Gates Memo Deals a Blow to Microsoft - America Online Seen as No Threat at All -- By Joel Brinkley, New York Times, June 25, 1999
Washington, DC -- The absent star made a final appearance in the Microsoft antitrust trial Thursday when a Government lawyer introduced as evidence a comment by William H. Gates, Microsoft's chairman, that knocked the legs from under his legal team's most important defensive strategy.
Gates has not appeared as a witness at his company's trial.
Nonetheless, he has exerted tremendous influence on the proceedings --
most often in a manner that helped the Government make its case.
Over the last six months, Microsoft's legal team has mounted a concerted campaign to demonstrate that America Online, through its
purchase of the Netscape Communications Corporation, was in a position to mount a strong challenge to Microsoft's dominance of personal computer operating systems.
But today, on the last day of testimony, Boies introduced a document that seemed to explode that argument in a single stroke by showing that Gates did not really believe it. It was an internal Microsoft memo titled Microsoft Competitive Reviews, dated Dec. 15, 1998 -- about three weeks after the AOL-Netscape deal was announced.
The document includes notes that an unnamed Microsoft employee took
as Gates offered his views on the competitive threat posed by the deal. One note quoted him as saying: "AOL doesn't have it in their genes to attack us in the platform space." In the industry, operating systems are known as "platforms."
The disclosure by the lead Government attorney, David Boies, was the
most important piece of evidence introduced on the final day. After court had adjourned, Boies stood on the courthouse steps with Joel I. Klein, the Assistant Attorney General who heads the anitrust division, and expressed broad satisfaction with the case they have presented.
It showed that Microsoft "intimidated, threatened, attempted to preclude," Klein said. "You name it, they did it. This is a serious, serious competitive problem that merits a serious solution." Microsoft lawyers did not comment.
In the courtroom earlier, the Microsoft witness on the stand,
Richard L. Schmalensee, dean of the Sloan School of Management at the
Massachusetts Institute of Technology, dismissed Gates's comment as
barely relevant. "Gates's judgment is entitled to some weight," he said, "but he hasn't seen the documents I have seen" -- the internal America Online documents that Micrsoft subpoenaed early this year.
That prompted Boies to ask him if he was ever willing to consider facts that did not support his position, to which Schmalensee replied, "Boies, I don't know if that is a blanket challenge to my ethics, or how to interpret that question."
Later Boies showed him a contract between Microsoft and Symantec,
which makes utility software. It stipulated among other things that if the company used a certain Internet protocol in its product, "Internet
Explorer must be set as the default browser."
Microsoft's campaign to force other companies to favor Internet Explorer is at the center of the Government's case. And with the contract on display, Judge Thomas Penfield Jackson asked the witness a question that sounded as if it should have come from the mouth of a Government lawyer.
He asked whether "any of these conditions are, in your opinion,
anti-competitive." Schmalensee said he could not answer. So the judge
asked, "Assuming Microsoft is a monopoly, are they anti-competitive?"
Once again Schmalensee said he did not know.
As the day drew toward its close, Boies introduced several academic papers by Schmalensee over the years that held opinions contradicting statements he had made in court. Schmalensee said his views had evolved.
But Boies's cross-examination seemed to peter out. That was not so for Michael Lacovara, Microsoft's lawyer. Re-examining his own witness, he offered as evidence a news article showing that a small company was about to begin selling an inexpensive product that allows Internet access without Microsoft software.
Microsoft has been trying to make the case that America Online planned
to offer such a product, nicknamed the AOL PC, that would pose a
competitive threat. America Online executives have denied that.
But Lacovara offered as evidence a news article that he said had been
issued just two hours earlier stating that America Online was in
negotiations to buy the company and use its product as the basis for an AOL PC. |
