Sorry to link to a subscription-only article again, but this one has so many good quotes, I just could not resist.
Microsoft's Lawyers Struggle With Serious Tactical Errors
interactive.wsj.com
They're letting the government define the case, instead of going with their strongest cards," says Thomas Hazlett, a visiting scholar at the American Enterprise Institute, a conservative Washington think tank, who has been a vocal opponent of the antitrust case brought by the Justice Department and 19 states. "Microsoft should stand up and say, 'Yes, we tried to eliminate our competitors.' Instead, they argue over threats, e-mails and exclusive contracts that are common in any industry -- playing right into thegovernment's hands."
Others who have strongly opposed the government's case express frustration with Microsoft's defense. "They're bungling it," says Stephen Margolis, a North Carolina State University economist who, like others quoted in this article, was on a list of pro-Microsoft economists that the company recently distributed to reporters.
Mr. Margolis notes that Microsoft's lawyers failed to pursue the strong arguments they could have made on "the lack of consumer harm and the idea that competitors aren't foreclosed from the market. Instead, they are defending themselves by saying they are not a monopoly. If people find that unreasonable -- and many people probably do -- it undermines everything else they say."
* * *
One of Microsoft's arguments has been that it doesn't dominate the PC operating-system market because of competitive threats from Silicon Valley start-up Be Inc. and tiny Red Hat Software Inc., in Research Triangle Park, N.C. But it isn't too convincing. "Once you get to the point where people are laughing, you have to do something," says Stanley Liebowitz, a University of Texas economist who has been a strong Microsoft supporter. But the company's defense team, he says, "doesn't seem to have any fallback position."
Actually, if Margolis will read the testimony and their summary judgment motion, he will see that they are trying to pursue the foreclosure argument. It's just that their witnesses have so badly "bungled" the factual presentations that it's going to be much easier for the government to win on this issue than it should have been.
And, Liebowitz is right, they have yet to establish any sort of viable fallback position.
To have Liebowitz and Margolis condemning Microsoft publicly in this way is very telling. The recriminations fly as the ship sinks.
Case in point: On his first full day cross-examining Microsoft's lead-off witness, economist Richard Schmalensee, Mr. Boies barely touched on the witness's 328-page statement. He hammered away at other points, such as whether Dr. Schmalensee's testimony squared with his past writings -- it didn't -- and avoided the line-by-line dissection of witness statements that Microsoft's lawyers had conducted earlier in the trial.
As I see it, Microsoft was trying to argue that the PC OS market is contestible, which also dovetails nicely with their "no foreclosure" argument. This was an issue they were going to lose, but one where they could have perhaps picked up some useful points that could help them in other areas. But Schmalensee hosed it so badly that he started the snowball rolling into the avalanche that put the credibility of their whole defense at risk.
And why they put him first (or even had him testify at all), as if he were their strongest witness, is beyond me.
A better prepared witness would not have had to say, "What could I have been thinking when I said that?" A better prepared witness would probably not won the contestibility issue for Microsoft, but he or she would have lost it in a way that did not put their whole defense at risk.
But Mr. Boies also has scored substantive points that strike at the core of Microsoft's case. When he rattled Dr. Schmalensee with questions on the survey, it was after the economics professor had been forced to concede a more important point: that there was no viable alternative to Windows for most PC makers today.
Similarly, the most damaging day for Mr. Allchin wasn't the day that landed him on the front pages of newspapers. It was the day before, when Mr. Boies pressed Mr. Allchin to admit -- not once, but 19 times -- that the benefits of adding Internet software to Windows could be achieved using the products separately as well. That undercut one of the company's key arguments: that Microsoft bundled the two products to benefit consumers, not to crush rival Netscape, as the government alleges.
Some of Microsoft's supporters wonder why the company's lawyers bothered arguing the unbundling point. In a separate but related case, a federal appeals court ruling last year gave Microsoft wide latitude to add new features to Windows, even if it targeted a product already being sold by another company. (After that ruling, exultant Microsoft lawyers said the decision would let the company add "a ham sandwich" to Windows if it chose to.)
Microsoft's fascination with the Sacred Court of Appeals Decision has always perplexed me. In another part of the article, Neukom is quoted as saying that the core of the government's case is "fatally flawed," but he certainly has not shown how at this point. Actually, it's his defense that is fatally flawed. His love of the Sacred Court of Appeals Decision has caused Microsoft more grief than any other single issue in the case.
I assume Neukom has read Hovenkamp on technological tying:
Should the development of a new product which reduces or eliminates the market for some existing product manufactured by a competitor ever be illegal monopolization? Two possibilities come to mind: 1) if it is undispuited that the new product is not superior to the old product, but is perhaps even inferior; 2) if there is clear evidence that the defendant's intent in developing the new product was to destroy the independent market for the competitor's product.
Neither situation merits condemnation. First, whether a new product is 'superior' or 'inferior' to an old product is entirely a matter of consumer preference, not of judicial decision. If IBM's new computer system with the built in memory was inferior to the old system in the eyes of consumers, they would refuse to buy the new system.
The question of bad intent is even clearer: every inventor 'intends' his invention to injure the competing products of close competitors, for that is the only way his own invention is likely to find a market. Suppose that Henry Ford knew absolutely that production of the Model T would destroy a carriage maker across the street. Should its development be illegal? Suppose that Henry Ford developed the Model T for no other reason than to ruin the business of the carriage maker, whom he disliked intensely? There is simply no way to distinguish between 'legitimate' and 'illegitimate' manifestations of intent. Intent is merged into the completed result, in this case a new product the sale of which injures or destroys certain competitors. No reasonable basis exists for concluding that the development of a new product or group of products, without more, is illegal monopolization. Such a rule would certainly do far more harm to the innovative processes in a market economy than it would promote competitive efficiency.
H. Hovenkamp, Economics and Federal Antitrust Law 154-55 (1985).
From their point of view, this says it all. Just copying this text and pasting it into their brief would probably do more good for their defense than all their quibbling over the "benefits" of integrating IE with Windows or their babbling on about what a "great" browser IE is and how it won all the reviews -- as if the judge were going to be convinced.
So, the question remains: why is Neukom so in love with the Sacred Court of Appeals Decision that he is basing his whole defense on it?
Maybe he is "waging little more than a public-relations campaign that has scant bearing on the substance of the case." ;) |
