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STATE of NEW YORK, Et Al., Plaintiffs V. MICROSOFT CORPORATION, Defendant. UNITED STATES DISTRICT COURT for the DISTRICT of COLU

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STATE of NEW YORK, Et Al., Plaintiffs V. MICROSOFT CORPORATION, Defendant. UNITED STATES DISTRICT COURT for the DISTRICT of COLU UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA STATE OF NEW YORK, et al., Plaintiffs Civil Action No. 98-1233 (CKK) v. MICROSOFT CORPORATION, Defendant. TABLE OF CONTENTS MEMORANDUM OPINION INTRODUCTION .............................................................1 I. PROCEDURAL HISTORY ..............................................1 II. LAW OF THE CASE ...................................................5 A. Court of Appeals Opinion ..........................................6 1. Market Definition ...........................................6 2. Theory of Liability ...........................................7 3. Four-Part Test for Liability ...................................9 4. Original Equipment Manufacturer (“OEM”) Licenses ............11 5. Integration of Internet Explorer (“IE”) and Windows .............11 6. Agreements with Internet Access Providers (“IAPs”) ..............13 7. Agreements with Internet Content Providers (“ICPs”), Independent Software Vendors (“ISVs”), and Apple .........................13 8. Java .....................................................15 9. Intel .....................................................16 10. Vacating the District Court’s Order of Remedy ...................18 11. Remand ..................................................21 B. District Court’s Findings of Fact and Surviving Conclusions of Law .....21 C. General Antitrust Law of Remedies .................................25 III. SCOPE OF THE REMEDY .............................................32 A. Legal Authority Related to Scope of the Remedy ......................38 B. Findings of Fact Related to Scope of the Remedy ......................44 1. Introduction ...............................................44 2. Treatment of Middleware ....................................47 a. “Middleware” and Related Definitions in Microsoft’s Proposal ...................................................47 i. “Non-Microsoft Middleware” in the SRPFJ .........49 ii. “Non-Microsoft Middleware Product” in the SRPFJ ..51 iii. “Microsoft Middleware Product” in the SRPFJ ......53 iv. “Microsoft Middleware” in the SRPFJ .............54 b. “Middleware” and Related Definitions in Plaintiffs’ Proposal ...................................................57 i. “Middleware” in the SPR ........................58 ii. “Microsoft Middleware Product” in the SPR ........60 3. New Technologies ..........................................63 a. Server/Network Computing ............................64 ii b. Set-Top Boxes and Interactive Television Software .........68 c. Handheld Devices ....................................70 d. Web Services ........................................72 C. Conclusions Regarding Scope of the Remedy .........................76 1. Server/Network Computing ..................................77 2. Set-Top Boxes and Interactive Television Software ...............79 3. Handheld Devices ..........................................81 4. Web Services ..............................................85 5. Middleware ...............................................88 D. Alleged “Bad” Acts by Microsoft ...................................93 1. Findings of Fact-Allegedly New “Bad” Acts Relating to Interoperation .........................................................96 a. Kerberos ............................................96 b. CIFS ..............................................98 c. Directory Services, LDAP, ADSI ........................99 d. TDS ..............................................100 e. MAPI .............................................101 f. MUP ..............................................102 2. Old “Bad” Acts Relating to Interoperation .....................103 3. Conclusions Regarding “Bad” Acts Evidence ...................104 a. Insufficient Nexus to Java Developer Tools Deception .....104 b. Insufficient Nexus to First Wave Agreements .............107 c. Nexus to Old “Bad” Acts .............................109 iii E. Causation Analysis ..............................................110 1. Microsoft’s Simple Injunction Argument ......................110 2. Economic Testimony .......................................113 a. Dr. Shapiro’s Causation Analysis ......................114 i. Factual Findings ..............................114 ii. Conclusions ..................................116 b. Dr. Murphy’s Causation Analysis ......................117 i. Factual Findings ..............................117 ii. Conclusions ..................................118 IV. REMEDY-SPECIFIC CONCLUSIONS ..................................118 A. Original Equipment Manufacturer (“OEM”) Configuration Flexibility ..119 1. Windows Licenses .........................................119 2. Installation and Display of Icons, Shortcuts, and Menu Entries ....121 3. Insertion of Internet Access Provider (“IAP”) Registration Offers ..123 4. Automatic Launching of Applications .........................124 B. End-User Access ................................................126 C. Additional Protection for OEM Flexibility ..........................139 D. Other Participants in the Ecosystem ...............................146 1. Ban on Retaliation ........................................146 2. Agreements Limiting Support for Competing Products ...........148 3. Exclusive Agreements ......................................150 4. Agreements Regarding Placement on the Desktop ...............153 iv E. Explicitly Forward-Looking Remedies .............................154 1. API Disclosures (Interoperation between Windows and Microsoft Middleware) ..............................................155 2. Communications Protocols (Interoperation Between PC Operating Systems and Server Operating Systems) .......................156 3. Plaintiffs’ Flawed Arguments for Overly Broad Disclosures .......158 a. Insufficient Connection to the Liability Findings ..........158 b. Harmful Effects of Cloning ...........................162 c. Harmful Effects of Disclosing Internal Interfaces .........164 4. Reasonable, Non-Discriminatory Licenses .....................165 5. Protection Against Hackers, Viruses, and Piracy ................167 F. Compliance and Enforcement Provisions ...........................168 G. Term of the Decree .............................................176 H. Other Provisions in Plaintiffs’ Proposed Remedy ....................178 1. Open-Source IE and Mandatory Auction of Office ..............179 2. Ban on Knowing Interference ...............................181 3. Support for Predecessor Versions ............................182 4. Ban on Contractual Tying ..................................183 5. Ban on Retaliation for Participation in This Case ...............184 6. Mandatory Java Distribution ................................186 7. Adherence to Industry Standards .............................188 8. Monitoring of Microsoft’s Intellectual Property Claims ...........190 9. Investment Reporting ......................................191 v V. CONCLUSION ......................................................192 APPENDIX A FINDINGS OF FACT I. ORIGINAL EQUIPMENT MANUFACTURER (“OEM”) FLEXIBILITY .....198 A. License Provisions ..............................................199 1. Plaintiffs’ Third-Party Licensing Proposal .....................199 2. Icon Design and Placement .................................202 3. Automatically Launching Software ...........................204 4. Registration Sequences .....................................208 B. Remedies Related to the “Binding” of IE and Windows ...............210 1. “Add/Remove” Utility ......................................210 2. Default Settings ...........................................213 3. Respect for OEM Settings ...................................220 II. UNIFORM OEM LICENSES ...........................................223 III. PROTECTION FROM RETALIATION .................................229 A. Independent Software Vendors (“ISVs”) and Independent Hardware Vendors (“IHVs”) ..............................................229 B. Original Equipment Manufacturers (“OEMs”) ......................233 IV. TERMINATION OF AN OEM’S WINDOWS LICENSE ...................239 V. OTHER PARTICIPANTS IN THE ECOSYSTEM .........................242 A. Agreements Limiting Support for Competing Products ...............242 B. Exclusive Agreements ...........................................247 1. Independent Software Vendors (“ISVs”) and Original Equipment vi Manufacturers (“OEMs”) ..................................247 2. Internet Access Providers (“IAPs”) ...........................252 VI. DISCLOSURE OF APIs AND COMMUNICATIONS PROTOCOLS .........254 A. Plaintiffs’ Disclosure Proposal ....................................254 B. Microsoft’s Disclosure Proposals ..................................267 VII. ENABLING LICENSES ...............................................271 VIII. SECURITY EXEMPTION .............................................274 IX. TERM OF THE DECREE .............................................277 X. OTHER PROVISIONS IN PLAINTIFFS’ REMEDY PROPOSAL ...........279 A. Plaintiffs’ Proposed Remedy §§ 12, 14 ..............................280 B. Plaintiffs’ Proposed Remedy § 1 ...................................287 C. Plaintiffs’ Proposed Remedy § 5 ...................................305 D. Plaintiffs’ Proposed Remedy § 3 ...................................307 E. Plaintiffs’ Proposed Remedy § 7 ...................................310 F. Plaintiffs’ Proposed Remedy § 9 ...................................312 G. Plaintiffs’ Proposed Remedy § 13 ..................................313
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