Microsoft, Government Attorney Continue a Clash Over Contracts
Wall Street Journal
An INTERACTIVE JOURNAL News Roundup
Microsoft Corp. and a lawyer for the Justice Department clashed again over the significance of the software giant's exclusive Web-browser contracts with Internet-content companies.
Government lead attorney David Boies, citing provisions in the pacts barring the promotion of the Web browser from rival Netscape Communications Corp. browser, said the contracts show "substantial intent" by Microsoft to elbow Netscape out of the market.
But Microsoft countered that the contracts, struck in late 1997 and dissolved after six months, did little to stop Netscape from getting its Navigator in the hands of computer users.
The Microsoft contracts -- struck with Internet-content companies such as Intuit Inc., Walt Disney Co., PointCast Inc. and Wired Magazine -- make up a relatively small piece of the government's broad antitrust lawsuit. The suit charges Microsoft with illegally using its alleged Windows monopoly to expand into new markets and crush competition from the likes of Netscape and Sun Microsystems Inc.
Still, the contracts represent an important tactical battleground for Microsoft as it attempts to shore up its fraying legal defense.
It isn't important that the Microsoft contracts weren't successful at restricting Netscape's browser and were canceled, Mr. Boies said at a midday press conference in front of the courthouse in Washington, D.C. What is important, he said, is that the Redmond, Wash., software maker believed when it struck the deals that their effect would be large.
Microsoft spokesman Mark Murray objected to that.
"There was absolutely no foreclosure of Netscape's ability to distribute its browser" through Internet-content providers, making the contracts and their impact irrelevant to the case, Mr. Murray said.
A Case of Nuts and Bolts
Inside the courtroom, arguments from both sides focused on the nuts and bolts of the deals, which required content creators to use Microsoft technology, favor its Internet Explorer browser and refrain from promoting, distributing or marketing Netscape Navigator, which was then more widely used. In exchange, top-line content companies had a sample of their Web content put in Windows' new desktop channel bar, an unpopular feature that Microsoft has since discontinued.
Microsoft's William Poole, senior director of business development, said from the witness stand that the company's goal was to establish its Internet Explorer brand and encourage the use of Web technology.
The "value of brand association" was behind the Netscape restrictions, he said, equating them to restrictions companies such as Coca-Cola Co. employ to limit the use of a rival's product, such as Pepsi from PepsiCo Inc.
Mr. Poole noted that such exclusive promotion contracts also have a lengthy duration -- five to 10 years, according to Poole -- while Microsoft's agreements with Internet-content providers, were of relatively short duration, only about 12 to 18 months in most cases.
Another example Mr. Poole gave the court was America Online Inc.'s exclusive agreement with People magazine. The full text of People can only be viewed on the Web by AOL subscribers, Mr. Poole said. Similarly, Netscape has an exclusivity provision in its instant-messaging agreement with AOL, prohibiting AOL from promoting products that may cause users to switch from the Netcaster Web-broadcasting program to a competing product. That restriction is limited to a particular area of the Web site, Mr. Poole noted.
Mr. Poole also pointed out that under the Microsoft agreements, Internet-content providers could accept paid advertising and provide links to guide Netscape users to Netscape-formatted content.
Mr. Poole testified Monday that Microsoft required the 24 providers with which it entered into contracts to provide a differentiated portion of their sites that could only be seen by using Internet Explorer. The contracts refer to "acceptable degradation" when viewed with browsers other than Internet Explorer.
On Tuesday, Mr. Poole explained that all Internet-content providers write their content to the lowest common denominator so that any browser can be used. The differentiation to which he earlier referred indicates enhanced presentation features specifically derived through Microsoft's new technology. The acceptable level of degradation, he said, only refers to dropping back to the standard presentation in comparison to the enhanced Microsoft version. For example, when viewing the Disney Web page using Explorer, a dancing mouse and a big green splat appear on the Web page. Those two items don't appear when using other browsers.
E-Mails Are at Issue
As he has so many times in the trial, Mr. Boies turned to e-mail exchanges to make his points.
On Monday, he used a blunt e-mail from Microsoft's Chairman Bill Gates to challenge Mr. Poole on his insistence that Microsoft didn't offer money to Intuit in exchange for distributing Microsoft's Web-browser software.
In a July 1996 e-mail, Mr. Gates described a conversation he had with Scott Cook, Intuit's founder, writing that he was "quite frank with him that if he had a favor we could do for him that would cost us something like $1 million, to do that in return for switching browsers in the next few months, I would be open to doing that."
Intuit, whose popular Quicken financial software is used by roughly 10 million people, agreed in June 1997 to give away Microsoft's browser, not Netscape's, with Quicken. In exchange, Microsoft gave Intuit a prominent placement within the Windows operating system.
The government alleges the deal is an example of illegal exclusionary agreements that Microsoft brandished as part of its campaign to "crush" rival Netscape.
Mr. Boies also confronted Mr. Poole Tuesday with an October 1997 e-mail message from Disney complaining about restrictions that Microsoft had placed on its business deals with Netscape.
In the e-mail, a Disney executive wrote: "We are being roughed up by the 1,000-pound gorilla of the industry." Microsoft was upset that Disney had allowed Netscape to use its familiar mouse logo.
"I find it somewhat ironic that the King Kong of content would be worried about a 1,000-pound gorilla," Mr. Poole shot back.
Recess Time?
The trial could be due for a lengthy recess next month.
In a private meeting with lawyers, U.S. District Judge Thomas Penfield Jackson indicated he will call a break to allow Microsoft's lead attorney to keep his vacation plans and to permit Mr. Boies to attend another previously scheduled trial, expected to last two to three weeks.
But the judge told the lawyers not to talk about it with reporters, according to a transcript of the meeting held at the close of court Monday.
"Simply tell them that you have no comment about it because I have not made any definitive determination yet, other than the fact that you'll get your vacation," the judge told Microsoft lawyer John Warden. "And Mr. Boies will get to Philadelphia by March 15." |
