Tales of Fear and Loathing in Case Against Microsoft
By JOEL BRINKLEY
New York Times
WASHINGTON -- Using internal company documents and sworn depositions at the Microsoft trial Thursday, a government lawyer depicted Compaq Computer Corp., the world's largest manufacturer of personal computers, as so fearful of Microsoft that it repeatedly abandoned software products it preferred in favor of Microsoft's offerings and even passed on information about a competing operating system in violation of a nondisclosure agreement.
"In regard to browsers," one internal memo stated in May 1996, "our goal is to feature the brand leader, Netscape." But in an e-mail written at almost the same time, a Compaq employee wrote, "Microsoft is unhappy with the Netscape icon on the desktop and wants to get it off." He added, "Microsoft's stance to date raises questions of improper use of their monopoly position."
A few weeks later, Compaq signed an agreement making Internet Explorer, Microsoft's browser, the default choice on all Compaq personal computers. That happened even though Celeste Dunn, who was in charge of buying software, had cautioned other executives that to comply with Microsoft's request, Compaq would have to "significantly alter" a line of computers, "revise its business model and jeopardize two profitable, revenue generating contracts" worth $9 million.
That exchange was just one in a cascade of disclosures that David Boies, the government's lead trial lawyer, made in court Thursday. They offered an extraordinary look inside the relationship between two powerful companies that are, as one Compaq document described it, "joined at the hip."
Microsoft promises a rebuttal when its lawyers question the witness on Friday.
Tom Siekman, general counsel for Compaq, insisted in an intervew that "our relationship with Microsoft is one of equal partners; we are not the weak sister."
Nonetheless, in court Thursday, the testimony of John T. Rose, a Compaq senior vice president, contradicted that of numerous other Compaq employees.
He is the only representative of the computer manufacturing industry to appear in court. Microsoft held high hopes that he would counteract the government's assertion that Microsoft's main customers -- manufacturers of personal computers -- fear the company and consider it a bully.
But Rose seemed generally out of touch. He said he had never seen or heard of most of the contracts, discussions and product proposals that were presented to him. The disconnect was so extreme that at one point Judge Thomas Penfield Jackson noted that Rose had disagreed with everything another senior employee had said in a deposition. "And I'm just wondering who speaks with authority for the company."
Rose insisted that he did.
In the most dramatic discloure in court Thursday, Boies asked Rose if he was aware that Compaq had received confidential product information from Be Inc., a tiny company that makes a niche operating system, and had passed it on to Microsoft in violation of a nondisclosure agreement.
Rose said he was not aware of this, and Compaq's lawyer, William Costen, leaped from his bench to declaim Boies' raising the issue in court to "sully the company with this information."
In a telephone interview Thursday evening, Jean Claude Gassee, chief executive of Be, said: "In November, a Compaq executive called me, rather embarrassed, to say that someone had inadvertantly leaked some information from us to a company in Redmond," the Seattle suburb where Microsoft has its headquarters. "He was very embarrassed, but my interpretation is that this is a result of the climate of fear Microsoft creates."
Boies offered several documents suggesting that Compaq's fear of Microsoft was longstanding. A document titled "Microsoft meeting presentation," dated January 1993, postulates Microsoft's "potential reactions" to Compaq's decision to use another company's software for personal digital assistants. "How retaliatory will they get?" it asks, then lists 14 ways Microsoft could hurt Compaq, including "selection and elevation of other" computer manufacturers "as leaders."
Boies then produced a letter dated three months later in which Bill Gates, Microsoft's chairman, congratulated Compaq's chief executive for selecting "Microsoft as the exclusive supplier of operating system software for your hand-held computers." What occurred in those three months was not described.
Another e-mail between senior Compaq executives helped to explain why Compaq dropped Netscape Communications' browser for Internet Explorer.
"Microsoft was upset with our internal use of Netscape and initiated a number of activities with Digital Equipment Company and Hewlett-Packard, reducing their emphasis on the Compaq partnership," the executive wrote. Compaq responded, she added, by agreeing to include Microsoft's software for the Internet.
Boies also presented memos showing that a Compaq executive had agreed in 1997 to make "side agreements" with Microsoft, "given Microsoft's concern that the agreements are defensible" with other manufacturers "and the Department of Justice."
Boies offered two such agreements signed on the same day and described them as the public agreement and "the real agreement." Details of the two contracts were not disclosed, but Rose said he was not familiar with either of them.
Boies closed Thursday's cross-examination by reading from an e-mail message from a Microsoft official who was the Compaq account manager in 1995, shortly after Microsoft reached a consent agreement with the government on an earlier antitrust case.
In it, Microsoft promised to stop forcing PC makers to buy one copy of a Microsoft operating system for every computer sold and instead charge them only for every computer on which the operating system was installed.
In the e-mail, the Microsoft manager wrote that despite the consent agreement, few manufacturers had chosen to renegotiate their contracts with Microsoft. And if Compaq chose to do so, "it would be a major issue at Microsoft."
Compaq Bowed To Pressure, Government Says
Filed at 3:49 p.m. EST
By Mary Mosquera for TechWeb, CMPnet
WASHINGTON, D.C. -- Whenever Compaq began to use a product that competed with Microsoft, the software giant pressured the top computer maker to stop, the government said Thursday.
Microsoft has a number of ways to influence actions by OEMs, said lead U.S. Department of Justice attorney David Boies, including how much a PC maker pays for each Windows operating system it ships to terminating a business relationship.
Internal Compaq e-mail demonstrated concern that Microsoft could retaliate effectively against the PC maker. The document listed possible retaliatory actions that Microsoft could threaten, such as changing Compaq's price advantage over other computer makers and restricting access to early software-code kits.
Boies said in his questioning of Compaq senior vice president John Rose, who is testifying for Microsoft, that the leading PC maker bowed to Microsoft pressure to stop using competing products -- including Netscape's Internet browser. The government has highlighted Microsoft's bullying tactics earlier in the trial with other companies, such as Apple and America Online.
Under Compaq's partnership with Microsoft, the Houston-based computer maker enjoys a significant discount in the price for the Windows OS. Rose said the day before that Compaq had no commercially viable alternative to Microsoft's OS for its PCs.
Whether Microsoft's aggressive practices overstep what is legal is central to Justice's case. The government and 19 states say the software giant has a monopoly and is maintaining it illegally to expand its dominance in other markets, specifically against Netscape's Navigator.
Compaq said it attempted in 1993 to use OS software by Go for its handheld devices. At the same time, Compaq was negotiating a contract with Microsoft to ship its products on Compaq computers.
The resulting five-year contract gave Compaq beneficial terms to carry Microsoft PC software, while in another agreement, Compaq selected Microsoft for the OS for handheld devices.
The need for interoperability between customers' PCs and handheld devices was key to the agreement, Rose said.
In 1996, Compaq removed Microsoft's Internet Explorer and MSN Network icons from Compaq's Presario model desktop to feature Netscape and AOL. During testing for the release, Microsoft said it violated a verbal accord.
Boies offered testimony from another Compaq senior official who said Microsoft threatened to terminate its agreement with Compaq if it didn't reinstate the disputed icons.
Rose said Compaq did not remove the icons but failed to follow through in placing them on the desktop as they agreed. He added he was never aware Microsoft wanted Compaq to exclude Netscape from the desktop.
Compaq later entered into an accord to make Microsoft's IE the default browser on all its PCs. Because the new contract was negotiated last year, Rose said the shipped default browser is still IE, but a consumer can easily click and change the default to Netscape Navigator.
"Microsoft has no objection to computer makers featuring AOL and Netscape," said Microsoft spokesman Mark Murray outside the courthouse. "Our only objection is when they rip out features of our products." |
