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Technology Stocks : MSFT Internet Explorer vs. NSCP Navigator -- Ignore unavailable to you. Want to Upgrade?

To: Keith Hankin who wrote (22589)	2/5/1999 10:09:00 PM
From: Gerald R. Lampton	Respond to of 24154

I don't think so: Point well taken, especially the L.A. Times article, which also appeared in my morning newspaper. (BTW, you left out all the really juicy quotes, like the one where the former president of the ABA section on Antitrust says that Microsoft is "doomed." Daniel Schuh you're not. ;) ) I completely agree that this past week cannot be described as anything other than an unmitigated disaster for Microsoft. Nothing I could possibly say will diminish that fact. All I was saying was that the complete hosing of Microsoft's credibility that occurred this week will not have that much impact on appeal because: (1) this tape incident really is a sideshow, (2) the District Judge will probably rely as much as possible on undisputed facts and admissions by Microsoft, (3) the Court of Appeals will not re-weigh the evidence, and (4) the passage of time will cause memories of this week to fade. While all of that is true, on reflection, I cannot deny that there will be effects, which will significantly affect Microsoft on appeal: (1) Microsoft's complete lack of credibility will hurt them in the fact-finding process. Even if the outcome is is likely to favor the government, on little issues of fact, the judge might still have felt compelled to go with Microsoft's version. Often, these subtle differences can make the difference between affirmance and reversal on appeal. (2) In presenting its briefs to the Court of Appeals, Microsoft will probably have to change in some ways the manner in which it presents its arguments. They might have to hire a different appellate counsel. They might have to find someone, such as a conservative public interest group or think tank, to step in and present a brief as an amicus to the court. An amicus would make particular sense for arguments which are a "long-shot" or that make points not central to Microsoft's direct legal argument but that nevertheless need to be made. The point is that, on appeal as at trial, arguments often have more credibility coming from the mouths of a third party's lawyers than from the mouths of Microsoft's discredited lawyers and witnesses. (3) Microsoft's complete lack of credibility at this point could have very serious reprecussions at the remedial stage. Let's say the choice is between imposing some sort of injunction that permanently limits Microsoft's conduct or the kinds of products they can design and a structural remedy, where the court breaks up the company but then leaves the off-spring completely alone to compete in the market. The trial judge might conclude that, if Microsoft cannot be trusted in court to be honest in the presentation of its case, then it certainly cannot be trusted to be forthcoming about its actions before a special master or other enforcement body, making the non-structural remedy impractical. Who wants to have the DOJ coming constantly into court, saying that Microsoft is lying to the special master? The judge might decide to just break up the company and let the offspring be as honest or dishonest as they like, keeping the court out of the whole sordid affair.

To: Keith Hankin who wrote (22589)	2/6/1999 12:17:00 AM
From: Gerald R. Lampton	Respond to of 24154

Federal Filings Newswires Copyright (c) 1999, Dow Jones & Company, Inc. Friday, February 5, 1999 MSFT Trial Weekly Wrap: Time For Defense To Reboot FORM TYPE: LEGAL ISSUER: FEDERAL FILINGS BUSINESS NEWS SYMBOL: X.FFI WASHINGTON (FFBN) -- The fourteenth week of the Microsoft Corp. (MSFT) antitrust trial was by far the most disastrous yet for the software giant, with one of its top executives doing more to help the government's case than the government's own 12 witnesses combined. Although the most attention-grabbing event was a video tape debacle that left the company's credibility on shaky ground with the federal judge overseeing the bench trial, the most legally significant developments had nothing to do with the video. Senior Vice President for Personal and Business Systems James Allchin admitted, under relentless cross-examination by Justice Department lead counsel David Boies, that nearly all benefits derived from browser integration in Windows 98 could also be achieved by adding Internet Explorer to a browserless Windows 95 version. This single admission utterly defeats Microsoft's defense to the government's claim that Microsoft illegally tied its browser to the operating system. What's worse, the tying claim was the government's weakest allegation, given a court of appeals ruling last June that found the version of Windows 95, which includes Internet Explorer technologies, is one integrated product. Although Microsoft hangs its hat on the higher court's finding that Microsoft could integrate its products as it chooses so long as there is a "plausible claim that it brings some advantage" to consumers, the June 23, 1998, opinion is not that clear cut. First, the decision was issued by a split 2-1 appellate panel. The issues presented for the court to decide were the clarification of an "anti-tying" provision in a 1994 consent decree and whether the browser and the operating system were two products or one integrated product under terms of that decree. Finally, the court employed contract law theories to discern the consent decree and specifically cautioned that its integration test may not be the appropriate test for antitrust law, stating in a footnote: "The antitrust question is of course distinct." One of the issues in the present case, brought by the Justice Department and 19 states, is whether Microsoft violated antitrust laws by tying Internet Explorer to Windows 98 for anti-competitive purposes, namely crushing rival Netscape Communications Corp. (NSCP). So, the reason for the company's decision is central in determining if it had anti-competitive motives. Microsoft claims it planned to integrate browsing technology since before Netscape was even formed in 1994. Evidence presented so far to support this is: comments Chairman Bill Gates made at a 1994 conference; testimony from Microsoft executives; a 1994 brain storming retreat for Microsoft executives at which plans for integration were set in motion; and a stack of 1993 and 1994 internal e-mails discussing putting Internet capabilities in Windows 95. Evidence undercutting those assertions are an even higher stack of 1996 and 1997 Microsoft e-mails among various executives discussing using Windows as leverage to promote Internet Explorer in a battle against Netscape's Navigator; competitors' testimony that Microsoft bullied them into replacing Navigator with Internet Explorer; and Netscape's claim that after it refused to cooperate with Microsoft in an illegal market division scheme, Microsoft vowed to crush Netscape. There is plenty of evidence to support both sides. The difficult task before U.S. District Judge Thomas Penfield Jackson is to determine which side to believe, and that's where this week's infamous video tape comes in. Microsoft produced a two-hour video tape purportedly showing computer tests that demonstrated the benefits of browsing and operating system integration. The tape also was intended to discredit a government expert witness's claim that he had created a software program that successfully removed Internet Explorer from Windows 98 without impairing the operating system. Microsoft said the program, created by Princeton University professor Edward Felten, only hid browsing access from users, the underlying browsing technology was still present, and the program damaged portions of the operating system. A four-minute segment of the tape contained several discrepancies, though, that forced Allchin to reveal that "multiple computers" had been used in the taping and that programs had been added and deleted on the computers, contrary to assertions made on the tape. Judge Jackson called the tape unreliable and Microsoft asked for a do over. The judge agreed. The second tape, a 70-minute production, hastily produced late Wednesday night, may have looked like a bad infomercial, but the substance of the tape supported nearly everything Microsoft contended. The Felten program did not remove browsing functions from Windows and it did hamper the operating system's ability to properly run two demonstrated applications. Although Microsoft decided not to recreate the specific demonstration from the four-minute segment that instigated the debacle, Allchin plausibly explained to the court that in order to get an accurate test, it needed to be conducted under laboratory conditions. In the first tape, the company claimed that the Felten program slowed down the computer's ability to connect to and download from a Windows Update page, but because Allchin was having trouble with phone lines during the demonstration, a side-by-side comparison of the time it would take two computers to connect and download would not show whether any performance difference was from the Felten program or phone line problems. An unintended benefit Microsoft may reap from the second video, though, is that Allchin's charm and wit shone through, something the tense questioning in court had managed to suppress. His ability to explain what he was doing step-by-step, in such a self-deprecating and unstaged manner may have done more to restore the credibility of his testimony in the Judge's eyes than the demonstration itself. Patti Dennis, Esq. Legal Editor