022882 agreed that: forth in the Stipulation filed by the 84. Bion Schulken (‘‘Schulken’’)—MTC– 1. A Final Judgment in the form parties on November 6, 2001, have been 00002254 attached hereto (‘‘second revised satisfied, the United States will file with 85. Bob Schulze (‘‘Schulze’’)—MTC– proposed Final Judgment’’) may be filed the Court a certificate of compliance and 00018164 and entered by the Court in this action a Motion for Entry of Second Revised 86. David Skinn (‘‘Skinn’’)—MTC–00031409 and as to the Settling States only in 87. Software and Information Industry Proposed Final Judgment, unless it State of New York, et al. v. Microsoft withdraws its consent to entry of the Association (‘‘SIIA’’)—MTC–00030614 (Civil Action No. 98–1233(CKK)), upon 88. Sony Corporation (‘‘Sony’’)—MTC– second revised proposed Final the motion of any party or upon the 00030605 Judgment pursuant to paragraph 2, 89. Robert Spotswood (‘‘Spotswood’’)— Court’s own motion, at any time after above. At any time thereafter, and at the MTC–00000604 compliance with the requirements of the conclusion of any further proceedings 90. Declaration of Joseph E. Stiglitz and Jason Antitrust Procedures and Penalties Act, ordered by the Court pursuant to 15 Furman, submitted as Attachment to CCIA 15 U.S.C. 16, and without further notice U.S.C. 16(f), the Court may then enter (‘‘CCIA, Stiglitz & Furman’’)—MTC– to any party or other proceedings, the second revised proposed Final 00030610 provided that the United States has not Judgment, provided that the Court 91. Sun Microsystems, Inc. (‘‘Sun’’)—MTC– withdrawn its consent, which it may do determines that entry of the second 00030609 at any time before the entry of the 92. The Telecommunications Research and revised proposed Final Judgment will second revised proposed Final serve the public interest. Action Center, National Black Chamber of Judgment by serving notice thereof on Commerce, and National Native Americans Microsoft and by filing that notice with Dated this 27th day of February, 2002. Chamber of Commerce (‘‘TRAC’’)—MTC– the Court. For Plaintiff the United States of America: 00028893 2. Microsoft’s prior obligations to Deborah P. Majoras, 93. Stuart Thiel (‘‘Thiel’’)—MTC–00012095 comply with the revised proposed Final Deputy Assistant Attorney General, Antitrust 94. Mason Thomas (‘‘Thomas’’)—MTC– Division, United States Department of 00030468 Judgment, submitted to the Court on November 6, 2001, shall continue Justice, 901 Pennsylvania Avenue, NW., 95. Nikkil Tilwalli (‘‘Tilwalli’’)—MTC– Washington, DC 20530,(202) 514–2401. 00016984 uninterrupted under this Stipulation For Plaintiffs the States of New York, Ohio, 96. Robert Timlin (‘‘Timlin’’)—MTC– and the second revised proposed Final Illinois, Kentucky, Louisiana, Maryland, 00011156 Judgment (except as modified by the Michigan, North Carolina and Wisconsin: 97. The Honorable John V. Tunney, Former second revised proposed Final Jay L. Himes, U.S. Senator (‘‘Sen. Tunney’’)—MTC– Judgment) as if the second revised Chief, Antitrust Bureau, Office of the 00032065 proposed Final Judgment was in full Attorney General of New York, 120 98. Nicholas Turk (‘‘Turk’’)—MTC–00016312 force and effect. Unless otherwise Broadway, New York, New York 10271, 99. U.S. Senate—MTC–00033734 provided in the second revised (212) 416–8282. 100. Lee Wagstaff (‘‘Wagstaff’’)—MTC– For Defendant Microsoft Corporation: 00014376 proposed Final Judgment, Microsoft shall immediately begin complying with Charles F. Rule, 101. Steven Waldman (‘‘Waldman’’)—MTC– Fried, Frank, Harris, Shriver & Jacobson, 00025808 the second revised proposed Final 1001 Pennsylvania Avenue, NW., Suite 102. Michael Wang (‘‘Wang’’)—MTC– Judgment as if it was in full force and 800, Washington, DC 20004, (202) 639– 00003256 effect. Where the second revised 7300. 103. Washington Legal Foundation proposed Final Judgment provides that (‘‘WLF’’)—MTC–00030601 the timing of Microsoft’s obligations are Second Revised Proposed Final 104. Robert Weiler (‘‘Weiler’’)—MTC– calculated from the date of submission Judgment 00017967 to the Court of the second revised WHEREAS, plaintiffs United States of 105. Tim Williams (‘‘Williams’’)—MTC– proposed Final Judgment, the time shall America (‘‘United States’’) and the 00000491 be calculated from November 6, 2001, States of New York, Ohio, Illinois, 106. Chris Young (‘‘Young’’)—MTC– the date of submission to the Court of 00014037 Kentucky, Louisiana, Maryland, 107. Anthony W. Youngman the revised proposed Final Judgment. Michigan, North Carolina and (‘‘Youngman’’)—MTC–00010202 Subject to the foregoing, Microsoft Wisconsin and defendant Microsoft agrees to be bound by the provisions of Corporation (‘‘Microsoft’’), by their Stipulation and Second Revised the second revised proposed Final respective attorneys, have consented to Proposed Final Judgment Judgment pending its entry by the the entry of this Final Judgment; In the United States District Court for Court. If the United States withdraws its And whereas, this Final Judgment the District of Columbia consent, or if (a) the second revised does not constitute any admission by proposed Final Judgment is not entered any party regarding any issue of fact or United States of America, Plaintiff, v. pursuant to the terms of the Stipulation, law; Microsoft Corporation, Defendant; (b) the time has expired for all appeals And whereas, Microsoft agrees to be Stipulation. of any Court ruling declining to enter bound by the provisions of this Final
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Judgment pending its approval by the notices during the term of its Windows where a list of icons, shortcuts, or menu Court; Operating System Product license. entries for applications are generally Now Therefore, upon remand from Nothing in this provision shall displayed, except that Microsoft may the United States Court of Appeals for prohibit Microsoft from providing restrict an OEM from displaying icons, the District of Columbia Circuit, and Consideration to any OEM with respect shortcuts and menu entries for any upon the consent of the aforementioned to any Microsoft product or service product in any list of such icons, parties, it is hereby ordered, adjudged, where that Consideration is shortcuts, or menu entries specified in and decreed: commensurate with the absolute level or the Windows documentation as being amount of that OEM’s development, limited to products that provide I. Jurisdiction distribution, promotion, or licensing of particular types of functionality, This Court has jurisdiction of the that Microsoft product or service. provided that the restrictions are non- subject matter of this action and of the B. Microsoft’s provision of Windows discriminatory with respect to non- person of Microsoft. Operating System Products to Covered Microsoft and Microsoft products. OEMs shall be pursuant to uniform 2. Distributing or promoting Non- II. Applicability license agreements with uniform terms Microsoft Middleware by installing and This Final Judgment applies to and conditions. dis playing on the desktop shortcuts of Microsoft and to each of its officers, Without limiting the foregoing, any size or shape so long as such directors, agents, employees, Microsoft shall charge each Covered shortcuts do not impair the subsidiaries, successors and assigns; OEM the applicable royalty for functionality of the user interface. and to all other persons in active Windows Operating System Products as 3. Launching automatically, at the concert or participation with any of set forth on a schedule, to be established conclusion of the initial boot sequence them who shall have received actual by Microsoft and published on a Web or subsequent boot sequences, or upon notice of this Final Judgment by site accessible to the Plaintiffs and all connections to or disconnections from personal service or otherwise. Covered OEMs, that provides for the Internet, any Non-Microsoft uniform royalties for Windows Middleware if a Microsoft Middleware III. Prohibited Conduct Operating System Products, except that: Product that provides similar A. Microsoft shall not retaliate against 1. the schedule may specify different functionality would otherwise be an OEM by altering Microsoft’s royalties for different language versions; launched automatically at that time, commercial relations with that OEM, or 2. the schedule may specify provided that any such Non-Microsoft by withholding newly introduced forms reasonable volume discounts based Middleware displays on the desktop no of non-monetary Consideration upon the actual volume of licenses of user interface or a user interface of (including but not limited to new any Windows Operating System Product similar size and shape to the user versions of existing forms of non- or any group of such products; and interface displayed by the monetary Consideration) from that 3. the schedule may include market corresponding Microsoft Middleware OEM, because it is known to Microsoft development allowances, programs, or Product. 4. Offering users the option of that the OEM is or is contemplating: other discounts in connection with Windows Operating System Products, launching other Operating Systems from 1. developing, distributing, provided that: the Basic Input/Output System or a non- promoting, using, selling, or licensing a. such discounts are offered and Microsoft boot-loader or similar any software that competes with available uniformly to all Covered program that launches prior to the start Microsoft Platform Software or any OEMs, except that Microsoft may of the Windows Operating System product or service that distributes or establish one uniform discount schedule Product. promotes any Non-Microsoft for the ten largest Covered OEMs and a 5. Presenting in the initial boot Middleware; second uniform discount schedule for sequence its own IAP offer provided 2. shipping a Personal Computer that the eleventh through twentieth largest that the OEM complies with reasonable (a) includes both a Windows Operating Covered OEMs, where the size of the technical specifications established by System Product and a non-Microsoft OEM is measured by volume of licenses; Microsoft, including a requirement that Operating System, or (b) will boot with b. such discounts are based on the end user be returned to the initial more than one Operating System; or objective, verifiable criteria that shall be boot sequence upon the conclusion of 3. exercising any of the options or applied and enforced on a uniform basis any such offer. alternatives provided for under this for all Covered OEMs; and 6. Exercising any of the options Final Judgment. c. such discounts or their award shall provided in Section III.H of this Final Nothing in this provision shall not be based on or impose any criterion Judgment. prohibit Microsoft from enforcing any or requirement that is otherwise D. Starting at the earlier of the release provision of any license with any OEM inconsistent with any portion of this of Service Pack 1 for Windows XP or 12 or any intellectual property right that is Final Judgment. months after the submission of this not inconsistent with this Final C. Microsoft shall not restrict by Final Judgment to the Court, Microsoft Judgment. Microsoft shall not terminate agreement any OEM licensee from shall disclose to ISVs, IHVs, IAPs, ICPs, a Covered OEM’s license for a Windows exercising any of the following options and OEMs, for the sole purpose of Operating System Product without or alternatives: interoperating with a Windows having first given the Covered OEM 1. Installing, and displaying icons, Operating System Product, via the written notice of the reasons for the shortcuts, or menu entries for, any Non- Microsoft Developer Network (‘‘MSDN’’) proposed termination and not less than Microsoft Middleware or any product or or similar mechanisms, the APIs and thirty days’ opportunity to cure. service (including but not limited to IAP related Documentation that are used by Notwithstanding the foregoing, products or services) that distributes, Microsoft Middleware to interoperate Microsoft shall have no obligation to uses, promotes, or supports any Non- with a Windows Operating System provide such a termination notice and Microsoft Middleware, on the desktop Product. For purposes of this Section opportunity to cure to any Covered or Start menu, or anywhere else in a III.D, the term APIs means the OEM that has received two or more such Windows Operating System Product interfaces, including any associated
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callback interfaces, that Microsoft develop software for, or in conjunction in a Windows Operating System Middleware running on a Windows with, Microsoft. Product where a list of icons, shortcuts, Operating System Product uses to call 3. Nothing in this section shall or menu entries for applications are upon that Windows Operating System prohibit Microsoft from enforcing any generally displayed, except that Product in order to obtain any services provision of any agreement with any Microsoft may restrict the display of from that Windows Operating System ISV or IHV, or any intellectual property icons, shortcuts, or menu entries for any Product. In the case of a new major right, that is not inconsistent with this product in any list of such icons, version of Microsoft Middleware, the Final Judgment. shortcuts, or menu entries specified in disclosures required by this Section G. Microsoft shall not enter into any the Windows documentation as being III.D shall occur no later than the last agreement with: limited to products that provide major beta test release of that Microsoft 1. any IAP, ICP, ISV, IHV or OEM that particular types of functionality, Middleware. In the case of a new grants Consideration on the condition provided that the restrictions are non- version of a Windows Operating System that such entity distributes, promotes, discriminatory with respect to non- Product, the obligations imposed by this uses, or supports, exclusively or in a Microsoft and Microsoft products; and Section III.D shall occur in a Timely fixed percentage, any Microsoft Platform (b) enabling or disabling automatic Manner. Software, except that Microsoft may invocations pursuant to Section III.C.3 E. Starting nine months after the enter into agreements in which such an of this Final Judgment that are used to submission of this proposed Final entity agrees to distribute, promote, use launch Non-Microsoft Middleware Judgment to the Court, Microsoft shall or support Microsoft Platform Software Products or Microsoft Middleware make available for use by third parties, in a fixed percentage whenever Products. The mechanism shall offer the for the sole purpose of inter operating or Microsoft in good faith obtains a end user a separate and unbiased choice communicating with a Windows representation that it is com mercially with respect to enabling or removing Operating System Product, on practicable for the entity to provide access (as described in this subsection reasonable and non-discriminatory equal or greater distribution, promotion, III.H.1) and altering default invocations terms (consistent with Section III.I), any use or support for software that (as described in the following Communications Protocol that is, on or competes with Microsoft Platform subsection III.H.2) with regard to each after the date this Final Judgment is Software, or such Microsoft Middle ware Product or 2. any IAP or ICP that grants submitted to the Court, (i) implemented Non-Microsoft Middleware Product and placement on the desktop or elsewhere in a Windows Operating System may offer the end-user a separate and in any Windows Operating System Product installed on a client computer, unbiased choice of enabling or removing Product to that IAP or ICP on the and (ii) used to interoperate, or access and altering default condition that the IAP or ICP refrain communicate, natively (i.e., without the configurations as to all Microsoft from distributing, promoting or using addition of software code to the client Middleware Products as a group or all any software that competes with operating system product) with a Non-Microsoft Middleware Products as Microsoft Middleware. Microsoft server operating system a group. Nothing in this section shall prohibit 2. Allow end users (via an unbiased product. Microsoft from entering into (a) any mechanism readily available from the F. 1. Microsoft shall not retaliate bona fide joint venture or (b) any joint desktop or Start menu), OEMs (via against any ISV or IHV because of that development or joint services standard OEM preinstallation kits), and ISV’s or IHV’s: arrangement with any ISV, IHV, IAP, Non-Microsoft Middleware Products a. developing, using, distributing, ICP, or OEM for a new product, (via a mechanism which may, at promoting or supporting any software technology or service, or any material Microsoft’s option, require confirmation that competes with Microsoft Platform value-add to an existing product, from the end user in an unbiased Software or any software that runs on technology or service, in which both manner) to designate a Non-Microsoft any software that competes with Microsoft and the ISV, IHV, IAP, ICP, or Middleware Product to be invoked in Microsoft Platform Software, or OEM contribute significant developer or place of that Microsoft Middleware b. exercising any of the options or other resources, that prohibits such Product (or vice versa) in any case alternatives provided for under this entity from competing with the object of where the Windows Operating System Final Judgment. the joint venture or other arrangement Product would otherwise launch the 2. Microsoft shall not enter into any for a reasonable period of time. Microsoft Middleware Product in a agreement relating to a Windows This Section does not apply to any separate Top-Level Window and display Operating System Product that agreements in which Microsoft licenses either (i) all of the user interface conditions the grant of any intellectual property in from a third elements or (ii) the Trademark of the Consideration on an ISV’s refraining party. Microsoft Middleware Product. from developing, using, distributing, or H. Starting at the earlier of the release Notwithstanding the foregoing promoting any software that competes of Service Pack 1 for Windows XP or 12 Section III.H.2, the Windows Operating with Microsoft Platform Software or any months after the submission of this System Product may invoke a Microsoft software that runs on any software that Final Judgment to the Court, Microsoft Middleware Product in any instance in competes with Microsoft Platform shall: which: Software, except that Microsoft may 1. Allow end users (via a mechanism (a) that Microsoft Middleware Product enter into agreements that place readily accessible from the desktop or would be invoked solely for use in limitations on an ISV’s development, Start menu such as an Add/Remove interoperating with a server maintained use, distribution or promotion of any icon) and OEMs (via standard by Microsoft (outside the context of such software if those limitations are preinstallation kits) to enable or remove general Web browsing), or reasonably necessary to and of access to each Microsoft Middleware (b) that designated Non-Microsoft reasonable scope and duration in Product or Non-Microsoft Middleware Middleware Product fails to implement relation to a bona fide contractual Product by (a) displaying or removing a reasonable technical requirement (e.g., obligation of the ISV to use, distribute icons, shortcuts, or menu entries on the a requirement to be able to host a or promote any Microsoft software or to desktop or Start menu, or anywhere else particular ActiveX control) that is
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necessary for valid technical reasons to sublicensing its rights under any license IV. Compliance and Enforcement supply the end user with functionality granted under this provision; and Procedures consistent with a Windows Operating 4. the terms of any license granted A. Enforcement Authority System Product, provided that the under this section are in all respects con 1. The Plaintiffs shall have exclusive technical reasons are described in a sistent with the express terms of this reasonably prompt manner to any ISV responsibility for enforcing this Final Final Judgment. that requests them. Judgment. Without in any way limiting 3. Ensure that a Windows Operating Beyond the express terms of any the sovereign enforcement authority of System Product does not (a) license granted by Microsoft pursuant to each of the plaintiff States, the plaintiff automatically alter an OEM’s this section, this Final Judgment does States shall form a committee to configuration of icons, shortcuts or not, directly or by implication, estoppel coordinate their enforcement of this menu entries installed or displayed by or otherwise, confer any rights, licenses, Final Judgment. A plaintiff State shall the OEM pursuant to Section III.C of covenants or immunities with regard to take no action to enforce this Final this Final Judgment without first any Microsoft intellectual property to Judgment without first consulting with seeking confirmation from the user and anyone. the United States and with the plaintiff (b) seek such confirmation from the end States’ enforcement committee. J. No provision of this Final Judgment user for an automatic (as opposed to 2. To determine and enforce user-initiated) alteration of the OEM’s shall: compliance with this Final Judgment, configuration until 14 days after the 1. Require Microsoft to document, duly authorized representatives of the initial boot up of a new Personal disclose or license to third parties: (a) United States and the plaintiff States, on Computer. Any such automatic portions of APIs or Documentation or reasonable notice to Microsoft and alteration and confirmation shall be portions or layers of Communications subject to any lawful privilege, shall be unbiased with respect to Microsoft Protocols the disclosure of which would permitted the following: Middleware Products and Non- compromise the security of a particular a. Access during normal office hours Microsoft Middleware. Microsoft shall installation or group of installations of to inspect any and all source code, not alter the manner in which a anti-piracy, anti-virus, software books, ledgers, accounts, Windows Operating System Product licensing, digital rights management, correspondence, memoranda and other automatically alters an OEM’s encryption or authentication systems, documents and records in the configuration of icons, shortcuts or including without limitation, keys, possession, custody, or control of Microsoft, which may have counsel menu entries other than in a new authorization tokens or enforcement present, regarding any matters version of a Windows Operating System criteria; or (b) any API, interface or other contained in this Final Judgment. Product. information related to any Microsoft Microsoft’s obligations under this b. Subject to the reasonable product if lawfully directed not to do so Section III.H as to any new Windows convenience of Microsoft and without Operating System Product shall be by a governmental agency of competent restraint or interference from it, to determined based on the Microsoft jurisdiction. interview, informally or on the record, Middleware Products which exist seven 2. Prevent Microsoft from officers, employees, or agents of months prior to the last beta test version conditioning any license of any API, Microsoft, who may have counsel (i.e., the one immediately preceding the Documentation or Communications present, regarding any matters first release candidate) of that Windows Protocol related to anti-piracy systems, contained in this Final Judgment. Operating System Product. anti-virus technologies, license c. Upon written request of the United I. Microsoft shall offer to license to enforcement mechanisms, States or a duly designated ISVs, IHVs, IAPs, ICPs, and OEMs any authentication/authorization security, or representative of a plaintiff State, on intellectual property rights owned or third party intellectual property reasonable notice given to Microsoft, licensable by Microsoft that are required protection mechanisms of any Microsoft Microsoft shall submit such written to exercise any of the options or product to any person or entity on the reports under oath as requested alternatives expressly provided to them requirement that the licensee: (a) Has no regarding any matters contained in this under this Final Judgment, provided history of software counterfeiting or Final Judgment. Individual plaintiff States will consult that piracy or willful violation of intellectual 1. all terms, including royalties or with the plaintiff States’ enforcement property rights, (b) has a reasonable other payment of monetary committee to minimize the duplication business need for the API, consideration, are reasonable and non- and burden of the exercise of the Documentation or Communications discriminatory; foregoing powers, where practicable. 2. the scope of any such license (and Protocol for a planned or shipping 3. The Plaintiffs shall not disclose any the intellectual property rights licensed product, (c) meets reasonable, objective information or documents obtained thereunder) need be no broader than is standards established by Microsoft for from Microsoft under this Final necessary to ensure that an ISV, IHV, certifying the authenticity and viability Judgment except for the purpose of IAP, ICP or OEM is able to exercise the of its business, (d) agrees to submit, at securing compliance with this Final options or alternatives expressly its own expense, any computer program Judgment, in a legal proceeding to provided under this Final Judgment using such APIs, Documentation or Com which one or more of the Plaintiffs is a (e.g., an ISV’s, IHV’s, IAP’s, ICP’s and munication Protocols to third-party party, or as otherwise required by law; OEM’s option to promote Non-Microsoft verification, approved by Microsoft, to provided that the relevant Plaintiff(s) Middleware shall not confer any rights test for and ensure verification and must provide ten days’ advance notice to any Microsoft intellectual property compliance with Microsoft to Microsoft before disclosing in any rights infringed by that Non-Microsoft specifications for use of the API or legal proceeding (other than a grand jury Middleware); interface, which specifications shall be proceeding) to which Microsoft is not a 3. an ISV’s, IHV’s, IAP’s, ICP’s, or related to proper operation and integrity party any information or documents OEM’s rights may be conditioned on its of the systems and mechanisms provided by Microsoft pursuant to this not assigning, transferring or identified in this paragraph. Final Judgment which Microsoft has
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identified in writing as material as to business days of the receipt of 6. Promptly after appointment of the which a claim of protection may be notification of selection. TC by the Court, the United States shall asserted under Rule 26(c)(7) of the b. The Plaintiffs shall apply to the enter into a Technical Committee Federal Rules of Civil Procedure. Court for appointment of the persons services agreement (‘‘TC Services 4. The Plaintiffs shall have the selected by the Plaintiffs and Microsoft Agreement’’) with each TC member that authority to seek such orders as are pursuant to Section IV.B.3.a above. Any grants the rights, powers and authorities necessary from the Court to enforce this objections to the eligibility of a selected necessary to permit the TC to perform Final Judgment, provided, however, that person that the parties have failed to its duties under this Final Judgment. the Plaintiffs shall afford Microsoft a resolve between themselves shall be Microsoft shall indemnify each TC reasonable opportunity to cure alleged decided by the Court based solely on the member and hold him or her harmless violations of Sections III.C, III.D, III.E requirements stated in Section IV.B.2 against any losses, claims, damages, and III.H, provided further that any above. liabilities or expenses arising out of, or action by Microsoft to cure any such c. As soon as practical after their in connection with, the performance of violation shall not be a defense to appointment by the Court, the two the TC’s duties, except to the extent that enforcement with respect to any members of the TC selected by the such liabilities, losses, damages, claims, knowing, willful or systematic Plaintiffs and Microsoft (the ‘‘Standing or expenses result from misfeasance, violations. Committee Members’’) shall identify to gross negligence, willful or wanton acts, the Plaintiffs and Microsoft the person or bad faith by the TC member. The TC B. Appointment of a Technical that they in turn propose to select as the Services Agreements shall include the Committee third member of the TC. The Plaintiffs following. 1. Within 30 days of entry of this and Microsoft shall not object to this a. The TC members shall serve, Final Judgment, the parties shall create selection on any grounds other than without bond or other security, at the and recommend to the Court for its failure to satisfy the requirements of cost and expense of Microsoft on such appointment a three-person Technical Section IV.B.2 above. Any such terms and conditions as the Plaintiffs Committee (‘‘TC’’) to assist in objection shall be made within ten approve, including the payment of enforcement of and compliance with business days of the receipt of reasonable fees and expenses. this Final Judgment. notification of the selection and shall be b. The TC Services Agreement shall 2. The TC members shall be experts served on the other party as well as on provide that each member of the TC in software design and programming. the Standing Committee Members. shall comply with the limitations No TC member shall have a conflict of d. The Plaintiffs shall apply to the provided for in Section IV.B.2 above. interest that could prevent him or her Court for appointment of the person 7. Microsoft shall provide the TC with from performing his or her duties under selected by the Standing Committee a permanent office, telephone, and other this Final Judgment in a fair and Members. If the Standing Committee office support facilities at Microsoft’s unbiased manner. Without limitation to Members cannot agree on a third corporate campus in Redmond, the foregoing, no TC member (absent the member of the TC, the third member Washington. Microsoft shall also, upon agreement of both parties): shall be appointed by the Court. Any reasonable advance notice from the TC, a. shall have been employed in any objection by Microsoft or the Plaintiffs provide the TC with reasonable access capacity by Microsoft or any competitor to the eligibility of the person selected to available office space, telephone, and to Microsoft within the past year, nor by the Standing Committee Members other office support facilities at any shall she or he be so employed during which the parties have failed to resolve other Microsoft facility identified by the his or her term on the TC; among themselves shall also be decided TC. b. shall have been retained as a by the Court based on the requirements 8. The TC shall have the following consulting or testifying expert by any stated in Section IV.B.2 above. powers and duties: a. The TC shall have the power and person in this action or in any other 4. Each TC member shall serve for an authority to monitor Microsoft’s action adverse to or on behalf of initial term of 30 months. At the end of compliance with its obligations under Microsoft; or a TC member’s initial 30-month term, this final judgment. c. shall perform any other work for the party that originally selected him or b. The TC may, on reasonable notice Microsoft or any competitor of Microsoft her may, in its sole discretion, either to Microsoft: for two years after the expiration of the request re-appointment by the Court to (i) interview, either informally or on term of his or her service on the TC. a second 30-month term or replace the the record, any Microsoft personnel, 3. Within 7 days of entry of this Final TC member in the same manner as who may have counsel present; any Judgment, the Plaintiffs as a group and provided for in Section IV.B.3.a above. such interview to be subject to the Microsoft shall each select one member In the case of the third member of the reasonable convenience of such of the TC, and those two members shall TC, that member shall be re-appointed personnel and without restraint or then select the third member. The or replaced in the manner provided in interference by Microsoft; selection and approval process shall Section IV.B.3.c above. (ii) inspect and copy any document in proceed as follows. 5. If the United States determines that the possession, custody or control of a. As soon as practicable after a member of the TC has failed to act Microsoft personnel; submission of this Final Judgment to the diligently and consistently with the (iii) obtain reasonable access to any Court, the Plaintiffs as a group and purposes of this Final Judgment, or if a systems or equipment to which Microsoft shall each identify to the member of the TC resigns, or for any Microsoft personnel have access; other the individual it proposes to select other reason ceases to serve in his or her (iv) obtain access to, and inspect, any as its designee to the TC. The Plaintiffs capacity as a member of the TC, the physical facility, building or other and Microsoft shall not object to each person or persons that originally premises to which Microsoft personnel other’s selection on any ground other selected the TC member shall select a have access; and than failure to satisfy the requirements replacement member in the same (v) require Microsoft personnel to of Section IV.B.2 above. Any such manner as provided for in Section provide compilations of documents, objection shall be made within ten IV.B.3. data and other information, and to
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submit reports to the TC containing application (including reasonable d. obtaining from each person such material, in such form as the TC attorneys’ fees and costs), regardless of designated in Section IV.C.3.a above an may reasonably direct. the Court’s disposition of such annual written certification that he or c. The TC shall have access to application, unless the Court shall she: (i) has read and agrees to abide by Microsoft’s source code, subject to the expressly find that the TC’s opposition the terms of this Final Judgment; and (ii) terms of Microsoft’s standard source to the application was without has been advised and understands that code Confidentiality Agreement, as substantial justification. his or her failure to comply with this approved by the Plaintiffs and to be 9. Each TC member, and any Final Judgment may result in a finding agreed to by the TC members pursuant consultants or staff hired by the TC, of contempt of court; to Section IV.B.9 below, and by any staff shall sign a confidentiality agreement e. maintaining a record of all persons or consultants who may have access to prohibiting disclosure of any to whom a copy of this Final Judgment the source code. The TC may study, information obtained in the course of has been distributed and from whom the interrogate and interact with the source performing his or her duties as a certification described in Section code in order to perform its functions member of the TC or as a person IV.C.3.d above has been obtained; and duties, including the handling of assisting the TC to anyone other than f. establishing and maintaining the complaints and other inquiries from Microsoft, the Plaintiffs, or the Court. website provided for in Section IV.D.3.b non-parties. All information gathered by the TC in below. d. The TC shall receive complaints connection with this Final Judgment g. receiving complaints from third from the Compliance Officer, third and any report and recommendations parties, the TC and the Plaintiffs parties or the Plaintiffs and handle them prepared by the TC shall be treated as concerning Microsoft’s compliance with in the manner specified in Section IV.D Highly Confidential under the this Final Judgment and following the below. Protective Order in this case, and shall appropriate procedures set forth in e. The TC shall report in writing to not be disclosed to any person other the Plaintiffs every six months until Section IV.D below; and than Microsoft and the Plaintiffs except expiration of this Final Judgment the h. maintaining a record of all as allowed by the Protective Order actions it has undertaken in performing complaints received and action taken by entered in the Action or by further order its duties pursuant to this Final Microsoft with respect to each such of this Court. Judgment, including the identification complaint. 10. No member of the TC shall make of each business practice reviewed and D. Voluntary Dispute Resolution any recommendations made by the TC. any public statements relating to the f. Regardless of when reports are due, TC’s activities. 1. Third parties may submit complaints concerning Microsoft’s when the TC has reason to believe that C. Appointment of a Microsoft Internal compliance with this Final Judgment to there may have been a failure by Compliance Officer Microsoft to comply with any term of the Plaintiffs, the TC or the Compliance this Final Judgment, the TC shall 1. Microsoft shall designate, within 30 Officer. immediately notify the Plaintiffs in days of entry of this Final Judgment, an 2. In order to enhance the ability of writing setting forth the relevant details. internal Compliance Officer who shall the Plaintiffs to enforce compliance g. TC members may communicate be an employee of Microsoft with with this Final Judgment, and to with non-parties about how their responsibility for administering advance the parties’ joint interest and complaints or inquiries might be Microsoft’s antitrust compliance the public interest in prompt resolution resolved with Microsoft, so long as the program and helping to ensure of issues and disputes, the parties have confidentiality of information obtained compliance with this Final Judgment. agreed that the TC and the Compliance from Microsoft is maintained. 2. The Compliance Officer shall Officer shall have the following h. The TC may hire at the cost and supervise the review of Microsoft’s additional responsibilities. expense of Microsoft, with prior notice activities to ensure that they comply 3. Submissions to the Compliance to Microsoft and subject to approval by with this Final Judgment. He or she may Officer. the Plaintiffs, such staff or consultants be assisted by other employees of a. Third parties, the TC, or the (all of whom must meet the Microsoft. Plaintiffs in their discretion may submit qualifications of Section IV.B.2) as are 3. The Compliance Officer shall be to the Compliance Officer any reasonably necessary for the TC to carry responsible for performing the following complaints concerning Microsoft’s out its duties and responsibilities under activities: compliance with this Final Judgment. this Final Judgment. The compensation a. within 30 days after entry of this Without in any way limiting its of any person retained by the TC shall Final Judgment, distributing a copy of authority to take any other action to be based on reasonable and customary the Final Judgment to all officers and enforce this Final Judgment, the terms commensurate with the directors of Microsoft; Plaintiffs may submit complaints related individual’s experience and b. promptly distributing a copy of this to Sections III.C, III.D, III.E and III.H to responsibilities. Final Judgment to any person who the Compliance Officer whenever doing i. The TC shall account for all succeeds to a position described in so would be consistent with the public reasonable expenses incurred, including Section IV.C.3.a above; interest. agreed upon fees for the TC members’ c. ensuring that those persons b. To facilitate the communication of services, subject to the approval of the designated in Section IV.C.3.a above are complaints and inquiries by third Plaintiffs. Microsoft may, on application annually briefed on the meaning and parties, the Compliance Officer shall to the Court, object to the requirements of this Final Judgment and place on Microsoft’s Internet website, in reasonableness of any such fees or other the U.S. antitrust laws and advising a manner acceptable to the Plaintiffs, expenses. On any such application: (a) them that Microsoft’s legal advisors are the procedures for submitting the burden shall be on Microsoft to available to confer with them regarding complaints. To encourage whenever demonstrate unreasonableness; and (b) any question concerning compliance possible the informal resolution of the TC member(s) shall be entitled to with this Final Judgment or under the complaints and inquiries, the website recover all costs incurred on such U.S. antitrust laws; shall provide a mechanism for
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communicating complaints and not limited to, a local area network, a Software code described as part of, inquiries to the Compliance Officer. wide area network or the Internet. These and distributed separately to update, a c. Microsoft shall have 30 days after rules govern the format, semantics, Microsoft Middleware Product shall not receiving a complaint to attempt to timing, sequencing, and error control of be deemed Microsoft Middleware unless resolve it or reject it, and will then messages exchanged over a network. identified as a new major version of that promptly advise the TC of the nature of C. ‘‘Consideration’’ means any Microsoft Middleware Product. A major the complaint and its disposition. monetary payment or the provision of version shall be identified by a whole 4. Submissions to the TC. preferential licensing terms; technical, number or by a number with just a a. The Compliance Officer, third marketing, and sales support; enabling single digit to the right of the decimal parties or the Plaintiffs in their programs; product information; point. discretion may submit to the TC any information about future plans; K. ‘‘Microsoft Middleware Product’’ complaints concerning Microsoft’s developer support; hardware or software means: compliance with this Final Judgment. certification or approval; or permission 1. the functionality provided by b. The TC shall investigate complaints to display trademarks, icons or logos. Internet Explorer, Microsoft’s Java received and will consult with the D. ‘‘Covered OEMs’’ means the 20 Virtual Machine, Windows Media Plaintiffs regarding its investigation. At OEMs with the highest worldwide Player, Windows Messenger, Outlook least once during its investigation, and volume of licenses of Windows Express and their successors in a more often when it may help resolve Operating System Products reported to Windows Operating System Product, complaints informally, the TC shall Microsoft in Microsoft’s fiscal year and meet with the Compliance Officer to preceding the effective date of the Final 2. for any functionality that is first allow Microsoft to respond to the Judgment. The OEMs that fall within licensed, distributed or sold by substance of the complaint and to this definition of Covered OEMs shall be Microsoft after the entry of this Final determine whether the complaint can be recomputed by Microsoft as soon as Judgment and that is part of any resolved without further proceedings. practicable after the close of each of Windows Operating System Product: c. If the TC concludes that a Microsoft’s fiscal years. a. Internet browsers, email client complaint is meritorious, it shall advise E. ‘‘Documentation’’ means all software, networked audio/video client Microsoft and the Plaintiffs of its information regarding the identification software, instant messaging software or conclusion and its proposal for cure. and means of using APIs that a person b. functionality provided by Microsoft d. No work product, findings or of ordinary skill in the art requires to software that— recommendations by the TC may be make effective use of those APIs. Such i. is, or in the year preceding the admitted in any enforcement proceeding information shall be of the sort and to commercial release of any new before the Court for any purpose, and no the level of specificity, precision and Windows Operating System Product member of the TC shall testify by detail that Microsoft customarily was, distributed separately by Microsoft deposition, in court or before any other provides for APIs it documents in the (or by an entity acquired by Microsoft) tribunal regarding any matter related to Microsoft Developer Network from a Windows Operating System this Final Judgment. (‘‘MSDN’’). Product; e. The TC may preserve the F. ‘‘IAP’’ means an Internet access ii. is similar to the functionality anonymity of any third party provider that provides consumers with provided by a Non-Microsoft complainant where it deems it a connection to the Internet, with or Middleware Product; and appropriate to do so upon the request of without its own proprietary content. iii. is Trademarked. the Plaintiffs or the third party, or in its G. ‘‘ICP’’ means an Internet content Functionality that Microsoft describes discretion. provider that provides content to users or markets as being part of a Microsoft of the Internet by maintaining Web sites. Middleware Product (such as a service V. Termination H. ‘‘IHV’’ means an independent pack, upgrade, or bug fix for Internet A. Unless this Court grants an hardware vendor that develops Explorer), or that is a version of a extension, this Final Judgment will hardware to be included in or used with Microsoft Middleware Product (such as expire on the fifth anniversary of the a Personal Computer running a Internet Explorer 5.5), shall be date it is entered by the Court. Windows Operating System Product. considered to be part of that Microsoft B. In any enforcement proceeding in I. ‘‘ISV’’ means an entity other than Middleware Product. which the Court has found that Microsoft that is engaged in the L. ‘‘Microsoft Platform Software’’ Microsoft has engaged in a pattern of development or marketing of software means (i) a Windows Operating System willful and systematic violations, the products. Product and/or (ii) a Microsoft Plaintiffs may apply to the Court for a J. ‘‘Microsoft Middleware’’ means Middleware Product. one-time extension of this Final software code that: M. ‘‘Non-Microsoft Middleware’’ Judgment of up to two years, together 1. Microsoft distributes separately means a non-Microsoft software product with such other relief as the Court may from a Windows Operating System running on a Windows Operating deem appropriate. Product to update that Windows System Product that exposes a range of Operating System Product; functionality to ISVs through published VI. Definitions 2. is Trademarked or is marketed by APIs, and that could, if ported to or A. ‘‘API’’ means application Microsoft as a major version of any made interoperable with, a non- programming interface, including any Microsoft Middleware Product defined Microsoft Operating System, thereby interface that Microsoft is obligated to in section VI.K.1; and make it easier for applications that rely disclose pursuant to III.D. 3. provides the same or substantially in whole or in part on the functionality B. ‘‘Communications Protocol’’ means similar functionality as a Microsoft supplied by that software product to be the set of rules for information exchange Middleware Product. ported to or run on that non-Microsoft to accomplish predefined tasks between Microsoft Middleware shall include at Operating System. a Windows Operating System Product least the software code that controls N. ‘‘Non-Microsoft Middleware and a server operating system product most or all of the user interface elements Product’’ means a non-Microsoft connected via a network, including, but of that Microsoft Middleware. software product running on a Windows
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Operating System Product (i) that the name in the United States Patent Plaintiff United States of America exposes a range of functionality to ISVs and Trademark Office; or (iii) asserting submits the following memorandum through published APIs, and that could, the name as a trademark in the United regarding modifications to the Revised if ported to or made interoperable with, States in a demand letter or lawsuit. Proposed Final Judgment (‘‘RPFJ’’). a non-Microsoft Operating System, Any product distributed under These modifications are reflected in the thereby make it easier for applications descriptive or generic terms or a name new, Second Revised Proposed Final that rely in whole or in part on the comprised of the Microsoft or Judgment (‘‘SRPFJ’’), which is being functionality supplied by that software Windows trademarks together with filed concurrently with this product to be ported to or run on that descriptive or generic terms shall not be memorandum,1 along with a new non-Microsoft Operating System, and Trademarked as that term is used in this stipulation signed by representatives of (ii) of which at least one million copies Final Judgment. Microsoft hereby the United States, the States of New were distributed in the United States disclaims any trademark rights in such York, Ohio, Illinois, Kentucky, within the previous year. descriptive or generic terms apart from Louisiana, Maryland, Michigan, North O. ‘‘OEM’’ means an original the Microsoft or Windows Carolina and Wisconsin (collectively the equipment manufacturer of Personal trademarks, and hereby abandons any ‘‘Settling States’’) and Microsoft Computers that is a licensee of a such rights that it may acquire in the Corporation (‘‘Microsoft’’).2 Windows Operating System Product. future. Introduction P. ‘‘Operating System’’ means the U. ‘‘Windows Operating System software code that, inter alia, (i) controls Product’’ means the software code (as On November 6, 2001, the United the allocation and usage of hardware opposed to source code) distributed States, the Settling States and Microsoft resources (such as the microprocessor commercially by Microsoft for use with submitted the RPFJ to the Court. and various peripheral devices) of a Personal Computers as Windows 2000 Pursuant to §§ 16(b) and (d) of the Personal Computer, (ii) provides a Professional, Windows XP Home, Tunney Act, 15 U.S.C. §§ 16(b)–(h), the platform for developing applications by Windows XP Professional, and United States received public comments exposing functionality to ISVs through successors to the foregoing, including submitted on the RPFJ between APIs, and (iii) supplies a user interface November 5, 2001, and January 28, the Personal Computer versions of the 3 that enables users to access products currently code named 2002. The United States received over functionality of the operating system ‘‘Longhorn’’ and ‘‘Blackcomb’’ and their 30,000 comments during that period, and in which they can run applications. successors, including upgrades, bug which it has reviewed and considered Q. ‘‘Personal Computer’’ means any as required by 15 U.S.C. § 16(d). fixes, service packs, etc. The software computer configured so that its primary Concurrently with this Memorandum, code that comprises a Windows purpose is for use by one person at a the United States is filing the Response Operating System Product shall be time, that uses a video display and of the United States to Public Comments determined by Microsoft in its sole keyboard (whether or not that video on the Revised Proposed Final Judgment discretion. display and keyboard is included) and and a Memorandum in Support of Entry that contains an Intel x86 compatible (or VII. Further Elements of the Proposed Final Judgment. The successor) microprocessor. Servers, Jurisdiction is retained by this Court United States will also file the public television set top boxes, handheld over this action and the parties thereto comments themselves (on CD–ROM computers, game consoles, telephones, for the purpose of enabling either of the only). pagers, and personal digital assistants parties thereto to apply to this Court at Discussion are examples of products that are not any time for further orders and Personal Computers within the meaning The Tunney Act contemplates that the directions as may be necessary or of this definition. United States should evaluate the public appropriate to carry out or construe this R. ‘‘Timely Manner’’ means at the comments that it receives and, if Final Judgment, to modify or terminate time Microsoft first releases a beta test appropriate, consider modifications of any of its provisions, to enforce version of a Windows Operating System the proposed consent decree in response compliance, and to punish violations of Product that is made available via an to the issues raised by those comments. its provisions. 4 MSDN subscription offering or of which See 15 U.S.C. 16(b) and (d). On a 150,000 or more beta copies are VIII. Third Party Rights 1 For the Court’s convenience, the United States distributed. Nothing in this Final Judgment is S. ‘‘Top-Level Window’’ means a also submits a red-lined version of the SRPFJ, intended to confer upon any other attached hereto as Exhibit A, which compares the window displayed by a Windows persons any rights or remedies of any SRPFJ to the RPFJ. Operating System Product that (a) has 2 nature whatsoever hereunder or by The Settling States also agreed to the RPFJ. its own window controls, such as move, Following the submission of the RPFJ to the Court reason of this Final Judgment. resize, close, minimize, and maximize, on November 6, 2001, the Court deconsolidated United States v. Microsoft Corp. from New York, et (b) can contain sub-windows, and (c) United States Memorandum Regarding al. v. Microsoft Corp., in which the Settling States, contains user interface elements under Modifications Contained in Second nine other states and the District of Columbia are the control of at least one independent Revised Proposed Final Judgment parties. process. 3 The public comment period officially ran from November 28, 2001, the date that the RPFJ and the T. ‘‘Trademarked’’ means distributed In the United States District Court for the District of Columbia United States’ Competitive Impact Statement in commerce and identified as (‘‘CIS’’) were published in the Federal Register. 66 distributed by a name other than United States of America, Plaintiff, v. F.R. 59,452 (Nov. 28, 2001). Out of an abundance Microsoft Corporation, Defendant; of caution, the United States also chose to accept Microsoft or Windows that Microsoft and treat as Tunney Act comments various has claimed as a trademark or service United States’ Memorandum Regarding communications from members of the public mark by (i) marking the name with Modifications Contained in Second Revised commenting on the proposed settlement that were trademark notices, such as or TM, in Proposed Final Judgment received by the DOJ beginning on November 5 2001, [Civil Action No. 98–1232 (CKK)] the first business day following submission of the connection with a product distributed initial Proposed Final Judgment to the Court. in the United States; (ii) filing an Next Court Deadline: March 6, 2002; 4 Of course, the United States retains the right to application for trademark protection for Tunney Act Hearing. withdraw its consent to the proposed decree at any
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number of past occasions, the United modifications, as well as the rationale Microsoft Middleware Product and States has modified proposed consent for making these refinements. Operating System is now defined, as decrees as a result of public comments.5 intended, according to this generic A. Section III.D and Definition VI.A— In response to the Court’s Order dated definition, thereby resolving any API January 30, 2002, 6 the parties reported potential concerns regarding their in their Joint Status Report (‘‘JSR’’) filed Section III.D. requires the disclosure reliance on a definition of API that is February 7, 2002, that they were of APIs (application programming specifically tied to Microsoft products. ‘‘considering whether, in response to interfaces) and other documentation for The modification does not change the public comments, to submit to the the purpose of ensuring interoperability Microsoft’s obligations under Section Court proposed modifications to the between competing middleware and III.D. RPFJ.’’ JSR at 7. Windows Operating System Products. At least one commentor noted that in B. Section III.E I. In Response to Public Comments, the the RPFJ, the definition of API Section III.E requires Microsoft to Parties Have Agreed on Certain (Definition VI.A) includes only Modifications to the Terms of the RPFJ disclose all Communications Protocols Microsoft APIs, thus rendering the other that a Windows Operating System Having fully reviewed and considered definitions that use the term API in the Product uses to interoperate natively all public comments it received context of Non-Microsoft software with a Microsoft server operating system regarding the RPFJ, the United States potentially meaningless. Specifically, product. It ensures that non-Microsoft proposed several modifications to the the definitions of Non-Microsoft servers will be able to interoperate with RPFJ. Microsoft and the Settling States Middleware, Non-Microsoft Middleware a Windows Operating System Product have agreed to the modifications that are Product and Operating System arguably using the same protocols the Microsoft reflected in the SRPFJ. While the United fail to function as intended if the server operating system product uses. States believes that the RPFJ as definition of APIs is limited solely to Several commentors argued, however, originally filed with the Court Microsoft APIs. This definition of API, that because the word ‘‘interoperate’’ in effectively remedied the violations as originally drafted, was intended to Section III.E is not defined, its meaning sustained by the Court of Appeals and apply only to Section III.D, but this is unclear, potentially making it would be in the public interest, it limitation was not reflected in the text possible for Microsoft to evade this believes that the modifications of the RPFJ. To correct this problem, the provision. The United States believes contained in the SRPFJ effectively original definition of API has, in the that, as interoperate is used in this respond to specific concerns raised in SRPFJ, been inserted directly into Section III.E, its meaning clearly reflects the public comments and that entry of Section III.D, so that Section III.D of the the parties’ intention that this provision the SRPFJ is in the public interest. SRPFJ now reads: Each modification clarifies the presents the opportunity for seamless language of the RPFJ in provisions about Starting at the earlier of the release of interoperability between Windows which public commentors have Service Pack 1 for Windows XP or 12 months Operating System Products and non- after the submission of this Final Judgment Microsoft servers. Although the United indicated concerns regarding the precise to the Court, Microsoft shall disclose to ISVs, meaning of the language. Each States believes that the meaning of IHVs, IAPs, ICPs, and OEMs, for the sole interoperate as included in Section III.E modification is an outgrowth of specific purpose of interoperating with a Windows concerns raised in the public comments Operating System Product, via the Microsoft of the RPFJ is clear, in response to the and does not fundamentally change the Developer Network (‘‘MSDN’’) or similar public comments, the United States RPFJ. With one exception,7 these mechanisms, the APIs and related proposed, and Microsoft and the modifications refine the language in the Documentation that are used by Microsoft Settling States agreed, to supplement RPFJ, and are intended to clarify the Middleware to interoperate with a Windows the term ‘‘interoperate’’ with ‘‘or Operating System Product. For purposes of parties’ shared intentions in drafting the communicate,’’ so that Section III.E of this Section III.D, the term APIs means the the SRPFJ now reads: RPFJ. The following sections explain the interfaces, including any associated callback interfaces, that Microsoft Middleware Starting nine months after the submission time prior to entry, based on the public comments running on a Windows Operating System of this proposed Final Judgment to the Court, or otherwise. Stipulation, November 6, 2001, at 1; Product uses to call upon that Windows Microsoft shall make available for use by Stipulation, February 27, 2002, at 1. Operating System Product in order to obtain third parties, for the sole purpose of 5 See, e.g., United States v. Allied Waste Indus., any services from that Windows Operating interoperating or communicating with a Response to Public Comments on Antitrust Consent System Product. In the case of a new major Windows Operating System Product, on Decree and Joint Motion for Entry of a Modified version of Microsoft Middleware, the reasonable and non-discriminatory terms Judgment, 65 F.R. 36,224 (June 7, 2000) (parties modified divestiture requirements as a result of disclosures required by this Section III.D (consistent with Section III.I), any objections raised in comments); United States v. shall occur no later than the last major beta Communications Protocol that is, on or after Thomson Corp., 949 F. Supp. 907, 915 (D.D.C. test release of that Microsoft Middleware. In the date this Final Judgment is submitted to 1996) (parties proposed modifications to final the case of a new version of a Windows the Court, (i) implemented in a Windows judgment in response to public comment, among Operating System Product, the obligations Operating System Product installed on a other things); see also Antitrust Procedures and imposed by this Section III.D shall occur in client computer, and (ii) used to interoperate, Penalties Act: Hearings on S. 782 and S. 1088 a Timely Manner. (New language in bold). or communicate, natively (i.e., without the Before the Subcomm. on Antitrust and Monopoly addition of software code to the client of the Senate Comm. on the Judiciary, 93rd Cong., A generic definition of API that is not 1st Sess. 146 (1973) (Testimony of the Hon. J. Skelly operating system product) with a Microsoft tied to Microsoft products has been server operating system product. (New Wright) (‘‘The Department itself has modified inserted as Definition VI.A to apply consent decrees on a number of occasions as a language in bold). result of public comment’’). throughout the SRPFJ except in Section 6 The Order stated, inter alia, that ‘‘the parties III.D: The addition of the phrase ‘‘or shall address . . . whether, in response to the ‘‘API’’ means application communicate’’ after ‘‘interoperate’’ comments received by the Department of Justice in programming interface, including any brings further clarity to this provision. accordance with 15 U.S.C. section 16(b), the United interface that Microsoft is obligated to This revision clarifies the parties’ intent States and Microsoft are considering any modifications’’ to the RPFJ. Order at 1. disclose pursuant to III.D. in drafting Section III.E and thus 7 See Section II.E., infra at 8–9, discussing Section The meaning of API in the definitions removes any potential for confusion or III.I.5. of the RPFJ. of Non-Microsoft Middleware, Non- ambiguity regarding the scope of the
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provision based on the meaning of waiting 14 days from the initial boot. In should be deleted. Accordingly, Section interoperate. response to concerns raised regarding III.I.5 does not appear in the SRPFJ. This Microsoft’s ability to change modification does not alter Microsoft’s C. Section III.H.2 configurations pursuant to Section existing obligations to comply fully with Section III.H.2 requires Microsoft to III.H.3, the following sentence has been the terms of the SRPFJ. provide points in its Windows added: Operating System Products for F. Definition VI.J—Microsoft Any such automatic alteration and Middleware automatically launching competing confirmation shall be unbiased with middleware, commonly referred to as respect to Microsoft Middleware Many commentors suggested that default settings, in certain Products and Non-Microsoft Definition VI.J, Microsoft Middleware, circumstances. Although Section III.H.1 Middleware. which required that software code be states that Microsoft must give end users Trademarked, as that term is defined, This sentence clarifies the parties’ ‘‘a separate and unbiased choice’’ with could potentially exclude current intention in drafting the RPFJ that respect to altering default invocations in products such as Internet Explorer, Microsoft may not alter a configuration Section III.H.2, there was a concern that Windows Media Player, Microsoft’s Java based on whether the middleware the requirement that Microsoft Virtual Machine, and Window products are Microsoft or Non-Microsoft implement Section III.H.2 in a wholly Messenger because at least some such products. Similarly, Microsoft may not unbiased manner was not entirely clear. products, the commentors claimed, did present a biased confirmation message To clarify that Microsoft must be not satisfy the definition of (such as a message that is derogatory unbiased with respect to Microsoft and Trademarked. To clarify any issues with respect to Non-Microsoft Non-Microsoft products under Section surrounding the status of the software products). Nor may automatic III.H.2, this provision was revised to code associated with these products, the alterations take actions based on a expressly state that such mechanisms Microsoft Middleware definition has trigger or rule that is biased against Non- and confirmation messages must be been modified to include explicitly the Microsoft Middleware or in favor of unbiased. The revised language of software code that is marketed by Microsoft Middleware Products. This Section III.H.2 in the SPRFJ provides: Microsoft as a major version of any of modification makes clear, as intended the named Microsoft Middleware Allow end users (via an unbiased by the parties in the RPFJ, that any Products listed in Section VI.K.1. With mechanism readily available from the action taken under Section III.H.3 must this change, software code can qualify desktop or Start menu), OEMs (via standard therefore be independent of whether the OEM preinstallation kits), and Non-Microsoft as Microsoft Middleware in part by affected products are Microsoft or Non- Middleware Products (via a mechanism being either (1) Trademarked or (2) Microsoft products. which may, at Microsoft’s option, require marketed as a major version of any of confirmation from the end user in an E. Section III.I.5 the named Microsoft Middleware unbiased manner) to designate a Non- Products (i.e., Internet Explorer, etc.), Microsoft Middleware Product to be invoked Several commentors raised concerns in place of that Microsoft Middleware regarding Section III.I.5, under which an even if it does not satisfy the definition Product (or vice versa) . . . (New language in ISV, IHV, IAP, ICP, or OEM could be for Trademarked. The limitation to a bold). required to grant Microsoft a license, on major version of a Microsoft Middleware Product is simply a This modification makes clear the reasonable and nondiscriminatory terms, to any intellectual property restatement of the limitation in the last parties’ intention that the mechanism paragraph of the Microsoft Middleware available to end users, as well as any relating to that ISV’s, IHV’s, IAP’s, ICP’s or OEM’s exercise of the options or definition, which limits the covered confirmation messages to the end user, software code to that identified as a must be unbiased with respect to alternatives provided by the RPFJ, if such a cross-license were necessary for major version of a Microsoft Microsoft and Non-Microsoft products. Middleware Product. This modification also addresses any Microsoft to provide the options or In addition, the previous subsection concern that the phrase ‘‘at Microsoft’s alternatives set forth in the RPFJ and (4) now modifies the entire definition option’’ in Section III.H.2 could be read exercised by the particular ISV, IHV, and has been revised to read: to allow Microsoft to take biased action IAP, ICP or OEM. These concerns against competing products. It also ranged from the general concern that the Microsoft Middleware shall include at addresses concerns that Microsoft’s imposition of a cross-licensing least the software code that controls presentation of the confirmation requirement was inappropriate to more most or all of the user interface elements message could include derogatory specific concerns, such as hypothesizing of the Microsoft Middleware. comments about competing products. that the cross-licensing provision would This change is intended to clarify that In addition, the two exceptions reduce the likelihood that persons or this provision of the definition is not a (Sections III.H.2(a) and (b)) that entities would take advantage of the required element and therefore previously followed Section III.H.3, but RPFJ’s disclosure provisions. somehow intended to narrow or limit by their plain language modified III.H.2 As the United States pointed out in its the definition; rather, the first three (‘‘Notwithstanding the foregoing Section CIS, Section III.I.5 was an extremely requirements are sufficient to define III.H.2 . . .’’), have been moved, so that narrow provision designed to ensure Microsoft Middleware. The purpose of they now follow Section III.H.2, and that Microsoft would be able fully to this last provision is essentially to renumbered accordingly for comply with the terms of the RPFJ specify a minimum size or ‘‘floor’’ as to clarification. without creating greater indirect the collection of software code that is infringement liability for itself than it included in a particular piece of D. Section III.H.3 would otherwise have. See CIS at 50. In Microsoft Middleware, preventing the Section III.H.3 prohibits Microsoft response to the concerns about this situation in which Microsoft could from designing its Windows Operating provision raised in the public arbitrarily break up into separate pieces System Products to alter automatically comments, however, the United States the software code of what would an OEM’s configuration choices without proposed, and Microsoft and the otherwise be Microsoft Middleware, seeking user confirmation and without Settling States agreed, that the provision thereby omitting from the Microsoft
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Middleware definition certain critical or Therefore, while this modification Conclusion significant pieces of code that constitute clarifies, and in fact may slightly For the reasons described herein, the that Microsoft Middleware. This broaden, Microsoft’s disclosure United States hereby submits the SRPFJ modification does not substantively obligations, it does not substantively to the Court. In our separate change this definition but instead makes differ from the original definition of Memorandum in Support of Entry of the clear that this provision governs the Timely Manner in the RPFJ. Proposed Final Judgment and Response scope of what code must be included in of the United States to Public Comments Microsoft Middleware. II. A New Round of Publication and Comment Is Not Warranted Because the on the Revised Proposed Final B. Definition VI.R—Timely Manner Proposed Modifications Are a Logical Judgment, both of which are also being A number of commentors question Outgrowth of the RPFJ. filed today, we set forth the reasons why Section VI.R’s definition of Timely The foregoing modifications directly the SRPFJ is in the public interest. Upon Manner, the term that defines when respond to concerns raised in the public completion of the Tunney Act Microsoft must meet its disclosure comments and are the result of the requirements, we will respectfully move obligations under Section III.D. Several United States’ review and consideration, the Court to enter the judgment. commentors contend that 150,000 beta as part of its compliance with the Dated: February 27, 2002. testers is too high a threshold to trigger Tunney Act, of the public comments Respectfully submitted, Section III.D’s disclosure requirement, submitted on the RPFJ. The Tunney Act Charles A. James arguing that for past Windows does not require a new round of Assistant Attorney General Operating System Products, Microsoft Deborah P. Majoras publication and comment as a result of Deputy Assistant Attorney General may have distributed 150,000 beta the modifications contained in the copies but may not have distributed Phillip R. Malone SRPFJ. The publication and comment Renata B. Hesse them to 150,000 individual beta testers. provisions of the Act serve ‘‘to enable David Blake-Thomas These commentors are concerned that the district court to make’’ its public Paula L. Blizzard the threshold will never be reached, interest determination. HyperLaw, Inc. Kenneth W. Gaul resulting in no required disclosure v. United States, 1998 WL 388807, at *3, Adam D. Hirsh before a new Windows Operating 159 F.3d 636 (D.C. Cir. 1998) Jacqueline S. Kelley System Product is released. Similarly, a (unpublished table decision). Steven J. Mintz number of commentors contend that Barbara Nelson Accordingly, a ‘‘court should treat David Seidman Microsoft may in the future choose to notice and comment under the Tunney distribute to fewer beta testers and David P. Wales Act as analogous to agency rulemaking Attorneys thereby evade its disclosure obligations. notice and comment.’’ Id. (quotation The parties’ intention in drafting this U.S. Department of Justice, Antitrust marks omitted). Applying that analogy, definition was not to distinguish Division, 601 D Street NW., Suite 1200, ‘‘there is no need for successive rounds between beta copies and beta testers Washington, DC 20530, (202) 514–8276. of notice and comment on each with respect to the 150,000 requirement. Philip S. Beck, revision,’’ provided the final decree ‘‘is The parties originally chose the 150,000 Special Trial Counsel. a ‘‘logical outgrowth’’ of the proposed beta tester distribution level based on (Editorial Note: Certain conventions consent decree. . . .. Further notice and the approximate current Microsoft have been used by the Office of the comment should be required only if it Developer Network (‘‘MSDN’’) Federal Register to highlight changes in ‘‘would provide the first opportunity for subscription base. In response to the the Second Revised Proposed Final interested parties to offer comments that foregoing concerns about the definition Judgment. New language is shown in of Timely Manner, however, the United could persuade the agency to modify its boldface, while language that was States proposed, and Microsoft and the [proposal].’’’ Id. (quoting Am. Water removed is set off with brackets.) Works Ass’n v. EPA, 40 F.3d 1266, 1274 Settling States agreed, to modify the Exhibit A definition to read: (D.C. Cir. 1994)). The proposed decree as modified is a Second Revised Proposed Final Timely Manner’’ means at the time logical outgrowth of the RPFJ and Judgment (Red-Lined Version) Microsoft first releases a beta test version of requires no further notice and comment. a Windows Operating System Product that is Whereas, plaintiffs United States of As explained above, each modification made available via an MSDN subscription America (‘‘United States’’) and the responds to public comments on the offering or of which 150,000 or more beta States of New York, Ohio, Illinois, RPFJ and clarifies language based upon copies are distributed. Kentucky, Louisiana, Maryland, those comments. Without question, each This modification clarifies the parties’ Michigan, North Carolina and is a natural and logical outgrowth of the intention that Timely Manner should be Wisconsin and defendant Microsoft notice and comment process. Taken triggered by the distribution of 150,000 Corporation (‘‘Microsoft’’), by their separately or together, the modifications or more beta copies, regardless of respective attorneys, have consented to do not fundamentally change the RPFJ. whether those copies are distributed to the entry of this Final Judgment; individuals who are considered to be All contribute to benefitting the public interest (and certainly have no adverse And whereas, this Final Judgment ‘‘beta testers.’’ The modification adds a does not constitute any admission by provision such that Timely Manner can effect on the public interest). The purpose of the notice and comment has any party regarding any issue of fact or also be triggered by distribution via an law; MSDN subscription offering. The thus been well-satisfied, and further notice and comment would merely inclusion of distribution via an MSDN it would enter the decree as in the public interest subscription offering as a trigger for this delay the Court’s public interest 8 if the parties agreed to a number of modifications, definition ensures that, even in the determination without good cause. and the Court entered the modified decree without event that the level of MSDN a new round of notice and comment once the 8 Entry of a decree following modification parties did so. United States v. AT&T, 552 F. Supp. subscribers decreases substantially, without a new round of notice and comment is 131, 225–26 (D.D.C. 1982); see also Mass. Sch. of Microsoft’s disclosure obligations under conventional in Tunney Act practice. For example, Law v. United States, 118 F.3d 776, 778 (D.C. Cir. Section III.D will still be triggered. After notice and comment in AT&T, the court said 1997).
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And whereas, Microsoft agrees to be OEM that has received two or more such where a list of icons, shortcuts, or menu bound by the provisions of this Final notices during the term of its Windows entries for applications are generally Judgment pending its approval by the Operating System Product license. displayed, except that Microsoft may Court; Nothing in this provision shall restrict an OEM from displaying icons, Now therefore, upon remand from the prohibit Microsoft from providing shortcuts and menu entries for any United States Court of Appeals for the Consideration to any OEM with respect product in any list of such icons, District of Columbia Circuit, and upon to any Microsoft product or service shortcuts, or menu entries specified in the consent of the aforementioned where that Consideration is the Windows documentation as being parties, it is hereby ordered, adjudged, commensurate with the absolute level or limited to products that provide and decreed: amount of that OEM’s development, particular types of functionality, distribution, promotion, or licensing of provided that the restrictions are non- I. Jurisdiction that Microsoft product or service. discriminatory with respect to non- This Court has jurisdiction of the B. Microsoft’s provision of Windows Microsoft and Microsoft products. subject matter of this action and of the Operating System Products to Covered 2. Distributing or promoting Non- person of Microsoft. OEMs shall be pursuant to uniform Microsoft Middleware by installing and displaying on the desktop shortcuts of II. Applicability license agreements with uniform terms and conditions. Without limiting the any size or shape so long as such This Final Judgment applies to foregoing, Microsoft shall charge each shortcuts do not impair the Microsoft and to each of its officers, Covered OEM the applicable royalty for functionality of the user interface. directors, agents, employees, Windows Operating System Products as 3. Launching automatically, at the subsidiaries, successors and assigns; set forth on a schedule, to be established conclusion of the initial boot sequence and to all other persons in active by Microsoft and published on a web or subsequent boot sequences, or upon concert or participation with any of site accessible to the Plaintiffs and all connections to or disconnections from them who shall have received actual Covered OEMs, that provides for the Internet, any Non-Microsoft notice of this Final Judgment by uniform royalties for Windows Middleware if a Microsoft Middleware personal service or otherwise. Operating System Products, except that: Product that provides similar functionality would otherwise be III. Prohibited Conduct 1. the schedule may specify different royalties for different language versions; launched automatically at that time, A. Microsoft shall not retaliate against 2. the schedule may specify provided that any such Non-Microsoft an OEM by altering Microsoft’s reasonable volume discounts based Middleware displays on the desktop no commercial relations with that OEM, or upon the actual volume of licenses of user interface or a user interface of by withholding newly introduced forms any Windows Operating System Product similar size and shape to the user of non-monetary Consideration or any group of such products; and interface displayed by the (including but not limited to new 3. the schedule may include market corresponding Microsoft Middleware versions of existing forms of non- development allowances, programs, or Product. monetary Consideration) from that other discounts in connection with 4. Offering users the option of OEM, because it is known to Microsoft Windows Operating System Products, launching other Operating Systems from that the OEM is or is contemplating: provided that: the Basic Input/Output System or a non- 1. developing, distributing, a. such discounts are offered and Microsoft boot-loader or similar promoting, using, selling, or licensing available uniformly to all Covered program that launches prior to the start any software that competes with OEMs, except that Microsoft may of the Windows Operating System Microsoft Platform Software or any establish one uniform discount schedule Product. product or service that distributes or for the ten largest Covered OEMs and a 5. Presenting in the initial boot promotes any Non-Microsoft second uniform discount schedule for sequence its own IAP offer provided Middleware; the eleventh through twentieth largest that the OEM complies with reasonable 2. shipping a Personal Computer that Covered OEMs, where the size of the technical specifications established by (a) includes both a Windows Operating OEM is measured by volume of licenses; Microsoft, including a requirement that System Product and a non-Microsoft b. such discounts are based on the end user be returned to the initial Operating System, or (b) will boot with objective, verifiable criteria that shall be boot sequence upon the conclusion of more than one Operating System; or applied and enforced on a uniform basis any such offer. 3. exercising any of the options or for all Covered OEMs; and 6. Exercising any of the options alternatives provided for under this c. such discounts or their award shall provided in Section III.H of this Final Final Judgment. not be based on or impose any criterion Judgment. Nothing in this provision shall or requirement that is otherwise D. Starting at the earlier of the release prohibit Microsoft from enforcing any inconsistent with any portion of this of Service Pack 1 for Windows XP or 12 provision of any license with any OEM Final Judgment. months after the submission of this or any intellectual property right that is C. Microsoft shall not restrict by Final Judgment to the Court, Microsoft not inconsistent with this Final agreement any OEM licensee from shall disclose to ISVs, IHVs, IAPs, ICPs, Judgment. Microsoft shall not terminate exercising any of the following options and OEMs, for the sole purpose of a Covered OEM’s license for a Windows or alternatives: interoperating with a Windows Operating System Product without 1. Installing, and displaying icons, Operating System Product, via the having first given the Covered OEM shortcuts, or menu entries for, any Non- Microsoft Developer Network (‘‘MSDN’’) written notice of the reasons for the Microsoft Middleware or any product or or similar mechanisms, the APIs and proposed termination and not less than service (including but not limited to IAP related Documentation that are used by thirty days’ opportunity to cure. products or services) that distributes, Microsoft Middleware to interoperate Notwithstanding the foregoing, uses, promotes, or supports any Non- with a Windows Operating System Microsoft shall have no obligation to Microsoft Middleware, on the desktop Product. For purposes of this Section provide such a termination notice and or Start menu, or anywhere else in a III.D, the term APIs means the opportunity to cure to any Covered Windows Operating System Product interfaces, including any associated
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callback interfaces, that Microsoft develop software for, or in conjunction in a Windows Operating System Middleware running on a Windows with, Microsoft. Product where a list of icons, shortcuts, Operating System Product uses to call 3. Nothing in this section shall or menu entries for applications are upon that Windows Operating System prohibit Microsoft from enforcing any generally displayed, except that Product in order to obtain any services provision of any agreement with any Microsoft may restrict the display of from that Windows Operating System ISV or IHV, or any intellectual property icons, shortcuts, or menu entries for any Product. In the case of a new major right, that is not inconsistent with this product in any list of such icons, version of Microsoft Middleware, the Final Judgment. shortcuts, or menu entries specified in disclosures required by this Section G. Microsoft shall not enter into any the Windows documentation as being III.D shall occur no later than the last agreement with: limited to products that provide major beta test release of that Microsoft 1. any IAP, ICP, ISV, IHV or OEM that particular types of functionality, Middleware. In the case of a new grants Consideration on the condition provided that the restrictions are non- version of a Windows Operating System that such entity distributes, promotes, discriminatory with respect to non- Product, the obligations imposed by this uses, or supports, exclusively or in a Microsoft and Microsoft products; and Section III.D shall occur in a Timely fixed percentage, any Microsoft Platform (b) enabling or disabling automatic Manner. Software, except that Microsoft may invocations pursuant to Section III.C.3 E. Starting nine months after the enter into agreements in which such an of this Final Judgment that are used to submission of this proposed Final entity agrees to distribute, promote, use launch Non-Microsoft Middleware Judgment to the Court, Microsoft shall or support Microsoft Platform Software Products or Microsoft Middleware make available for use by third parties, in a fixed percentage whenever Products. The mechanism shall offer the for the sole purpose of interoperating or Microsoft in good faith obtains a end user a separate and unbiased choice communicating with a Windows representation that it is commercially with respect to enabling or removing Operating System Product, on practicable for the entity to provide access (as described in this subsection reasonable and non-discriminatory equal or greater distribution, promotion, III.H.1) and altering default invocations terms (consistent with Section III.I), any use or support for software that (as described in the following Communications Protocol that is, on or competes with Microsoft Platform subsection III.H.2) with regard to each after the date this Final Judgment is Software, or such Microsoft Middleware Product or 2. any IAP or ICP that grants submitted to the Court, (i) implemented Non-Microsoft Middleware Product and placement on the desktop or elsewhere in a Windows Operating System may offer the end-user a separate and in any Windows Operating System Product installed on a client computer, unbiased choice of enabling or removing Product to that IAP or ICP on the and (ii) used to interoperate, or access and altering default condition that the IAP or ICP refrain communicate, natively (i.e., without the configurations as to all Microsoft from distributing, promoting or using addition of software code to the client Middleware Products as a group or all any software that competes with operating system product) with a Non-Microsoft Middleware Products as Microsoft Middleware. Microsoft server operating system a group. Nothing in this section shall prohibit 2. Allow end users (via [a] an product. Microsoft from entering into (a) any unbiased mechanism readily available F. 1. Microsoft shall not retaliate bona fide joint venture or (b) any joint from the desktop or Start menu), OEMs against any ISV or IHV because of that development or joint services (via standard OEM preinstallation kits), ISV’s or IHV’s: arrangement with any ISV, IHV, IAP, and Non-Microsoft Middleware a. developing, using, distributing, ICP, or OEM for a new product, Products (via a mechanism which may, promoting or supporting any software technology or service, or any material at Microsoft’s option, require that competes with Microsoft Platform value-add to an existing product, confirmation from the end user in an Software or any software that runs on technology or service, in which both unbiased manner) to designate a Non- any software that competes with Microsoft and the ISV, IHV, IAP, ICP, or Microsoft Middleware Product to be Microsoft Platform Software, or OEM contribute significant developer or invoked in place of that Microsoft b. exercising any of the options or other resources, that prohibits such Middleware Product (or vice versa) in alternatives provided for under this entity from competing with the object of any case where the Windows Operating Final Judgment. the joint venture or other arrangement System Product would otherwise launch 2. Microsoft shall not enter into any for a reasonable period of time. the Microsoft Middleware Product in a agreement relating to a Windows This Section does not apply to any separate Top-Level Window and display Operating System Product that agreements in which Microsoft licenses either (i) all of the user interface conditions the grant of any intellectual property in from a third elements or (ii) the Trademark of the Consideration on an ISV’s refraining party. Microsoft Middleware Product. from developing, using, distributing, or H. Starting at the earlier of the release Notwithstanding the foregoing promoting any software that competes of Service Pack 1 for Windows XP or 12 Section III.H.2, the Windows Operating with Microsoft Platform Software or any months after the submission of this System Product may invoke a Microsoft software that runs on any software that Final Judgment to the Court, Microsoft Middleware Product in any instance in competes with Microsoft Platform shall: which: Software, except that Microsoft may 1. Allow end users (via a mechanism (a) that Microsoft Middleware enter into agreements that place readily accessible from the desktop or Product would be invoked solely for limitations on an ISV’s development, Start menu such as an Add/Remove use in interoperating with a server use, distribution or promotion of any icon) and OEMs (via standard maintained by Microsoft (outside the such software if those limitations are preinstallation kits) to enable or remove context of general Web browsing), or reasonably necessary to and of access to each Microsoft Middleware (b) that designated Non-Microsoft reasonable scope and duration in Product or Non-Microsoft Middleware Middleware Product fails to implement relation to a bona fide contractual Product by (a) displaying or removing a reasonable technical requirement obligation of the ISV to use, distribute icons, shortcuts, or menu entries on the (e.g., a requirement to be able to host a or promote any Microsoft software or to desktop or Start menu, or anywhere else particular ActiveX control) that is
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necessary for valid technical reasons to under this Final Judgment, provided Protocol related to anti-piracy systems, supply the end user with functionality that anti-virus technologies, license consistent with a Windows Operating 1. all terms, including royalties or enforcement mechanisms, System Product, provided that the other payment of monetary authentication/authorization security, or technical reasons are described in a consideration, are reasonable and non- third party intellectual property reasonably prompt manner to any ISV discriminatory; protection mechanisms of any Microsoft that requests them. 2. the scope of any such license (and product to any person or entity on the 3. Ensure that a Windows Operating the intellectual property rights licensed requirement that the licensee: (a) Has no System Product does not (a) thereunder) need be no broader than is history of software counterfeiting or automatically alter an OEM’s necessary to ensure that an ISV, IHV, piracy or willful violation of intellectual configuration of icons, shortcuts or IAP, ICP or OEM is able to exercise the property rights, (b) has a reasonable menu entries installed or displayed by options or alternatives expressly business need for the API, the OEM pursuant to Section III.C of provided under this Final Judgment Documentation or Communications this Final Judgment without first (e.g., an ISV’s, IHV’s, IAP’s, ICP’s and Protocol for a planned or shipping seeking confirmation from the user and OEM’s option to promote Non-Microsoft product, (c) meets reasonable, objective (b) seek such confirmation from the end Middleware shall not confer any rights standards established by Microsoft for user for an automatic (as opposed to to any Microsoft intellectual property certifying the authenticity and viability user-initiated) alteration of the OEM’s rights infringed by that Non-Microsoft of its business, (d) agrees to submit, at configuration until 14 days after the Middleware); its own expense, any computer program initial boot up of a new Personal 3. an ISV’s, IHV’s, IAP’s, ICP’s, or using such APIs, Documentation or Computer. Any such automatic OEM’s rights may be conditioned on its Communication Protocols to third-party alteration and confirmation shall be not assigning, transferring or verification, approved by Microsoft, to unbiased with respect to Microsoft sublicensing its rights under any license test for and ensure verification and Middleware Products and Non- granted under this provision; and compliance with Microsoft Microsoft Middleware. Microsoft shall 4. the terms of any license granted specifications for use of the API or not alter the manner in which a under this section are in all respects con interface, which specifications shall be Windows Operating System Product sistent with the express terms of this related to proper operation and integrity automatically alters an OEM’s Final Judgment[; and.] of the systems and mechanisms [5. an ISV, IHV, IAP, ICP, or OEM may configuration of icons, shortcuts or identified in this paragraph. menu entries other than in a new be required to grant to Microsoft on version of a Windows Operating System reasonable and nondiscriminatory terms IV. Compliance and Enforcement Product. a license to any intellectual property Procedures [Notwithstanding the foregoing rights it may have relating to the A. Enforcement Authority Section III.H.2, the Windows Operating exercise of their options or alternatives System Product may invoke a Microsoft provided by this Final Judgment; the 1. The Plaintiffs shall have exclusive Middleware Product in any instance in scope of such license shall be no responsibility for enforcing this Final which: broader than is necessary to insure that Judgment. Without in any way limiting 1. that Microsoft Middleware Product Microsoft can provide such options or the sovereign enforcement authority of would be invoked solely for use in alternatives.] each of the plaintiff States, the plaintiff interoperating with a server maintained Beyond the express terms of any States shall form a committee to by Microsoft (outside the context of license granted by Microsoft pursuant to coordinate their enforcement of this general Web browsing), or this section, this Final Judgment does Final Judgment. A plaintiff State shall 2. that designated Non-Microsoft not, directly or by implication, estoppel take no action to enforce this Final Middleware Product fails to implement or otherwise, confer any rights, licenses, Judgment without first consulting with a reasonable technical requirement (e.g., covenants or immunities with regard to the United States and with the plaintiff a requirement to be able to host a any Microsoft intellectual property to States’ enforcement committee. particular ActiveX control) that is anyone. 2. To determine and enforce necessary for valid technical reasons to J. No provision of this Final Judgment compliance with this Final Judgment, supply the end user with functionality shall: duly authorized representatives of the 1. Require Microsoft to document, consistent with a Windows Operating United States and the plaintiff States, on disclose or license to third parties: (a) System Product, provided that the reasonable notice to Microsoft and portions of APIs or Documentation or technical reasons are described in a subject to any lawful privilege, shall be portions or layers of Communications reasonably prompt manner to any ISV permitted the following: that requests them.] Protocols the disclosure of which would Microsoft’s obligations under this compromise the security of a particular a. Access during normal office hours Section III.H as to any new Windows installation or group of installations of to inspect any and all source code, Operating System Product shall be anti-piracy, anti-virus, software books, ledgers, accounts, determined based on the Microsoft licensing, digital rights management, correspondence, memoranda and other Middleware Products which exist seven encryption or authentication systems, documents and records in the months prior to the last beta test version including without limitation, keys, possession, custody, or control of (i.e., the one immediately preceding the authorization tokens or enforcement Microsoft, which may have counsel first release candidate) of that Windows criteria; or (b) any API, interface or other present, regarding any matters Operating System Product. information related to any Microsoft contained in this Final Judgment. I. Microsoft shall offer to license to product if lawfully directed not to do so b. Subject to the reasonable ISVs, IHVs, IAPs, ICPs, and OEMs any by a governmental agency of competent convenience of Microsoft and without intellectual property rights owned or jurisdiction. restraint or interference from it, to licensable by Microsoft that are required 2. Prevent Microsoft from interview, informally or on the record, to exercise any of the options or conditioning any license of any API, officers, employees, or agents of alternatives expressly provided to them Documentation or Communications Microsoft, who may have counsel
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present, regarding any matters to Microsoft within the past year, nor which the parties have failed to resolve contained in this Final Judgment. shall she or he be so employed during among themselves shall also be decided c. Upon written request of the United his or her term on the TC; by the Court based on the requirements States or a duly designated b. shall have been retained as a stated in Section IV.B.2 above. representative of a plaintiff State, on consulting or testifying expert by any 4. Each TC member shall serve for an reasonable notice given to Microsoft, person in this action or in any other initial term of 30 months. At the end of Microsoft shall submit such written action adverse to or on behalf of a TC member’s initial 30-month term, reports under oath as requested Microsoft; or the party that originally selected him or regarding any matters contained in this c. shall perform any other work for her may, in its sole discretion, either Final Judgment. Microsoft or any competitor of Microsoft request re-appointment by the Court to Individual plaintiff States will consult for two years after the expiration of the a second 30-month term or replace the with the plaintiff States’ enforcement term of his or her service on the TC. TC member in the same manner as committee to minimize the duplication 3. Within 7 days of entry of this Final provided for in Section IV.B.3.a above. and burden of the exercise of the Judgment, the Plaintiffs as a group and In the case of the third member of the foregoing powers, where practicable. Microsoft shall each select one member TC, that member shall be re-appointed 3. The Plaintiffs shall not disclose any of the TC, and those two members shall or replaced in the manner provided in information or documents obtained then select the third member. The Section IV.B.3.c above. selection and approval process shall from Microsoft under this Final 5. If the United States determines that proceed as follows. Judgment except for the purpose of a member of the TC has failed to act securing compliance with this Final a. As soon as practicable after submission of this Final Judgment to the diligently and consistently with the Judgment, in a legal proceeding to purposes of this Final Judgment, or if a which one or more of the Plaintiffs is a Court, the Plaintiffs as a group and Microsoft shall each identify to the member of the TC resigns, or for any party, or as otherwise required by law; other reason ceases to serve in his or her provided that the relevant Plaintiff(s) other the individual it proposes to select as its designee to the TC. The Plaintiffs capacity as a member of the TC, the must provide ten days’ advance notice person or persons that originally to Microsoft before disclosing in any and Microsoft shall not object to each other’s selection on any ground other selected the TC member shall select a legal proceeding (other than a grand jury replacement member in the same proceeding) to which Microsoft is not a than failure to satisfy the requirements of Section IV.B.2 above. Any such manner as provided for in Section party any information or documents IV.B.3. provided by Microsoft pursuant to this objection shall be made within ten 6. Promptly after appointment of the Final Judgment which Microsoft has business days of the receipt of TC by the Court, the United States shall identified in writing as material as to notification of selection. enter into a Technical Committee which a claim of protection may be b. The Plaintiffs shall apply to the services agreement (‘‘TC Services asserted under Rule 26(c)(7) of the Court for appointment of the persons Agreement’’) with each TC member that Federal Rules of Civil Procedure. selected by the Plaintiffs and Microsoft grants the rights, powers and authorities 4. The Plaintiffs shall have the pursuant to Section IV.B.3.a above. Any necessary to permit the TC to perform authority to seek such orders as are objections to the eligibility of a selected its duties under this Final Judgment. necessary from the Court to enforce this person that the parties have failed to Microsoft shall indemnify each TC Final Judgment, provided, however, that resolve between themselves shall be member and hold him or her harmless the Plaintiffs shall afford Microsoft a decided by the Court based solely on the against any losses, claims, damages, reasonable opportunity to cure alleged requirements stated in Section IV.B.2 liabilities or expenses arising out of, or violations of Sections III.C, III.D, III.E above. in connection with, the performance of and III.H, provided further that any c. As soon as practical after their the TC’s duties, except to the extent that action by Microsoft to cure any such appointment by the Court, the two such liabilities, losses, damages, claims, violation shall not be a defense to members of the TC selected by the or expenses result from misfeasance, enforcement with respect to any Plaintiffs and Microsoft (the ‘‘Standing gross negligence, willful or wanton acts, knowing, willful or systematic Committee Members’’) shall identify to or bad faith by the TC member. The TC violations. the Plaintiffs and Microsoft the person that they in turn propose to select as the Services Agreements shall include the B. Appointment of a Technical third member of the TC. The Plaintiffs following. Committee and Microsoft shall not object to this a. The TC members shall serve, 1. Within 30 days of entry of this selection on any grounds other than without bond or other security, at the Final Judgment, the parties shall create failure to satisfy the requirements of cost and expense of Microsoft on such and recommend to the Court for its Section IV.B.2 above. Any such terms and conditions as the Plaintiffs appointment a three-person Technical objection shall be made within ten approve, including the payment of Committee (‘‘TC’’) to assist in business days of the receipt of reasonable fees and expenses. enforcement of and compliance with notification of the selection and shall be b. The TC Services Agreement shall this Final Judgment. served on the other party as well as on provide that each member of the TC 2. The TC members shall be experts the Standing Committee Members. shall comply with the limitations in software design and programming. d. The Plaintiffs shall apply to the provided for in Section IV.B.2 above. No TC member shall have a conflict of Court for appointment of the person 7. Microsoft shall provide the TC with interest that could prevent him or her selected by the Standing Committee a permanent office, telephone, and other from performing his or her duties under Members. If the Standing Committee office support facilities at Microsoft’s this Final Judgment in a fair and Members cannot agree on a third corporate campus in Redmond, unbiased manner. Without limitation to member of the TC, the third member Washington. Microsoft shall also, upon the foregoing, no TC member (absent the shall be appointed by the Court. Any reasonable advance notice from the TC, agreement of both parties): objection by Microsoft or the Plaintiffs provide the TC with reasonable access a. shall have been employed in any to the eligibility of the person selected to available office space, telephone, and capacity by Microsoft or any competitor by the Standing Committee Members other office support facilities at any
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other Microsoft facility identified by the complaints or inquiries might be program and helping to ensure TC. resolved with Microsoft, so long as the compliance with this Final Judgment. 8. The TC shall have the following confidentiality of information obtained 2. The Compliance Officer shall powers and duties: from Microsoft is maintained. supervise the review of Microsoft’s a. The TC shall have the power and h. The TC may hire at the cost and activities to ensure that they comply authority to monitor Microsoft’s expense of Microsoft, with prior notice with this Final Judgment. He or she may compliance with its obligations under to Microsoft and subject to approval by be assisted by other employees of this final judgment. the Plaintiffs, such staff or consultants Microsoft. b. The TC may, on reasonable notice (all of whom must meet the 3. The Compliance Officer shall be to Microsoft: qualifications of Section IV.B.2) as are responsible for performing the following (i) interview, either informally or on reasonably necessary for the TC to carry activities: the record, any Microsoft personnel, out its duties and responsibilities under a. within 30 days after entry of this who may have counsel present; any this Final Judgment. The compensation Final Judgment, distributing a copy of such interview to be subject to the of any person retained by the TC shall the Final Judgment to all officers and reasonable convenience of such be based on reasonable and customary directors of Microsoft; personnel and without restraint or terms commensurate with the b. promptly distributing a copy of this interference by Microsoft; individual’s experience and Final Judgment to any person who (ii) inspect and copy any document in responsibilities. succeeds to a position described in the possession, custody or control of i. The TC shall account for all Section IV.C.3.a above; Microsoft personnel; reasonable expenses incurred, including c. ensuring that those persons (iii) obtain reasonable access to any agreed upon fees for the TC members’ designated in Section IV.C.3.a above are systems or equipment to which services, subject to the approval of the annually briefed on the meaning and Microsoft personnel have access; Plaintiffs. Microsoft may, on application requirements of this Final Judgment and (iv) obtain access to, and inspect, any to the Court, object to the the U.S. antitrust laws and advising physical facility, building or other reasonableness of any such fees or other them that Microsoft’s legal advisors are premises to which Microsoft personnel expenses. On any such application: (a) available to confer with them regarding have access; and the burden shall be on Microsoft to any question concerning compliance (v) require Microsoft personnel to demonstrate unreasonableness; and (b) with this Final Judgment or under the provide compilations of documents, the TC member(s) shall be entitled to U.S. antitrust laws; data and other information, and to recover all costs incurred on such d. obtaining from each person submit reports to the TC containing application (including reasonable designated in Section IV.C.3.a above an such material, in such form as the TC attorneys’ fees and costs), regardless of annual written certification that he or may reasonably direct. the Court’s disposition of such she: (i) has read and agrees to abide by c. The TC shall have access to application, unless the Court shall the terms of this Final Judgment; and (ii) Microsoft’s source code, subject to the expressly find that the TC’s opposition has been advised and understands that terms of Microsoft’s standard source to the application was without his or her failure to comply with this code Confidentiality Agreement, as substantial justification. Final Judgment may result in a finding approved by the Plaintiffs and to be 9. Each TC member, and any of contempt of court; agreed to by the TC members pursuant consultants or staff hired by the TC, e. maintaining a record of all persons to Section IV.B.9 below, and by any staff shall sign a confidentiality agreement to whom a copy of this Final Judgment or consultants who may have access to prohibiting disclosure of any has been distributed and from whom the the source code. The TC may study, information obtained in the course of certification described in Section interrogate and interact with the source performing his or her duties as a IV.C.3.d above has been obtained; code in order to perform its functions member of the TC or as a person f. establishing and maintaining the and duties, including the handling of assisting the TC to anyone other than website provided for in Section IV.D.3.b complaints and other inquiries from Microsoft, the Plaintiffs, or the Court. below. non-parties. All information gathered by the TC in g. receiving complaints from third d. The TC shall receive complaints connection with this Final Judgment parties, the TC and the Plaintiffs from the Compliance Officer, third and any report and recommendations concerning Microsoft’s compliance with parties or the Plaintiffs and handle them prepared by the TC shall be treated as this Final Judgment and following the in the manner specified in Section IV.D Highly Confidential under the appropriate procedures set forth in below. Protective Order in this case, and shall Section IV.D below; and e. The TC shall report in writing to not be disclosed to any person other h. maintaining a record of all the Plaintiffs every six months until than Microsoft and the Plaintiffs except complaints received and action taken by expiration of this Final Judgment the as allowed by the Protective Order Microsoft with respect to each such actions it has undertaken in performing entered in the Action or by further order complaint. its duties pursuant to this Final of this Court. D. Voluntary Dispute Resolution Judgment, including the identification 10. No member of the TC shall make of each business practice reviewed and any public statements relating to the 1. Third parties may submit any recommendations made by the TC. TC’s activities. complaints concerning Microsoft’s f. Regardless of when reports are due, compliance with this Final Judgment to when the TC has reason to believe that C. Appointment of a Microsoft Internal the Plaintiffs, the TC or the Compliance there may have been a failure by Compliance Officer Officer. Microsoft to comply with any term of 1. Microsoft shall designate, within 30 2. In order to enhance the ability of this Final Judgment, the TC shall days of entry of this Final Judgment, an the Plaintiffs to enforce compliance immediately notify the Plaintiffs in internal Compliance Officer who shall with this Final Judgment, and to writing setting forth the relevant details. be an employee of Microsoft with advance the parties’ joint interest and g. TC members may communicate responsibility for administering the public interest in prompt resolution with non-parties about how their Microsoft’s antitrust compliance of issues and disputes, the parties have
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agreed that the TC and the Compliance the Plaintiffs or the third party, or in its detail that Microsoft customarily Officer shall have the following discretion. provides for APIs it documents in the additional responsibilities. Microsoft Developer Network V. Termination 3. Submissions to the Compliance (‘‘MSDN’’). Officer. A. Unless this Court grants an F. ‘‘IAP’’ means an Internet access a. Third parties, the TC, or the extension, this Final Judgment will provider that provides consumers with Plaintiffs in their discretion may submit expire on the fifth anniversary of the a connection to the Internet, with or to the Compliance Officer any date it is entered by the Court. without its own proprietary content. complaints concerning Microsoft’s B. In any enforcement proceeding in G. ‘‘ICP’’ means an Internet content compliance with this Final Judgment. which the Court has found that provider that provides content to users Without in any way limiting its Microsoft has engaged in a pattern of of the Internet by maintaining Web sites. authority to take any other action to willful and systematic violations, the H. ‘‘IHV’’ means an independent enforce this Final Judgment, the Plaintiffs may apply to the Court for a hardware vendor that develops Plaintiffs may submit complaints related one-time extension of this Final hardware to be included in or used with to Sections III.C, III.D, III.E and III.H to Judgment of up to two years, together a Personal Computer running a the Compliance Officer whenever doing with such other relief as the Court may Windows Operating System Product. I. ‘‘ISV’’ means an entity other than so would be consistent with the public deem appropriate. Microsoft that is engaged in the interest. VI. Definitions development or marketing of software b. To facilitate the communication of A. [‘‘Application Programming products. complaints and inquiries by third Interfaces (APIs)’’] ‘‘API’’ means [the J. ‘‘Microsoft Middleware’’ means parties, the Compliance Officer shall interfaces] application programming software code that place on Microsoft’s Internet website, in interface, including any [associated 1. Microsoft distributes separately a manner acceptable to the Plaintiffs, callback interfaces,] interface that from a Windows Operating System the procedures for submitting Microsoft [Middleware running on a Product to update that Windows complaints. To encourage whenever Windows Operating System Product Operating System Product; possible the informal resolution of uses to call upon that Windows 2. is Trademarked; or is marketed by complaints and inquiries, the website Operating System Product in order to Microsoft as a major version of any shall provide a mechanism for obtain any services from that Windows Microsoft Middleware Product defined communicating complaints and Operating System Product] is obligated in section VI.K.1; and inquiries to the Compliance Officer. to disclose pursuant to III.D. 3. provides the same or substantially c. Microsoft shall have 30 days after B. ‘‘Communications Protocol’’ means similar functionality as a Microsoft receiving a complaint to attempt to the set of rules for information exchange Middleware Product; [and.] resolve it or reject it, and will then to accomplish predefined tasks between [4. includes at least the software code promptly advise the TC of the nature of a Windows Operating System Product that controls most or all of the user the complaint and its disposition. and a server operating system product interface elements of that Microsoft 4. Submissions to the TC. connected via a network, including, but Middleware.] Microsoft Middleware shall include a. The Compliance Officer, third not limited to, a local area network, a at least the software code that controls parties or the Plaintiffs in their wide area network or the Internet. These most or all of the user interface discretion may submit to the TC any rules govern the format, semantics, complaints concerning Microsoft’s elements of that Microsoft Middleware. timing, sequencing, and error control of Software code described as part of, compliance with this Final Judgment. messages exchanged over a network. b. The TC shall investigate complaints and distributed separately to update, a C. ‘‘Consideration’’ means any Microsoft Middleware Product shall not received and will consult with the monetary payment or the provision of Plaintiffs regarding its investigation. At be deemed Microsoft Middleware unless preferential licensing terms; technical, identified as a new major version of that least once during its investigation, and marketing, and sales support; enabling more often when it may help resolve Microsoft Middleware Product. A major programs; product information; version shall be identified by a whole complaints informally, the TC shall information about future plans; meet with the Compliance Officer to number or by a number with just a developer support; hardware or software single digit to the right of the decimal allow Microsoft to respond to the certification or approval; or permission substance of the complaint and to point. to display trademarks, icons or logos. K. ‘‘Microsoft Middleware Product’’ determine whether the complaint can be D. ‘‘Covered OEMs’’ means the 20 means resolved without further proceedings. OEMs with the highest worldwide 1. the functionality provided by c. If the TC concludes that a volume of licenses of Windows Internet Explorer, Microsoft’s Java complaint is meritorious, it shall advise Operating System Products reported to Virtual Machine, Windows Media Microsoft and the Plaintiffs of its Microsoft in Microsoft’s fiscal year Player, Windows Messenger, Outlook conclusion and its proposal for cure. preceding the effective date of the Final Express and their successors in a d. No work product, findings or Judgment. The OEMs that fall within Windows Operating System Product, recommendations by the TC may be this definition of Covered OEMs shall be and admitted in any enforcement proceeding recomputed by Microsoft as soon as 2. for any functionality that is first before the Court for any purpose, and no practicable after the close of each of licensed, distributed or sold by member of the TC shall testify by Microsoft’s fiscal years. Microsoft after the entry of this Final deposition, in court or before any other E. ‘‘Documentation’’ means all Judgment and that is part of any tribunal regarding any matter related to information regarding the identification Windows Operating System Product this Final Judgment. and means of using APIs that a person a. Internet browsers, email client e. The TC may preserve the of ordinary skill in the art requires to software, networked audio/video client anonymity of any third party make effective use of those APIs. Such software, instant messaging software or complainant where it deems it information shall be of the sort and to b. functionality provided by Microsoft appropriate to do so upon the request of the level of specificity, precision and software that—
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i. is, or in the year preceding the Q. ‘‘Personal Computer’’ means any fixes, service packs, etc. The software commercial release of any new computer configured so that its primary code that comprises a Windows Windows Operating System Product purpose is for use by one person at a Operating System Product shall be was, distributed separately by Microsoft time, that uses a video display and determined by Microsoft in its sole (or by an entity acquired by Microsoft) keyboard (whether or not that video discretion. from a Windows Operating System display and keyboard is included) and VII. Further Elements Product; that contains an Intel x86 compatible (or ii. is similar to the functionality successor) microprocessor. Servers, Jurisdiction is retained by this Court provided by a Non-Microsoft television set top boxes, handheld over this action and the parties thereto Middleware Product; and computers, game consoles, telephones, for the purpose of enabling either of the iii. is Trademarked. pagers, and personal digital assistants parties thereto to apply to this Court at Functionality that Microsoft describes are examples of products that are not any time for further orders and or markets as being part of a Microsoft Personal Computers within the meaning directions as may be necessary or Middleware Product (such as a service of this definition. appropriate to carry out or construe this pack, upgrade, or bug fix for Internet R. ‘‘Timely Manner’’ means at the Final Judgment, to modify or terminate Explorer), or that is a version of a time Microsoft first releases a beta test any of its provisions, to enforce Microsoft Middleware Product (such as version of a Windows Operating System compliance, and to punish violations of Internet Explorer 5.5), shall be Product that is [distributed to] made its provisions. considered to be part of that Microsoft available via an MSDN subscription VIII. Third Party Rights Middleware Product. offering or of which 150,000 or more L. ‘‘Microsoft Platform Software’’ beta [testers]copies are distributed. Nothing in this Final Judgment is means (i) a Windows Operating System S. ‘‘Top-Level Window’’ means a intended to confer upon any other Product and/or (ii) a Microsoft window displayed by a Windows persons any rights or remedies of any Middleware Product. Operating System Product that (a) has nature whatsoever hereunder or by M. ‘‘Non-Microsoft Middleware’’ its own window controls, such as move, reason of this Final Judgment. means a non-Microsoft software product resize, close, minimize, and maximize, running on a Windows Operating (b) can contain sub-windows, and (c) Dorothy Fountain, System Product that exposes a range of contains user interface elements under Deputy Director of Operations. functionality to ISVs through published the control of at least one independent [FR Doc. 02–5354 Filed 3–15–02; 8:45 am] APIs, and that could, if ported to or process. made interoperable with, a non- T. ‘‘Trademarked’’ means distributed BILLING CODE 4410–11–P Microsoft Operating System, thereby in commerce and identified as make it easier for applications that rely distributed by a name other than DEPARTMENT OF JUSTICE in whole or in part on the functionality Microsoft or Windows that Microsoft supplied by that software product to be has claimed as a trademark or service Antitrust Division ported to or run on that non-Microsoft mark by (i) marking the name with Operating System. trademark notices, such as or TM, in United States V. Microsoft Corporation N. ‘‘Non-Microsoft Middleware connection with a product distributed Product’’ means a non-Microsoft in the United States; (ii) filing an List of Individuals and Entities software product running on a Windows application for trademark protection for Submitting Public Comments Operating System Product (i) that the name in the United States Patent The United States hereby publishes a exposes a range of functionality to ISVs and Trademark Office; or (iii) asserting complete list of the names (as provided through published APIs, and that could, the name as a trademark in the United in the comment) of all individuals or if ported to or made interoperable with, States in a demand letter or lawsuit. entities submitting Tunney Act public a non-Microsoft Operating System, Any product distributed under comments on the Revised Proposed thereby make it easier for applications descriptive or generic terms or a name Final Judgment in the matter of United that rely in whole or in part on the comprised of the Microsoft or States v. Microsoft Corp., Civil Action functionality supplied by that software Windows trademarks together with No. 98–1232, pending in the United product to be ported to or run on that descriptive or generic terms shall not be States District Court for the District of non-Microsoft Operating System, and Trademarked as that term is used in this Columbia; the approximate number of (ii) of which at least one million copies Final Judgment. Microsoft hereby pages of each comment; a unique were distributed in the United States disclaims any trademark rights in such tracking number assigned to each within the previous year. descriptive or generic terms apart from comment so that each comment may be O. ‘‘OEM’’ means an original the Microsoft or Windows located on the Department’s website; equipment manufacturer of Personal trademarks, and hereby abandons any and an index to the comments organized Computers that is a licensee of a such rights that it may acquire in the by six categories based primarily on the Windows Operating System Product. future. level of detail of the comment. The P. ‘‘Operating System’’ means the U. ‘‘Windows Operating System United States’ response to the comments software code that, inter alia, (i) controls Product’’ means the software code (as is being published concurrently with the allocation and usage of hardware opposed to source code) distributed this list. To view the comments resources (such as the microprocessor commercially by Microsoft for use with referenced herein and/or copies of the and various peripheral devices) of a Personal Computers as Windows 2000 comments, please follow the Personal Computer, (ii) provides a Professional, Windows XP Home, instructions provided below. platform for developing applications by Windows XP Professional, and Electronic copies of all comments exposing functionality to ISVs through successors to the foregoing, including identified herein are available on the APIs, and (iii) supplies a user interface the Personal Computer versions of the Department of Justice’s Web site at that enables users to access products currently code named www.usdoj.gov/atr/cases/ms- functionality of the operating system ‘‘Longhorn’’ and ‘‘Blackcomb’’ and their comments.htm. Interested persons may and in which they can run applications. successors, including upgrades, bug also request CD–ROM(s) containing the
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