[Federal Register Volume 66, Number 229 (Wednesday, November 28, 2001)]
[Notices]
[Pages 59452-59476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29498]
[[Page 59452]]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Microsoft Corporation; Revised Proposed Final
Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. section 16(b) through (h), that a revised
proposed Final Judgment, Stipulation and Competitive Impact Statement
have been filed with the United States District Court for the District
of Columbia in United States of American v. Microsoft Corporation,
Civil Action No. 98-1232. On May 18, the United States filed a
Complaint alleging that Microsoft, the world's largest supplier of
computer software for personal computers, restrained competition in
violation of sections 1 and 2 of the Sherman Act, 15 U.S.C. 1-2.
Following a 7-day trial in late 1998 and early 1999, the United States
District Court found that Microsoft had violated both sections 1 and 2
of the Sherman Act. On appeal, the United States Court of Appeals for
the District of Columbia unanimously affirmed portions of the district
court's finding and conclusion that Microsoft illegally maintained its
operating system monopoly in violation of section 2 of the Sherman Act,
but reversed and remanded other portions of the district court's
determinations. Specifically, the court of appeals reversed the
district court's determination that Microsoft violated section 2 by
illegally attempting to monopolize the Internet browser market and
remanded the district court's determination that Microsoft violated
section 1 of the Sherman Act by unlawfully tying its browser to its
operating system. The court of appeals also vacated the district
court's remedial order, including its order that Microsoft be split
into separate operating systems and applications businesses, and
remanded the case to a new district court judge for further
proceedings. Following intensive mediation efforts, the United States
and Microsoft subsequently reached the agreement embodied in the
revised proposed Final Judgment, which would impose injunctive relief
to enjoin continuance and prevent recurrence of the violations of the
Sherman Act by Microsoft that were upheld by the court of appeals.
The revised proposed Final Judgment, filed November 6, 2001, will
stop recurrence of Microsoft's unlawful conduct, prevent recurrence of
similar conduct in the future and restore competitive conditions in the
personal computer operating system market by, among other things,
prohibiting actions by Microsoft to prevent computer manufacturers and
others from developing, distributing or featuring middlewear products
that are threats to Microsoft's operating system monopoly; creating the
opportunity for independent software vendors to develop products that
will be competitive with Microsoft's middleware products; requiring
Microsoft to disclose interfaces in order to ensure that competing
middlewear and server software can interoperate with Microsoft's
operating systems; ensuring full compliance with the revised proposed
Final Judgment; and providing for swift resolution of technical
disputes. Copies of the Complaint, revised proposed Final Judgment and
Competitive Impact Statement are available for inspection at the
Department of Justice in Washington, DC at Antitrust Documents Group,
325 7th Street NW., Ste. 215 North, Washington, DC 20530 (please call
202-514-2481, for appointments only), on the Department of Justice web
site at http://www.usdoj.gov/atr, and at the Office of the Clerk of the
United States District Court for the District of Columbia, 333
Constitution Avenue, NW., Washington, DC 20002.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Renata Hesse, Trial Attorney, Suite 1200, Antitrust Division,
Department of Justice, 601 D Street NW, Washington, DC 20530;
(facsimile) 202-616-9937 or 202-307-1545; or e-mail
[email protected]. While comments may also be sent by regular
mail, in light of recent events affecting the delivery of all types of
mail to the Department of Justice, including U.S. Postal Service and
other commercial delivery services, and current uncertainties
concerning when the timely delivery of this mail may resume, the
Department strongly encourages, whenever possible, that comments be
submitted via email or facsimile.
Constance K. Robinson,
Director of Operations & Merger Enforcement.
United States District Court for the District of Columbia
United States of America, Plaintiff, vs. Microsoft Corporation,
Defendant
[Civil Action No. 98-1232 (CKK)]
State of New York ex rel. Attorney General Eliot Spitzer, et al.,
Plaintiffs, vs. Microsoft Corporation, Defendant
[Civil Action No. 98-1233 (CKK)]
Next Court Deadline: November 6, 2001, Status Conference.
Stipulation
Plaintiffs United States of America (``United States'') and the
States of New York, Ohio, Illinois, Kentucky, Louisiana, Maryland,
Michigan, North Carolina and Wisconsin and Defendant Microsoft
Corporation (``Microsoft''), by and through their respective attorneys,
having agreed to the entry of this Stipulation, it is hereby stipulated
and agreed that:
1. A Final Judgment in the form attached hereto may be filed and
entered by the Court, upon the motion of any party or upon the Court's
own motion, at any time after compliance with the requirements of the
Antitrust Procedures and Penalties Act, 15 U.S.C. 16, and without
further notice to any party or other proceedings, provided that the
United States has not withdrawn its consent, which it may do at any
time before the entry of the revised proposed Final Judgment by serving
notice thereof on Microsoft and by filing that notice with the Court.
2. Unless otherwise provided in the revised proposed Final
Judgment, Microsoft shall begin complying with the revised proposed
Final Judgment as it was in full force and effect starting on December
16, 2001. Subject to the foregoing, Microsoft agrees to be bound by the
provisions of the revised proposed Final Judgment pending its entry by
the Court. If the United States withdraws its consent, or if (a) the
revised proposed Final Judgment is not entered pursuant to the terms of
the Stipulation, (b) the time has expired for all appeals of any Court
ruling declining to enter the revised proposed Final Judgment, and (c)
the Court has not otherwise ordered continued compliance with the terms
and provisions of the revised proposed Final Judgment, then all of the
parties shall be released from all further obligations under this
Stipulation, and the making of this Stipulation shall be without
[[Page 59453]]
prejudice to any party in this or any other proceeding.
3. Pursuant to 15 U.S.C. 16(g), within ten (10) days of the
submission of the revised proposed Final Judgment, Microsoft will file
with the Court a description of any and all written or oral
communications by or on behalf of Microsoft, or other person, with any
officer or employee of the United States concerning or relevant to the
revised proposed Final Judgment, except that any such communications
made by counsel of record alone with the Attorney General or the
employees of the United States Department of Justice alone shall be
excluded from this requirement.
4. Pursuant to 15 U.S.C. 16(b), on or before November 16, 2001, the
United States will file with the Court a Competitive Impact Statement
explaining the terms of the revised proposed Final Judgment. The United
States will publish the revised proposed Final Judgment and Competitive
Impact Statement in the Federal Register.
5. The United States will publish a notice informing the public of
the revised proposed Final Judgment and public comment period in the
Washington Post and the San Jose Mercury News, for seven days over a
period of two weeks commencing no later than November 15, 2001.
6. Members of the public may submit written comments about the
revised proposed Final Judgment to a designated official of the
Antitrust Division of the United States Department of Justice for a
period of 60 days after publication of the revised proposed Final
Judgment and Competitive Impact Statement in the Federal Register.
7. Within 30 days after the close of the 60-day public comment
period, the United States will file with the Court and publish in the
Federal Register any comments it receives and its response to those
comments.
8. Once the aforementioned procedures have been complied with, the
United States will file with the Court a certification of compliance
with the requirements of 15 U.S.C. 16, and a Motion for Entry of
Revised Proposed Final Judgment, unless it withdraws its consent to
entry of the revised proposed Final Judgment pursuant to paragraph 2,
above. At any time thereafter, and at the conclusion of any further
proceedings ordered by the court pursuant to 15 U.S.C. 16(f), the Court
may then enter the revised proposed Final Judgment, provided that the
Court determines that entry of the revised proposed Final Judgment will
serve the public interest.
Dated this 6th day of November, 2001.
For Plaintiff the United States of America:
Charles A. James (Bar No. 292201),
Assistant Attorney General, Antitrust Division, United States
Department of Justice, 901 Pennsylvania Avenue, NW., Washington, DC
20530, (202) 514-2401.
For Plaintiffs the States of New York, Ohio, Illinois, Kentucky,
Louisiana, Maryland, Michigan, North Carolina and Wisconsin:
Eliot Spitzer,
Attorney General of New York, 120 Broadway, New York, New York
10271, (212) 416-8282.
For Defendant Microsoft Corporation:
John L. Warden (Bar No. 222083),
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004,
(212) 558-4000.
Revised Proposed Final Judgment
Whereas, plaintiffs United States of America (``United States'')
and the States of New York, Ohio, Illinois, Kentucky, Louisiana,
Maryland, Michigan, North Carolina and Wisconsin and defendant
Microsoft Corporation (``Microsoft''), by their respective attorneys,
have consented to the entry of this Final Judgment;
And Whereas, this Final Judgment does not constitute any admission
by any party regarding any issue of fact or law;
And Whereas, Microsoft agrees to be bound by the provisions of this
Final Judgment pending its approval by the Court;
Now Therefore, upon remand from the United States Court of Appeals
for the District of Columbia Circuit, and upon the consent of the
aforementioned parties, it is hereby
Ordered, Adjudged, and Decreed:
I. Jurisdiction
This Court has jurisdiction of the subject matter of this action
and of the person of Microsoft.
II. Applicability
This Final Judgment applies to Microsoft and to each of its
officers, directors, agents, employees, subsidiaries, successors and
assigns; and to all other persons in active concert or participation
with any of them who shall have received actual notice of this Final
Judgment by personal service or otherwise.
III. Prohibited Conduct
A. Microsoft shall not retaliate against an OEM by altering
Microsoft's commercial relations with that OEM, or by withholding newly
introduced forms of non-monetary Consideration (including but not
limited to new versions of existing forms of non-monetary
Consideration) from that OEM, because it is known to Microsoft that the
OEM is or is contemplating:
1. Developing, distributing, promoting, using, selling, or
licensing any software that competes with Microsoft Platform Software
or any product or service that distributes or promotes any Non-
Microsoft Middleware;
2. Shipping a Personal Computer that (a) includes both a Windows
Operating System Product and a non-Microsoft Operating System, or (b)
will boot with more than one Operating System; or
3. Exercising any of the options or alternatives provided for under
this Final Judgment.
Nothing in this provision shall prohibit Microsoft from enforcing
any provision of any license with any OEM or any intellectual property
right that is not inconsistent with this Final Judgment. Microsoft
shall not terminate a Covered OEM's license for a Windows Operating
System Product without having first given the Covered OEM written
notice of the reasons for the proposed termination and not less than
thirty days' opportunity to cure. Notwithstanding the foregoing,
Microsoft shall have no obligation to provide such a termination notice
and opportunity to cure to any Covered OEM that has received two or
more such notices during the term of its Windows Operating System
Product license.
Nothing in this provision shall prohibit Microsoft from providing
Consideration to any OEM with respect to any Microsoft product or
service where that Consideration is commensurate with the absolute
level or amount of that OEM's development, distribution, promotion, or
licensing of that Microsoft product or service.
B. Microsoft's provision of Windows Operating System Products to
Covered OEMs shall be pursuant to uniform license agreements with
uniform terms and conditions. Without limiting the foregoing, Microsoft
shall charge each Covered OEM the applicable royalty for Windows
Operating System Products as set forth on a schedule, to be established
by Microsoft and published on a web site accessible to the Plaintiffs
and all Covered OEMs, that provides for uniform royalties for Windows
Operating System Products, except that:
1. The schedule may specify different royalties for different
language versions;
2. The schedule may specify reasonable volume discounts based upon
the actual volume of licenses of any Windows Operating System Product
or any group of such products; and
3. The schedule may include market development allowances,
programs, or other discounts in connection with Windows Operating
System Products, provided that:
[[Page 59454]]
a. Such discounts are offered and available uniformly to all
Covered OEMs, except that Microsoft may establish one uniform discount
schedule for the ten largest Covered OEMs and a second uniform discount
schedule for the eleventh through twentieth largest Covered OEMs, where
the size of the OEM is measured by volume of licenses;
b. Such discounts are based on objective, verifiable criteria that
shall be applied and enforced on a uniform basis for all Covered ;s,
and
c. Such discounts or their award shall not be based on or impose
any criterion or requirement that is otherwise inconsistent with any
portion of this Final Judgment.
C. Microsoft shall not restrict by agreement any OEM licensee from
exercising any of the following options or alternatives:
1. Installing, and displaying icons, shortcuts, or menu entries
for, any Non-Microsoft Middleware or any product or service (including
but not limited to IAP products or services) that distributes, uses,
promotes, or supports any Non-Microsoft Middleware, on the desktop or
Start menu, or anywhere else in a Windows Operating System Product
where a list of icons, shortcuts, or menu entries for applications are
generally displayed, except that Microsoft may restrict an OEM from
displaying icons, shortcuts and menu entries for any product in any
list of such icons, shortcuts, or menu entries specified in the Windows
documentation as being limited to products that provide particular
types of functionality, provided that the restrictions are non-
discriminatory with respect to non-Microsoft and Microsoft products.
2. Distributing or promoting Non-Microsoft Middleware by installing
and displaying on the desktop shortcuts of any size or shape so long as
such shortcuts do not impair the functionality of the user interface.
3. Launching automatically, at the conclusion of the initial boot
sequence or subsequent boot sequences, or upon connections to or
disconnections from the Internet, any Non-Microsoft Middleware if a
Microsoft Middleware Product that provides similar functionality would
otherwise be launched automatically at that time, provided that any
such Non-Microsoft Middlware displays on the desktop no user interface
or a user interface of similar size and shape to the user interface
displayed by the corresponding Microsoft Middleware Product.
4. Offering users the option of launching other Operating Systems
from the Basic Input/Output System or a non-Microsoft boot-loader or
similar program that launches prior to the start of the Windows
Operating System Product.
5. Presenting in the initial boot sequence its own IAP offer
provided that the OEM complies with reasonable technical specifications
established by Microsoft, including a requirement that the end user be
returned to the initial boot sequence upon the conclusion of any such
offer.
6. Exercising any of the options provided in Section III.H of this
Final Judgment.
D. Starting at the earlier of the release of Service Pack I for
Windows XP or 12 months after the submission of this Final Judgment to
the Court, Microsoft shall disclose to ISVs, IHVs, IAPs, ICPs, and
OEMs, for the sole purpose of interoperating with a Windows Operating
System Product, via the Microsoft Developer Network (``MSDN'') or
similar mechanisms, the APIs and related Documentation that are used by
Microsoft Middlware to interoperate with a Windows Operating System
Product. In the case of a new major version of Microsoft Middleware,
the disclosures required by this Section III.D shall occur no later
than the last major beta test release of that Microsoft Middleware. In
the case of a new version of a Windows Operating System Product, the
obligations imposed by this Section III.D shall occur in a Timely
Manner.
E. Starting nine months after the submission of this proposed Final
Judgment to the Court, Microsoft shall make available for use by third
parties, for the sole purpose of interoperating with a Windows
Operating System Product, on reasonable and non-discriminatory terms
(consistent with Section III.I), any Communications Protocol that is,
on or after the date this Final Judgment is submitted to the Court, (i)
implemented in a Windows Operating System Product installed on a client
computer, and (ii) used to interoperate natively (i.e., without the
addition of software code to the client operating system product) with
a Microsoft server operating system product.
F. 1. Microsoft shall not retaliate against any ISV or IHV because
of that ISV's or IHV's:
a. Developing, using, distributing, promoting or supporting any
software that competes with Microsoft Platform Software or any software
that runs on any software that competes with Microsoft Platform
Software, or
b. Exercising any of the options or alternatives provided for under
this Final Judgment.
2. Microsoft shall not enter into any agreement relating to a
Windows Operating System Product that conditions the grant of any
Consideration on an ISV's refraining from developing, using,
distributing, or promoting any software that competes with Microsoft
Platform Software or any software that runs on any software that
competes with Microsoft Platform Software, except that Microsoft may
enter into agreements that place limitations on an ISV's development,
use, distribution or promotion of any such software if those
limitations are reasonably necessary to and of reasonable scope and
duration in relation to a bona fide contractual obligation of the ISV
to use, distribute or promote any Microsoft software or to develop
software for, or in conjunction with, Microsoft.
3. Nothing in this section shall prohibit Microsoft from enforcing
any provision of any agreement with any ISV or IHV, or any intellectual
property right, that is not inconsistent with this Final Judgment.
G. Microsoft shall not enter into any agreement with:
1. Any IAP, ICP, ISV, IHV or OEM that grants Consideration on the
condition that such entity distributes, promotes, uses, or supports,
exclusively or in a fixed percentage, any Microsoft Platform Software,
except that Microsoft may enter into agreements in which such an entity
agrees to distribute, promote, use or support Microsoft Platform
Software in a fixed percentage whenever Microsoft in good faith obtains
a representation that it is commercially practicable for the entity to
provide equal or greater distribution, promotion, use or support for
software that competes with Microsoft Platform Software, or
2. Any IAP or ICP that grants placement on the desktop or elsewhere
in any Windows Operating System Product to that IAP or ICP on the
condition that the IAP or ICP refrain from distributing, promoting or
using any software that competes with Microsoft Middleware.
Nothing in this section shall prohibit Microsoft from entering into
(a) any bona fide joint venture or (b) any joint development or joint
services arrangement with any ISV, IHV, IAP, ICP, or OEM for a new
product, technology or service, or any material value-add to an
existing product, technology or service, in which both Microsoft and
the ISV, IHV, IAP, ICP, or OEM contribute significant developer or
other resources, that prohibits such entity from competing with the
object of
[[Page 59455]]
the joint venture or other arrangement for a reasonable period of time.
This Section does not apply to any agreements in which Microsoft
licenses intellectual property in from a third party.
H. Starting at the earlier of the release of Service Pack 1 for
Windows XP or 12 months after the submission of this Final Judgment to
the Court, Microsoft shall:
1. Allow end users (via a mechanism readily accessible from the
desktop or Start menu such as an Add/Remove icon) and OEMs (via
standard preinstallation kits) to enable or remove access to each
Microsoft Middleware Product or Non-Microsoft Middleware Product by (a)
displaying or removing icons, shortcuts, or menu entries on the desktop
or Start menu, or anywhere else in a Windows Operating System Product
where a list of icons, shortcuts, or menu entries for applications are
generally displayed, except that Microsoft may restrict the display of
icons, shortcuts, or menu entries for any product in any list of such
icons, shortcuts, or menu entries specified in the Windows
documentation as being limited to products that provide particular
types of functionality, provided that the restrictions are non-
discriminatory with respect to non-Microsoft and Microsoft products;
and (b) enabling or disabling automatic invocations pursuant to section
III.C.3 of this Final Judgment that are used to launch Non-Microsoft
Middleware Products or Microsoft Middleware Products. The mechanism
shall offer the end user a separate and unbiased choice with respect to
enabling or removing access (as described in this subsection III.H.1)
and altering default invocations (as described in the following
subsection III.H.2) with regard to each such Microsoft Middleware
Product or Non-Microsoft Middleware Product and may offer the end-user
a separate and unbiased choice of enabling or removing access and
altering default configurations as to all Microsoft Middleware Products
as a group or all Non-Microsoft Middleware Products as a group.
2. Allow end users (via a mechanism readily available from the
desktop or Start menu), OEMs (via standard OEM preinstallation kits),
and Non-Microsoft Middleware Products (via a mechanism which may, at
Microsoft's option, require confirmation from the end user) to
designate a Non-Microsoft Middleware Product to be invoked in place of
that Microsoft Middleware Product (or vice versa) in any case where the
Windows Operating System Product would otherwise launch the Microsoft
Middleware Product in a separate Top-Level Window and display either
(i) all of the user interface elements or (ii) the Trademark of the
Microsoft Middleware Product.
3. Ensure that a Windows Operating System Product does not (a)
automatically alter an OEM's configuration of icons, shortcuts or menu
entries installed or displayed by the OEM pursuant to section III.C of
this Final Judgment without first seeking confirmation from the user
and (b) seek such confirmation from the end user for an automatic (as
opposed to user-initiated) alteration of the OEM's configuration until
14 days after the initial boot up of a new Personal Computer. Microsoft
shall not alter the manner in which a Windows Operating System Product
automatically alters an OEM's configuration of icons, shortcuts or menu
entries other than in a new version of a Windows Operating System
Product.
Notwithstanding the foregoing Section III.H.2, the Windows
Operating System Product may invoke a Microsoft Middleware product in
any instance in which:
1. That Microsoft Middleware Product would be invoked solely for
use in interoperating with a server maintained by Microsoft (outside
the context of general Web browsing), or
2. That designated Non-Microsoft Middleware Product fails to
implement a reasonable technical requirement (e.g., a requirement to be
able to host a particular Active X control) that is necessary for valid
technical reasons to supply the end user with functionality consistent
with a Windows Operating System Product, provided that the technical
reasons are described in a reasonably prompt manner to any ISV that
requests them.
Microsoft's obligations under this section III.H as to any new
Windows Operating System Product shall be determined based on the
Microsoft Middleware Products which exist seven months prior to the
last beta test version (i.e., the one immediately preceding the first
release candidate) of that Windows Operating System Product.
I. Microsoft shall offer to license to ISVs, IHVs, IAPs, ICPs, and
OEMs any intellectual property rights owned or licensable by Microsoft
that are required to exercise any of the options or alternatives
expressly provided to them under this Final Judgment, provided that:
1. All terms, including royalties or other payment of monetary
consideration, are reasonable and non-discriminatory;
2. The scope of any such license (and the intellectual property
rights licensed thereunder) need be no broader than is necessary to
ensure that an ISV, IHV, IAP, ICP or OEM is able to exercise the
options or alternatives expressly provided under this Final Judgment
(e.g., an ISV's, IHV's, IAP's, ICP's and OEM's option to promote Non-
Microsoft Middleware shall not confer any rights to any Microsoft
intellectual property rights infringed by that Non-Microsoft
Middleware);
3. An ISV's, IHV's, IAP's, ICP's or OEM's rights may be conditioned
on its not assigning, transferring or sublicensing its rights under any
license granted under this provision;
4. The terms of any license granted under this section are in all
respects consistent with the express terms of this Final Judgment; and
5. An ISV, IHV, IAP, ICP, or OEM may be required to grant to
Microsoft on reasonable and nondiscriminatory terms a license to any
intellectual property rights it may have relating to the exercise of
their options or alternatives provided by this Final Judgment; the
scope of such license shall be no broader than is necessary to insure
that Microsoft can provide such options or alternatives.
Beyond the express terms of any license granted by Microsoft
pursuant to this section, this Final Judgment does not, directly or by
implication, estoppel or otherwise, confer any rights, licenses,
covenants or immunities with regard to any Microsoft intellectual
property to anyone.
J. No provision of this Final Judgment shall:
1. Require Microsoft to document, disclose or license to third
parties: (a) Portions of APIs or Documentation or portions or layers of
Communications Protocols the disclosure of which would compromise the
security of a particular installation or group of installations of
anti-piracy, anti-virus, software licensing, digital rights management,
encryption or authentication systems, including without limitation,
keys, authorization tokens or enforcement criteria; or (b) and API,
interface or other information related to any Microsoft product it
lawfully directed not to do so by a governmental agency of competent
jurisdiction.
2. Prevent Microsoft from conditioning any license of any API,
Documentation or Communications Protocol related to anti-piracy
systems, anti-virus technologies, license enforcement mechanisms,
authentication/authorization security, or third party intellectual
property protection mechanisms of any Microsoft
[[Page 59456]]
product to any person or entity on the requirement that the licensee:
(a) Has no history of software counterfeiting or privacy or willful
violation of intellectual property rights, (b) has a reasonable
business need for the API, Documentation or Communications Protocol for
a planned or shipping product, (c) meets reasonable, objective
standards established by Microsoft for certifying the authenticity and
viability of its business, (d) agrees to submit, at its own expense,
any computer program using such APIs, Documentation or Communication
Protocols to third-party verification, approved by Microsoft, to test
for and ensure verification and compliance with Microsoft
specifications for use of the API or interface, which specifications
shall be related to proper operation and integrity of the systems and
mechanisms identified in this paragraph.
IV. Compliance and Enforcement Procedures
A. Enforcement Authority
1. The Plaintiffs shall have exclusive responsibility for enforcing
this Final Judgment. Without in any way limiting the sovereign
enforcement authority of each of the plaintiff States, the plaintiff
States shall form a committee to coordinate their enforcement of this
Final Judgment. A plaintiff State shall take no action to enforce this
Final Judgment without first consulting with the United States and with
the plaintiff States' enforcement committee.
2. To determine and enforce compliance with this Final Judgment,
duly authorized representatives of the United States and the plaintiff
States, on reasonable notice to Microsoft and subject to any lawful
privilege, shall be permitted the following:
a. Access during normal office hours to inspect any and all source
code, books, ledgers, accounts, correspondence, memoranda and other
documents and records in the possession, custody, or control of
Microsoft, which may have counsel present, regarding any matters
contained in this Final Judgment.
b. Subject to the reasonable convenience of Microsoft and without
restraint or interference from it, to interview, informally or on the
record, officers, employees, or agents of Microsoft, who may have
counsel present, regarding any matters contained in this Final
Judgment.
c. Upon written request of the United States or a duly designated
representative of a plaintiff State, on reasonable notice given to
Microsoft, Microsoft shall submit such written reports under oath as
requested regarding any matters contained in this Final Judgment.
Individual plaintiff States will consult with the plaintiff States'
enforcement committee to minimize the duplication and burden of the
exercise of the foregoing powers, where practicable.
3. The Plaintiffs shall not disclose any information or documents
obtained from Microsoft under this Final Judgment except for the
purpose of securing compliance with this Final Judgment, in a legal
proceeding to which one or more of the Plaintiffs is a party, or as
otherwise required by law; provided that the relevant Plaintiff(s) must
provide ten days' advance notice to Microsoft before disclosing in any
legal proceeding (other than a grand jury proceeding) to which
Microsoft is not a party any information or documents provided by
Microsoft pursuant to this Final Judgment which Microsoft has
identified in writing as material as to which a claim of protection may
be asserted under Rule 26(c)(7) of the Federal Rules of Civil
Procedure.
4. The Plaintiffs shall have the authority to seek such orders as
are necessary from the Court to enforce this Final Judgment, provided,
however, that the Plaintiffs shall afford Microsoft a reasonable
opportunity to cure alleged violations of sections III.C, III.D, III.E
and III.H, provided further that any action by Microsoft to cure any
such violation shall not be a defense to enforcement with respect to
any knowing, willful or systematic violations.
B. Appointment of a Technical Committee
1. Within 30 days of entry of this Final Judgment, the parties
shall create and recommend to the Court for its appointment a three-
person Technical Committee (``TC'') to assist in enforcement of and
compliance with this Final Judgment.
2. The TC members shall be experts in software design and
programming. No TC member shall have a conflict of interest that could
prevent him or her from performing his or her duties under this Final
Judgment in a fair and unbiased manner. Without limitation to the
foregoing, no TC member (absent the agreement of both parties):
a. Shall have been employed in any capacity by Microsoft or any
competitor to Microsoft within the past year, nor shall she or he be so
employed during his or her term on the TC;
b. Shall have been retained as a consulting or testifying expert by
any person in this action or in any other action adverse to or on
behalf of Microsoft; or
c. Shall perform any other work for Microsoft or any competitor of
Microsoft for two years after the expiration of the term of his or her
service on the TC.
3. Within 7 days of entry of this Final Judgment, the Plaintiffs as
a group and Microsoft shall each select one member of the TC, and those
two members shall then select the third member. The selection and
approval process shall proceed as follows.
a. As soon as practicable after submission of this Final Judgment
to the Court, the Plaintiffs as a group and Microsoft shall each
identify to the other the individual it proposes to select as its
designee to the TC. The Plaintiffs and Microsoft shall not object to
each other's selection on any ground other than failure to satisfy the
requirements of section IV.B.2 above. Any such objection shall be made
within ten business days of the receipt of notification of selection.
b. The Plaintiffs shall apply to the Court for appointment of the
persons selected by the Plaintiffs and Microsoft pursuant to section
IV.B.3.a above. Any objections to the eligibility of a selected person
that the parties have failed to resolve between themselves shall be
decided by the Court based solely on the requirements stated in section
IV.B.2 above.
c. As soon as practical after their appointment by the Court, the
two members of the TC selected by the Plaintiffs and Microsoft (the
``Standing Committee Members'') shall identify to the Plaintiffs and
Microsoft the person that they in turn propose to select as the third
member of the TC. The Plaintiffs and Microsoft shall not object to this
selection on any grounds other than failure to satisfy the requirements
of section IV.B.2 above. Any such objection shall be made within ten
business days of the receipt of notification of the selection and shall
be served on the other party as well as on the Standing Committee
Members.
d. The Plaintiffs shall apply to the Court for appointment of the
person selected by the Standing Committee Members. If the Standing
Committee Members cannot agree on a third member of the TC, the third
member shall be appointed by the Court. Any objection by Microsoft or
the Plaintiffs to the eligibility of the person selected by the
Standing Committee Members which the parties have failed to resolve
among themselves shall also be decided by the Court based on the
requirements stated in section IV.B.2 above.
4. Each TC member shall serve for an initial term of 30 months. At
the end of
[[Page 59457]]
a TC member's initial 30-month term, the party that originally selected
him or her may, in its sole discretion, either request re-appointment
by the Court to a second 30-month term or replace the TC member in the
same manner as provided for in section IV.B.3.a above. In the case of
the third member of the TC, that member shall be re-appointed or
replaced in the manner provided in section IV.B.3.c above.
5. If the United States determines that a member of the TC has
failed to act diligently and consistently with the purposes of this
Final Judgment, or if a member of the TC resigns, or for any other
reason ceases to serve in his or her capacity as a member of the TC,
the person or persons that originally selected the TC member shall
select a replacement member in the same manner as provided for in
section IV.B.3.
6. Promptly after appointment of the TC by the Court, the United
States shall enter into a Technical Committee services agreement (``TC
Services Agreement'') with each TC member that grants the rights,
powers and authorities necessary to permit the TC to perform its duties
under this Final Judgment. Microsoft shall indemnify each TC member and
hold him or her harmless against any losses, claims, damages,
liabilities or expenses arising out of, or in connection with, the
performance of the TC's duties, except to the extent that such
liabilities, losses, damages, claims, or expenses result from
misfeasance, gross negligence, willful or wanton acts, or bad faith by
the TC member. The TC Services Agreements shall include the following.
a. The TC members shall serve, without bond or other security, at
the cost and expense of Microsoft on such terms and conditions as the
Plaintiffs approve, including the payment of reasonable fees and
expenses.
b. The TC Services Agreement shall provide that each member of the
TC shall comply with the limitations provided for in section IV.B.2
above.
7. Microsoft shall provide the TC with a permanent office,
telephone, and other office support facilities at Microsoft's corporate
campus in Redmond, Washington. Microsoft shall also, upon reasonable
advance notice from the TC, provide the TC with reasonable access to
available office space, telephone, and other office support facilities
at any other Microsoft facility identified by the TC.
8. The TC shall have the following powers and duties:
a. The TC shall have the power and authority to monitor Microsoft's
compliance with its obligations under this final judgment.
b. The TC may, on reasonable notice to Microsoft:
(i) Interview, either informally or on the record, any Microsoft
personnel, who may have counsel present; any such interview to be
subject to the reasonable convenience of such personnel and without
restraint or interference by Microsoft;
(ii) Inspect and copy any document in the possession, custody or
control of Microsoft personnel;
(iii) Obtain reasonable access to any systems or equipment to which
Microsoft personnel have access;
(iv) Obtain access to, and inspect, any physical facility, building
or other premises to which Microsoft personnel have access; and
(v) Require Microsoft personnel to provide compilations of
documents, data and other information, and to submit reports to the TC
containing such material, in such form as the TC may reasonably direct.
c. The TC shall have access to Microsoft's source code, subject to
the terms of Microsoft's standard source code Confidentiality
Agreement, as approved by the Plaintiffs and to be agreed to by the TC
members pursuant to section IV.B.9 below, and by any staff or
consultants who may have access to the source code. The TC may study,
interrogate and interact with the source code in order to perform its
functions and duties, including the handling of complaints and other
inquiries from non-parties.
d. The TC shall receive complaints from the Compliance Officer,
third parties or the Plaintiffs and handle them in the manner specified
in section IV.D below.
e. The TC shall report in writing to the Plaintiffs every six
months until expiration of this Final Judgment the actions it has
undertaken in performing its duties pursuant to this Final Judgment,
including the identification of each business practice reviewed and any
recommendations made by the TC.
f. Regardless of when reports are due, when the TC has reason to
believe that there may have been a failure by Microsoft to comply with
any term of this Final Judgment, the TC shall immediately notify the
Plaintiffs in writing setting forth the relevant details.
g. TC members may communicate with non-parties about how their
complaints or inquiries might be resolved with Microsoft, so long as
the confidentiality of information obtained from Microsoft is
maintained.
h. The TC may hire at the cost and expense of Microsoft, with prior
notice to Microsoft and subject to approval by the Plaintiffs, such
staff or consultants (all of whom must met the qualifications of
section IV.B.2) as are reasonably necessary for the TC to carry out its
duties and responsibilities under this Final Judgment. The compensation
of any person retained by the TC shall be based on reasonable and
customary terms commensurate with the individual's experience and
responsibilities.
i. The TC shall account for all reasonable expenses incurred,
including agreed upon fees for the TC members' services, subject to the
approval of the Plaintiffs. Microsoft may, on application to the Court,
object to the reasonableness of any such fees or other expenses. On any
such application: (a) The burden shall be on Microsoft to demonstrate
unreasonableness; and (b) the TC member(s) shall be entitled to recover
all costs incurred on such application (including reasonable attorney's
fees and costs), regardless of the Court's disposition of such
application, unless the Court shall expressly find that the TC's
opposition to the application was without substantial justification.
9. Each TC member, and any consultants or staff hired by the TC,
shall sign a confidentiality agreement prohibiting disclosure of any
information obtained in the court of performing his or her duties as a
member of the TC or as a person assisting the TC to anyone other than
Microsoft, the Plaintiffs, or the Court. All information gathered by
the TC in connection with this Final Judgment and any report and
recommendations prepared by the TC shall be trated as Highly
Confidential under the Protective Order in this case, and shall not be
disclosed to any person other than Microsoft and the Plaintiffs except
as allowed by the Protective Order entered in the Action or by the
further order of this Court.
10. No member of the TC shall make any public statements relating
to the TC's activities.
C. Appointment of a Microsoft Internal Compliance Officer
1. Microsoft shall designate, within 30 days of entry of this Final
Judgment, an internal Compliance Officer who shall be an employee of
Microsoft with responsibility for administering Microsoft's antitrust
compliance program and helping to ensure compliance with this Final
Judgment.
2. The Compliance Officer shall supervise the review of Microsoft's
activities to ensure that they comply with this Final Judgment. He or
she may
[[Page 59458]]
be assisted by other employees of Microsoft.
3. The Compliance Officer shall be responsible for performing the
following activities:
a. Within 30 days after entry of this Final Judgment, distributing
a copy of the Final Judgment to all officers and directors of
Microsoft;
b. Promptly distributing a copy of this Final Judgment to any
person who succeeds to a position described in section IV.C.3. a above;
c. Ensuring that those persons designated in section IV.C.3.a above
are annually briefed on the meaning and requirements of this Final
Judgment and the U.S. antitrust laws and advising them that Microsoft's
legal advisors are available to confer with them regarding any question
concerning compliance with this Final Judgment or under the U.S.
antitrust laws;
d. Obtaining from each person designated in section IV.C.3.a above
an annual written certification that he or she: (i) Has read and agrees
to abide by the terms of this Final Judgment; and (ii) has been advised
and understands that his or her failure to comply with this Final
Judgment may result in a finding of contempt of court;
e. Maintaining a record of all persons to whom a copy of this Final
Judgment has been distributed and from whom the certification described
in section IV.C.3.d above has been obtained;
f. Establishing and maintaining the website provided for in section
IV.D.3.b below.
g. Receiving complaints from third parties, the TC and the
Plaintiffs concerning Microsoft's compliance with this Final Judgment
and following the appropriate procedures set forth in section IV.D
below; and
h. Maintaining a record of all complaints received and action taken
by Microsoft with respect to each such complaint.
D. Voluntary Dispute Resolution
1. Third parties may submit complaints concerning Microsoft's
compliance with this Final Judgment to the Plaintiffs, the TC or the
Compliance Officer.
2. In order to enhance the ability of the Plaintiffs to enforce
compliance with this Final Judgment, and to advance the parties' joint
interest and the public interest in prompt resolution of issues and
disputes, the parties have agreed that the TC and the Compliance
Officer shall have the following additional responsibilities.
3. Submissions to the Compliance Officer.
a. Third parties, the TC, or the Plaintiffs in their discretion may
submit to the Compliance Officer any complaints concerning Microsoft's
compliance with this Final Judgment. Without in any way limiting its
authority to take any other action to enforce this Final Judgment, the
Plaintiffs may submit complaints related to sections III.C, III.D,
III.E and III.H to the Compliance Officer whenever doing so would be
consistent with the public interest.
b. To facilitate the communication of complaints and inquiries by
third parties, the Compliance Officer shall place on Microsoft's
Internet web site, in a manner acceptable to the Plaintiffs, the
procedures for submitting complaints. To encourage whenever possible
the informal resolution of complaints and inquiries, the web site shall
provide a mechanism for communicating complaints and inquiries to the
Compliance Officer.
c. Microsoft shall have 30 days after receiving a complaint to
attempt to resolve it or reject it, and will then promptly advise the
TC of the nature of the complaint and its disposition.
4. Submissions to the TC.
a. The Compliance Officer, third parties or the Plaintiffs in their
discretion may submit to the TC any complaints concerning Microsoft's
compliance with this Final Judgment.
b. The TC shall investigate complaints received and will consult
with the Plaintiffs regarding its investigation. At least once during
its investigation, and more often when it may help resolve complaints
informally, the TC shall meet with the Compliance Officer to allow
Microsoft to respond to the substance of the complaint and to determine
whether the compliant can be resolved without further proceedings.
c. If the TC concludes that a complaint is meritorious, it shall
advise Microsoft and the Plaintiffs of its conclusion and its proposal
for cure.
d. No work product, findings or recommendations by the TC may be
admitted in any enforcement proceeding before the Court for any
purpose, and no member of the TC shall testify by deposition, in court
or before any other tribunal regarding any matter related to this Final
Judgment.
e. The TC may preserve the anonymity of any third party complaint
where it deems it appropriate to do so upon the request of the
Plaintiffs or the third party, or in its discretion.
V. Termination
A. Unless this Court grants an extension, this Final Judgment will
expire on the fifth anniversary of the date it is entered by the Court.
B. In any enforcement proceeding in which the Court has found that
Microsoft has engaged in a pattern of willful and systematic
violations, the Plaintiffs may apply to the Court for a one-time
extension of this Final Judgment of up to two years, together with such
other relief as the Court may deem appropriate.
VI. Definitions
A. ``Application Programming Interfaces (APIs)'' means the
interfaces, including any associated callback interfaces, that
Microsoft Middleware running on a Windows Operating System Product uses
to call upon that Windows Operating System Product in order to obtain
any services from that Windows Operating System Product.
B. ``Communications Protocol'' means the set of rules for
information exchange to accomplish predefined tasks between a Windows
Operating System Product and a server operating system product
connected via a network, including, but not limited to, a local area
network, a wide area network or the Internet. These rules govern the
format, semantics, timing, sequencing, and error control of messages
exchanged over a network.
C. ``Consideration'' means any monetary payment or the provision of
preferential licensing terms; technical, marketing, and sales support;
enabling programs; product information; information about future plans;
developer support; hardware or software certification or approval; or
permission to display trademarks, icons or logos.
D. ``Covered OEMs'' means the 20 OEMs with the highest worldwide
volume of licenses of Windows Operating System Products reported to
Microsoft in Microsoft's fiscal year preceding the effective date of
the Final Judgment. The OEMs that fall within this definition of
Covered OEMs shall be recomputed by Microsoft as soon as practicable
after the close of each of Microsoft's fiscal years.
E. ``Documentation'' means all information regarding the
identification and means of using APIs that a person of orindary skill
in the art requires to make effective use of those APIs. Such
information shall be of the sort and to the level of specificity,
precision and detail that Microsoft customarily provides for APIs it
documents in the Microsoft Developer Network (``MSDN'').
F. ``IAP'' means an Internet access provider that provides
consumers with a connection to the Internet, with or without its own
proprietary content.
[[Page 59459]]
G. ``ICP'' means an Internet content provider that provides content
to users of the Internet by maintaining Web sites.
H. ``IHV'' means an independent hardware vendor that develops
hardware to be included in or used with a Personal Computer running a
Windows Operating System Product.
I. ``ISV'' means an entity other than Microsoft that is engaged in
the development or marketing of software products.
J. ``Microsoft Middleware'' means software code that
1. Microsoft distributes separately from a Windows Operating System
Product to update that Windows Operating System Product;
2. Is Trademarked;
3. Provides the same or substantially similar functionality as a
Microsoft Middleware Product; and
4. Includes at least the software code that controls most or all of
the user interface elements of that Microsoft Middleware.
Software code described as part of, and distributed separately to
update, a Microsoft Middleware Product shall not be deemed Microsoft
Middleware unless identified as a new major version of that Microsoft
Middleware Product. A major version shall be identified by a whole
number or by a number with just a single digit to the right of the
decimal point.
K. ``Microsoft Middleware Product'' means
1. The functionality provided by Internet Explorer, Microsoft's
Java Virtual Machine, Windows Media Player, Windows Messenger, Outlook
Express and their successors in a Windows Operating System Product, and
2. For any functionality that is first licensed, distributed or
sold by Microsoft after the entry of this Final Judgment and that is
part of any Windows Operating System Product.
a. Internet browsers email client software, networked audio/video
client software, instant message software or
b. Functionality provided by Microsoft software that--
i. Is, or in the year preceding the commercial release of any new
Windows Operating System Product was, distributed separately by
Microsoft (or by an entity acquired by Microsoft) from a Windows
Operating System Product;
ii. Is similar to the functionality provided by a Non-Microsoft
Middleware Product; and
iii. Is Trademarked.
Functionality that Microsoft describes or markets as being part of
a Microsoft Middleware Product (such as a service pack, upgrade, or bug
fix for Internet Explorer), or that is a version of a Microsoft
Middleware Product (such as Internet Explorer 5.5), shall be considered
to be part of that Microsoft Middleware Product.
L. ``Microsoft Platform Software'' means (i) a Windows Operating
System Product and/or (ii) a Microsoft Middleware Product.
M. ``Non-Microsoft Middleware'' means a non-Microsoft software
product running on a Windows Operating System Product that exposes a
range of functionality to ISVs through published APIs, and that could,
if ported to or made interoperable with, a non-Microsoft Operating
System, thereby make it easier for applications that rely in whole or
in part on the functionality supplied by that software product to be
ported to or run on that non-Microsoft Operating System.
N. ``Non-Microsoft Middleware Product'' means a non-Microsoft
software product running on a Windows Operating System Product (i) that
exposes a range of functionality to ISVs through published APIs, and
that could, if ported to or made interoperable with, a non-Microsoft
Operating System, thereby make it easier for applications that rely in
whole or in part on the functionality supplied by that software product
to be ported to or run on that non-Microsoft Operating System, and (ii)
of which at least one million copies were distributed in the United
States within the previous year.
O. ``OEM'' means an original equipment manufacturer or Personal
Computers that is a licensee of a Windows Operating System Product.
P. ``Operating System'' means the software code that, inter alia,
(i) controls the allocation and usage of hardware resources (such as
the microprocessor and various peripheral devices) of a Personal
Computer, (ii) provides a platform for developing applications by
exposing functionality to ISVs through APIs, and (iii) supplies a user
interface that enables users to access functionality of the operating
system and in which they can run applications.
Q. ``Personal Computer'' means any computer configured so that its
primary purpose is for use by one person at a time, that uses a video
display and keyboard (whether or not that video display and keyboard is
included) and that contains an Intel x86 compatible (or successor)
microprocessor. Servers, television set top boxes, handheld computers,
game consoles, telephones, pagers, and personal digital assistants are
examples of products that are not Personal Computers within the meaning
of this definition.
R. ``Timely Manner'' means at the time Microsoft first releases a
beta test version of a Windows Operating System Product that is
distributed to 150,000 or more beta testers.
S. ``Top-Level Window'' means a window displayed by a Windows
Operating System Product that (a) has its own window controls, such as
move, resize, close, minimize, and maximize, (b) can contain sub-
windows, and (c) contains user interface elements under the control of
at least one independent process.
T. ``Trademarked'' means distributed in commerce and identified as
distributed by a name other than Microsoft or
Windows that Microsoft has claimed as a trademark or service
mark by (i) marking the name with trademark notices, such as
or \TM\, in connection with a product distributed in the United States;
(ii) filing an application for trademark protection for the name in the
United States Patent and Trademark Office; or (iii) asserting the name
as a trademark in the United States in a demand letter or lawsuit. Any
product distributed under descriptive or generic terms or a name
comprised of the Microsoft or Windows trademarks
together with descriptive or generic terms shall not be Trademarked as
that term is used in this Final Judgment. Microsoft hereby disclaims
any trademark rights in such descriptive or generic terms apart from
the Microsoft or Windows trademarks, and hereby
abandons any such rights that it may acquire in the future.
U. ``Windows Operating System Product'' means the software code (as
opposed to source code) distributed commercially by Microsoft for use
with Personal Computers as Windows 2000 Professional, Windows XP Home,
Windows XP Professional, and successors to the foregoing, including the
Personal Computer versions of the products currently code named
``Longhorn'' and ``Blackcomb'' and their successors, including
upgrades, bug fixes, service packs, etc. The software code that
comprises a Windows Operating System Product shall be determined by
Microsoft in its sole discretion.
VII. Further Elements
Jurisdiction is retained by this Court over this action and the
parties thereto for the purpose of enabling either of the parties
thereto to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify or terminate any of its provisions, to
enforce
[[Page 59460]]
compliance, and to punish violations of its provisions.
VIII. Third Party Rights
Nothing in this Final Judgment is intended to confer upon any other
persons any rights or remedies of any nature whatsoever hereunder or by
reason of this Final Judgment.
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Microsoft Corporation,
Defendant
[Civil Action No. 98-1232 (CKK)]
State of New York ex. rel., Attorney General Eliot Spitzer, et al.,
Plaintiffs, v. Microsoft Corporation, Defendant
[Civil Action No. 98-1233 (CKK)]
Competitive Impact Statement
Pursuant to section 2(b) of the Antitrust Procedures and Penalties
Act (``APPA''), 15 U.S.C. 16(b)-(h), the United States files this
Competitive Impact Statement relating to the revised proposed Final
Judgment (``Proposed Final Judgment'') submitted on November 6, 2001
for entry in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
On May 18, 1998, the United States filed a civil antitrust
Complaint alleging that Microsoft Corporation (``Microsoft''), the
world's largest supplier of computer software for personal computers,
restrained competition in violation of sections 1 and 2 of the Sherman
Act, 15 U.S.C. 1-2. The case was tried in the United States District
Court for the District of Columbia, which found that Microsoft violated
both sections 1 and 2 of the Sherman Act. Microsoft appealed to the
United States Court of Appeals for the District of Columbia, and the
Court of Appeals affirmed in part and reversed in part the decision of
the District Court, and vacated the Final Judgment that had been
entered by the District Court. After the case was remanded to District
Court for further proceedings, the parties reached the agreement that
is embodied in the Proposed Final Judgment. The Proposed Final Judgment
will provide a prompt, certain and effective remedy for consumers by
imposing injunctive relief to halt continuance and prevent recurrence
of the violations of the Sherman Act by Microsoft that were upheld by
the Court of Appeals and restore competitive conditions to the market.
Entry of the Proposed Final Judgment will terminate this action, except
that the Court will retain jurisdiction to construe, modify, or enforce
its provisions and to punish violations thereof.
II. Overview of Relief
The Court of Appeals upheld the conclusion that Microsoft had
engaged in a variety of exclusionary acts designed to protect its
operating system monopoly from the threat posed by a type of platform
software known as ``middleware,'' in violation of section 2 of the
Sherman Act. Specifically, the Court determined that, in response to
the middleware threat, Microsoft: (1) Undertook a variety of
restrictions on personal computer Original Equipment Manufacturers
(``OEMs''); (2) integrated its Web browser into Windows in a non-
removable way while excluding rivals; (3) engaged in restrictive and
exclusionary dealings with Internet Access Providers, Independent
Software Vendors and Apple Computer; and (4) attempted to mislead and
threaten software developers in order to contain and subvert Java
middleware technologies that threatened Microsoft's operating system
monopoly.
The relief contained in the proposed Final Judgment provides
prompt, certain and effective remedies for consumers. The requirements
and prohibitions will eliminate Microsoft's illegal practices, prevent
recurrence of the same or similar practices, and restore the
competitive threat that middleware products posed prior to Microsoft's
unlawful undertakings. The provisions benefit consumers by: \1\
Ensuring that computer manufacturers have contractual and
economic freedom to make decisions about distributing and supporting
non-Microsoft middleware products without fear of coercion or
retaliation by Microsoft, by broadly prohibiting retaliation against a
computer manufacturer that supports or distributes alternative
middleware or operating systems.
Further ensuring computer manufacturers' freedom to make
middleware decisions by requiring that Microsoft provide uniform
licensing terms to the 20 largest and most competitively significant
computer manufacturers.
Ensuring that computer manufacturers have the freedom to
configure the personal computers they sell to feature and promote non-
Microsoft middleware, and ensuring that developers of these
alternatives to Microsoft products are able to feature those products
on personal computers, by prohibiting Microsoft from restricting
computer manufacturers' ability to install and feature non-Microsoft
middleware and competing operating systems in a variety of ways on the
desktop and elsewhere.
Ensuring that computer manufacturers have the freedom to
offer, and consumers the freedom to use, non-Microsoft middleware, by
requiring Microsoft to provide the ability for computer manufacturers
and consumers to customize, without interference or reversal, their
personal computers as to the middleware they install, use and feature,
and by requiring Microsoft to allow them also to designate non-
Microsoft middleware to be invoked automatically in place of Microsoft
middleware.
Ensuring that Microsoft cannot thwart the purposes of the
remedies in the Proposed Final Judgment by withholding or providing
only in discriminatory fashion necessary intellectual property
licenses, by requiring Microsoft to offer necessary related licenses
for the intellectual property that it is required to disclose.
Creating the opportunity for software developers and other
computer industry participants to develop new middleware products that
compete directly with Microsoft by requiring Microsoft to disclose all
of the interfaces and related technical information that Microsoft's
middleware uses to interoperate with the Windows operating system.
Preventing Microsoft from incorporating into the Windows
operating system features or functionality with which only its own
servers can interoperate by requiring Microsoft to disclose the
communications protocols that are necessary for software located on a
computer server to interoperate with the Windows operating system.
Ensuring that software and hardware developers are free to
develop, distribute, or write to software that competes with Microsoft
middleware or operating system software without adverse action by
Microsoft, by prohibiting Microsoft from retaliating against developers
or conditioning consideration on a developer refraining from
developing, distributing or writing to software that competes with
Microsoft platform software.
Depriving Microsoft of the means with which to retaliate
against, or induce the hindering of the development of, competing
products by prohibiting Microsoft from entering into agreements that
require parties to exclusively, or in a fixed percentage, promote
Microsoft middleware or operating system products.
The requirements and prohibitions in the Proposed Final Judgment
are supported by strong enforcement
[[Page 59461]]
provisions, including the power to seek criminal and civil contempt
sanctions and other relief in the event of a violation, and the
imposition of three full-time, on-site, independent enforcement
monitors. The Proposed Final Judgment also provides that, in an
enforcement proceeding in which Microsoft has been found to have
engaged in willful and systematic violations, the Court may order that
the five-year term may be extended by up to two years, in addition to
any other relief the Court deems appropriate.
III. Description of the Practices Giving Rise to the Alleged Violation
A. Background of the Proceedings
1. Proceedings in the District Court
On the same day that the United States filed its Complaint against
Microsoft, 20 states and the District of Columbia (one state later
withdrew and another later reached a separate settlement) filed a
similar, although not identical, complaint. The District Court
consolidated the cases at Microsoft's request. The Complaint alleged
that Microsoft unlawfully maintained its monopoly in the market for
operating systems designed to run on Intel-compatible personal
computers by engaging in a series of exclusionary, anticompetitive and
predatory acts in violation of section 2 of the Sherman Act. The
Complaint also asserted that Microsoft unlawfully attempted to
monopolize the market for Web browsers in violation of section 2 of the
Sherman Act, and that certain actions taken by Microsoft as part of its
campaign to protect its operating system monopoly power, such as tying
its Web browser, Internet Explorer, to its operating system and
entering into exclusive dealing arrangements, constituted unreasonable
restraints on competition in violation of section 1 of the Sherman Act.
After extensive discovery, on October 19, 1998, the Court began a
78-day trial that ended on June 24, 1999. The Court heard testimony
from 26 witnesses and admitted depositions of 79 other witnesses and
2,733 exhibits. On November 5, 1999, the Court entered its Findings of
Fact. United States. v. Microsoft Corp., 84 F. Supp.2d 9 (D.D.C. 1999).
On April 3, 2000, after the parties had engaged in four months of
intensive but ultimately unsuccessful mediation efforts before Judge
Richard Posner, the Court entered its Conclusions of Law. United States
v. Microsoft Corp., 87 F. Supp.2d 30 (D.D.C. 2000).
The District Court held that Microsoft engaged in a series of
illegal anticompetitive acts to protect and maintain its personal
computer operating system monopoly, in violation of section 2 of the
Sherman Act and analogous state laws. The Court also concluded that
Microsoft violated Section 2 by attempting to monopolize the market for
Web browsers and section 1 by tying its browser to its Windows
operating system. The Court ruled that Microsoft's exclusive dealing
arrangements did not separately violate Section 1. The Court then
proceeded to consider a remedy for Microsoft's antitrust violations,
and on June 7, 2000, issued this Final Judgment, which imposed a remedy
that included a break-up of Microsoft into separate operating system
and applications businesses, along with interim conduct provisions.
United States v. Microsoft Corp., 97 F. Supp. 2d 59 (D.D.C. 2000).
2. Proceedings in the Court of Appeals
Microsoft appealed the District Court's decision. On June 28, 2001,
the Court of Appeals, sitting en banc, unanimously affirmed in part,
reversed in part and remanded in part the District Court judgment.
Specifically, the Court affirmed the District Court's finding and
conclusion that Microsoft had illegally maintained its operating system
monopoly in violation of Section 2. United States v. Microsoft Corp.,
253 F.3d 34 (D.C. Cir. 2001). The Court upheld the District Court's
finding of monopoly power in the market for Intel-compatible personal
computer operating systems. With certain exceptions, the Court agreed
with the District Court's findings and conclusions that Microsoft had
engaged in a variety of exclusionary acts designed to protect its
operating system monopoly from the threat posed by a particular type of
software known as ``middleware.'' Specifically, the Court upheld the
conclusion that, in response to the middleware threat, Microsoft
undertook a variety of restrictions on OEMs; integrated Internet
Explorer into Windows in a non-removable way while excluding rivals;
engaged in restrictive and exclusionary dealings with Internet Access
Providers, Independent Software Vendors, and Apple Computer; and
attempted to mislead and threaten software developers in order to
contain and subvert so-called ``Java'' middleware technologies that
threatened Microsoft's operating system monopoly. Each of these
actions, which served to maintain the Windows monopoly, violated
section 2 of the Sherman Act.
The Court reversed and remanded the Section 1 tying claim for
reconsideration under the more rigorous rule of reason standard. It
also reversed the District Court's determination that Microsoft had
attempted to monopolize the Web browser market in violation of Section
2. In light of its finding that an evidentiary hearing on remedy was
necessary and the fact that the District Court's Final Judgment may
have rested on liability determinations that did not survive appellate
review, the Court of Appeals vacated the Final Judgment and remanded
the case to the District Court for new remedy proceedings. Finally, the
Court of Appeals disqualified the trial judge retroactively to the date
of entry of the Final Judgment based on violations of 28 U.S.C. 455(a).
3. Proceedings in the District Court Upon Remand
Upon remand, the District Court ordered the parties to confer and
file a Joint Status Report, identifying the issues that remained on
remand and the measures to be taken to reach resolution, and proposing
a schedule. As part of that process, Plaintiffs advised Microsoft that
they did not intend to pursue further proceedings on remand regarding
their Section 1 tying claim and did not intend to pursue on remand the
restructuring of Microsoft into separate operating system and
applications businesses that had previously been ordered by the
District Court. Plaintiffs took these steps after careful consideration
of the Court of Appeals' decision and its likely impact on prospective
remedies, in an effort to obtain prompt, effective and certain relief
for consumers.
Subsequently, the District Court ordered the parties into a period
of intensive settlement and mediation discussions to attempt to reach a
fair resolution, commencing on September 28, 2001, and expiring on
November 2, 2001. During that period, the parties expended every effort
to comply with the Court's order and, after extensive negotiations, the
United States, nine of the States (New York, Ohio, Illinois, Kentucky,
Louisiana, Maryland, Michigan, North Carolina, and Wisconsin), and
Microsoft were able to reach agreement upon a Proposed Final Judgment
that would achieve a prompt, certain and effective remedy for consumers
by imposing injunctive relief to enjoin continuance and prevent
recurrence of the violations of the Sherman Act by Microsoft that were
upheld by the Court of Appeals, and restore the competitive conditions
prevailing prior to Microsoft's unlawful conduct. The Proposed Final
Judgment was filed on November 6, 2001.\2\
[[Page 59462]]
B. Factual Background
1. Microsoft's Operating System Monopoly
Personal computers consist, inter alia, of central processing
components (a microprocessor and main memory), software, and data
storage (e.g., a hard disk). The software on a personal computer
largely consists of an operating system and applications designed to
accomplish specific tasks, such as word processing. The operating
system controls the allocation and use of computer resources and serves
as a ``platform'' for applications by exposing interfaces (application
programming interfaces, or APIs) that applications invoke to perform
crucial tasks such as displaying text on a screen.
Microsoft has monopoly power in the market for Intel-compatible
personal computer operating systems and undertook an extensive campaign
of exclusionary acts to maintain its operating system monopoly. The
relevant market for evaluating Microsoft's monopoly power is the
licensing of all Intel-compatible personal computer operating systems
worldwide. Intel-compatible personal computers are designed to function
with Intel's 80x86 and successor families of microprocessors (or
compatible microprocessors). Operating systems designed for Intel-
compatible personal computers do not run on other personal computers,
and operating systems designed for other personal computers do not run
on Intel-compatible personal computers. Moreover, consumers are very
reluctant to substitute away from Intel-compatible personal computers
(for any reason, including an increase in operating system prices)
because to do so would entail incurring substantial costs and would not
result in a satisfactory substitute. Thus, a monopolist of operating
systems for Intel-compatible personal computers can set and maintain
the price of a license substantially above that which would be charged
in a competitive market without losing so many customers as to make the
action unprofitable.
2. The Applications Barrier to Entry
The operating system serves principally two functions: it enables
the computer's hardware to operate and it serves as a platform for
applications programs, such as word-processing and spreadsheets. The
latter function is the source of an ``applications barrier to entry''
that protects Microsoft's monopoly power in the operating system
market: users do not want to invest in an operating system until it is
clear that the system will support generations of applications that
will meet their needs, and developers do not want to invest in writing
or quickly porting (i.e., adapting) applications for an operating
system until it is clear that there will be a sizeable and stable
market for it. This self-reinforcing cycle is sometimes referred to as
a ``network effect,'' a phenomenon by which the attractiveness of a
product increases with the number of people using it.
The ubiquity of the Windows operating system thus induces
developers to create vastly more applications for Windows than for
other operating systems. The availability of a rich array of
applications in turn attracts consumers to Windows. A competing
operating system will not attract large numbers of users unless those
users believe that there is and will continue to be a sufficient and
timely array of applications available for use on that operating
system. Software developers, however, have little incentive to write
applications for an operating system without a large number of users.
3. Combating the Middleware Threats
The formidable applications entry barrier may be eroded through
platform software known as ``middleware.'' A middleware program is not
an operating system; rather, it is platform software that runs on top
of an operating system--i.e., uses operating system interfaces to take
advantage of the operating system's code and functionality--and
simultaneously exposes its own APIs so that applications can run on the
middleware itself. An application written to rely exclusively on a
middleware program's APIs could run on all operating systems on which
that middleware runs. Because such middleware also runs on Windows,
application developers would not be required to sacrifice Windows
compatibility if they chose to write applications for a middleware
platform. Applications developers would thus have incentives to write
for widely used middleware, and users would not be reluctant to choose
a non-Windows operating system for fear that it would run an
insufficient array of applications.
Middleware's potential to erode the applications barrier to entry
thus poses a threat to Microsoft's ability to maintain its operating
system monopoly. Recognizing this threat, Microsoft engaged in an
extensive pattern of conduct designed to eliminate the threat posed by
middleware. To protect its operating system monopoly, Microsoft focused
on two incarnations of middleware that, working together, had the
potential to weaken the applications barrier severely without the
assistance of any other middleware: Netscape's Web browser and Sun
Microsystems' implementation of the Java technologies.
a. Microsoft's Campaign To Eliminate the Netscape Threat. In
December 1994, Netscape first marketed a Web browser called Navigator.
Within months, Navigator was the preeminent Web browser. Microsoft
became deeply concerned that Netscape was moving its business in a
direction that could diminish the applications barrier to entry and
thus decided to eliminate the threat that Navigator would become a
viable alternative platform for applications. Microsoft first tried to
reach an agreement with Netscape in June 1995, pursuant to which
Netscape would have stopped efforts to develop Navigator into
``platform-level'' (i.e., API-exposing) browsing software for the
Windows 95 operating system that was to be released later that summer;
in return, Microsoft proposed to refrain from competing with Netscape
in developing browsers for other operating systems.
Microsoft warned Netscape that timely access to critical technical
information about Windows APIs--information that Netscape needed to
make its browser run well on Windows 95--depended on its acquiescence.
Had Netscape acquiesced in Microsoft's proposal, it would have become
all but impossible for Navigator or any other browser rival to pose a
platform threat to Windows.
Netscape did not accept Microsoft's proposal, and in response,
Microsoft withheld from Netscape crucial Windows-related technical
information that it routinely provided to others, and delayed the
provision of necessary APIs, so that Netscape was excluded from most of
the 1995 holiday selling season. Moreover, once it became clear to
senior executives at Microsoft that Netscape would not abandon its
efforts to develop Navigator into a platform, Microsoft focused its
efforts on ensuring that few developers would write their applications
to rely on the APIs that Navigator exposed.
Microsoft understood that software developers would only write to
the APIs exposed by Navigator in numbers large enough to threaten the
applications barrier if they believed that Navigator would emerge as
the standard software employed to browse the Web. If Microsoft could
demonstrate that Netscape would not become the standard and that
Microsoft's browser, Internet Explorer, would meet or exceed Netscape's
browser usage share, developers would continue to focus
[[Page 59463]]
their efforts on the Windows platform. Therefore, to protect the
applications barrier to entry, Microsoft embarked on a multifaceted
campaign to maximize Internet Explorer's share of usage and to minimize
Navigator's.
Decision-makers at Microsoft worried that simply developing its own
attractive browser product, providing it to consumers free of charge,
and promoting it vigorously would not divert enough browser usage from
Navigator to neutralize Navigator as a platform. Thus, rather than
confine itself to improving and promoting Internet Explorer as a
competitor to Navigator, Microsoft decided to constrict Netscape's
access to the two distribution channels that led most efficiently to
browser usage: installation by OEMs on new personal computers and
distribution by Internet Access Providers (``IAPs''). Users rarely
switched from whatever browsing software was placed most readily at
their disposal, which was usually the browsing software installed on
their computer by the OEM or supplied by their IAP when they signed up
for Internet service. Microsoft thus sought to ensure that, to as great
an extent as possible, OEMs and IAPs bundled and promoted Internet
Explorer to the exclusion of Navigator.
Microsoft largely succeeded in exiling Navigator from the crucial
OEM distribution channel. By January 1998, Microsoft executive Joachim
Kempin was able to report to CEO Bill Gates that Navigator was being
shipped through only 4 of the 60 OEM distribution sub-channels, and
even then most often in a position much less likely to lead to usage
than would Internet Explorer's position. By early 1999, Navigator was
present on the desktop of only a tiny percentage of the personal
computers that OEMs shipped.
Similarly, Microsoft's IAP channel restrictions significantly
hampered Netscape's ability to distribute Navigator: they caused
Internet Explorer's usage share to surge; they caused Navigator's usage
share to plummet; they raised Netscape's own costs; and they sealed off
a major portion of the IAP channel from the prospect of recapture by
Navigator.
To help ensure that developers would not view Navigator as truly
cross-platform middleware, Microsoft also pressured Apple to make
Navigator less readily accessible on Apple personal computers. As
leverage to obtain Apple's compliance, Microsoft threatened to cancel
development of its ``Office for Macintosh'' software, which, as
Microsoft recognized, was critical to Apple's business. Microsoft
required Apple to make Internet Explorer its default browser and
restricted Apple's freedom to feature and promote non-Microsoft
browsing software, in order to protect the applications barrier to
entry.
As part of its effort to hamper distribution of Navigator and to
discourage the development of software that used non-Microsoft
technology, Microsoft also targeted Independent Software Vendors
(``ISVs''). Microsoft contractually required ISVs to use Internet
Explorer-specific technologies in return for timely and commercially
necessary technical information about Windows, and precluded important
ISVs from distributing Navigator with their products.
Microsoft's actions succeeded in eliminating the threat that the
Navigator browser posed to Microsoft's operating system monopoly.
Foreclosed from effectively using the OEM and IAP distribution channels
by Microsoft's exclusionary conduct, Navigator was relegated to more
costly and significantly less effective modes of distribution. The
adverse business effects of these restrictions also deterred Netscape
from undertaking technical innovations in Navigator that might have
attracted consumers and revenues.
Because of its reduced access to efficient distribution channels,
Navigator's share of browser use fell precipitously. Even though
Navigator's installed base of users increased during the browser war,
the population of browser users expanded so quickly that Navigator's
usage share fell dramatically even as its installed base grew.
Navigator lost its ability to become the standard software for browsing
the Web because Microsoft had successfully--and illegally--excluded
Navigator from that status.
b. Microsoft's Efforts To Extinguish Java. Microsoft also feared
another middleware technology, Sun Microsystems' Java. Java software
presented a means for overcoming the applications barrier to entry by
enabling developers to write programs that could be ported to different
operating systems with relative ease. Microsoft was concerned about
Java because a key to maintaining and reinforcing the applications
barrier to entry has been preserving the difficulty of porting
applications from Windows to other platforms, and vice versa.
Java software has four elements: a programming language; a set of
``class libraries,'' which are Java programs that expose APIs on which
developers writing in Java can rely; a compiler that translates the
code written by the developer into Java ``bytecode''; and ``Java
Virtual Machines'' (``JVMs''), programs that translate the Java
bytecode into instructions comprehensible to the underlying system. The
Java class libraries and JVM together form the ``Java runtime
environment.'' If a software program relies only on APIs exposed by the
Java Class libraries, it will run on any personal computer system
carrying a Java runtime environment, no matter what operating system is
on the computer. Therefore, Java applications require porting only to
the extent that those applications rely directly on the APIs exposed by
a particular operating system.
In May 1995, Netscape announced that it would include a Sun-
compliant Windows JVM with every copy of Navigator, thereby creating
the possibility that Sun's Java implementation would achieve the
necessary ubiquity on Windows to pose a threat to the applications
barrier to entry. Microsoft's determination to cripple cross-platform
Java was an important reason for its concern about Navigator. Microsoft
thus took, numerous steps to interfere with the development,
distribution, and use of cross-platform Java. Those steps included: (1)
Pressuring third parties not to support cross-platform Java; (2)
seeking to extinguish the Java threat through technological means that
maximized the difficulty with which applications written in Java could
be ported from Windows to other platforms, and vice versa; and (3)
other anticompetitive steps to discourage developers from creating Java
applications compatible with non-Microsoft JVMs.
Through its actions against Navigator and Java, Microsoft retarded,
and perhaps extinguished altogether, the process by which these two
middleware technologies could have facilitated the introduction of
competition into the market for Intel-compatible personal computer
operating systems.
4. Summary of Effects of Microsoft's Anticompetitive Conduct
The Court of Appeals affirmed that, through its anticompetitive
conduct, Microsoft has unlawfully protected and maintained its
operating system monopoly in violation of section 2 of the Sherman Act.
IV. Explanation of the Proposed Final Judgment
The Proposed Final Judgment seeks to eliminate Microsoft's illegal
practices, to prevent recurrence of the same or similar practices and
to restore the competitive threat that middleware products posed prior
to Microsoft's
[[Page 59464]]
unlawful conduct. As discussed in further detail below, it seeks to
achieve these goals by prohibiting Microsoft from engaging in specified
activities, by requiring Microsoft to undertake certain other specified
activities, by establishing a three-person independent Technical
Committee (``TC'') to assist in enforcement and compliance, and by
requiring Microsoft to establish an internal antitrust compliance
program. The Proposed Final Judgment applies to Microsoft's conduct
nationwide.
A. Scope of the Proposed Final Judgment
A number of the definitions contained in the Proposed Final
Judgment are essential to understanding the proper construction of the
scope of the requirements and restrictions contained in the Proposed
Final Judgment.
``Microsoft Middleware,'' a defined term, is the concept that
triggers Microsoft's obligations, including those relating to
Microsoft's licensing and disclosure obligations under sections III.D.
and III.E., in this Proposed Final Judgment. Microsoft Middleware means
software code that is distributed separately from a Windows Operating
System Product to update that Windows Operating System Product, is
Trademarked (as that term is defined in the Proposed Final Judgment),
provides the same or substantially similar functionality as a Microsoft
Middleware Product and, at a minimum, includes the software code that
controls most or all of the user interface elements of the Microsoft
Middleware. Microsoft typically develops and distributes a
``redistributable'' associated with Microsoft Middleware Products. For
instance, Microsoft offers a redistributable of Internet Explorer 6,
which is a set of software code that is distributed separately under
the Internet Explorer trademark and has the same functionality as
Internet Explorer in Windows XP. This block of software code is the
Microsoft Middleware that corresponds to the Internet Explore Microsoft
Middleware Product. If such a redistributable exists, as they currently
do for most Microsoft Middleware Products, then the redistributable is
Microsoft Middleware. The primary purpose of the fourth requirement,
that the Microsoft Middleware include at least the code that controls
most or all of the user interface, is to ensure that the definition
captures situations where no such redistributable exists, or where
Microsoft chooses to divide up the software code that would otherwise
have been a redistributable and to distribute that code not in one
block but in various smaller blocks. In such cases, even though the
first three requirements would be met, there could be uncertainty as to
which of the smaller blocks of code constitute the Microsoft
Middleware, particularly if some of the blocks are characterized by
Microsoft as operating system updates. The fourth requirement sets a
minimum functional requirement that in no case (regardless of the size
of, or manner of, distributing the code) shall the software code
constituting Microsoft Middleware be less than that which controls
most, or all of, the user interface elements of that Microsoft
Middleware.
Software code distributed to update a Microsoft Middleware Product,
such as an update to Internet Explorer, is Microsoft Middleware if it
is a new ``major version'' of that Product: e.g., if it is identified
by a new name or a new version number that consists of a whole number
(e.g., ``7.0'') or a number with a single digit to the right of the
decimal place (e.g., ``7.1''). This requirement is intended to focus
the definition on code updates that provide commercially meaningful new
or improved functionality, rather than simple bug fixes or patches, and
uses Microsoft's current, regular versioning practices to differentiate
minor fixes from more significant new versions.
``Microsoft Middleware Product,'' a defined term, is a concept
critical to, among other things, identifying software to which user
access and defaults must be made removable in favor of competing
software pursuant to section III.H. Microsoft Middleware Product is
broad; it covers not only a variety of existing products, but also sets
forth an objective test for products not yet in existence that may
become covered by the definition in the future. Existing products
within this definition are those that include the functionality
provided to users by a number of identified Microsoft products:
Internet Explorer, Microsoft's Java Virtual Machine, Windows Media
Player, Windows Messenger, and Outlook Express. The definition includes
not only the functionality provided by these products, but also
functionality provided by any successors to these products distributed
by Microsoft. A future product would also be a Microsoft Middleware
Product if it is first licensed, distributed or sold by Microsoft after
entry of the Proposed Final Judgment as part of a Windows Operating
System Product, and provides functionality similar to Internet
browsers, email client software, networked audio/video client software,
and instant messaging software. Thus, for example, future real time
communications software that provides functionality similar to instant
messaging software would be included, whether that software provides
instant messaging via text, audio, and/or video. Alternately, future
products would be encompassed within this definition if, in the year
preceding commercial release of a new Windows Operating System Product,
they are distributed separately from Windows, provide functionality
similar to a Non-Microsoft Middleware Product, and are Trademarked.
To be distributed separately from a Windows Operating System
Product means that the software code is distributed separately from the
original installation on a Personal Computer in any channel. Examples
of channels include retail, separate installation by OEMs, downloads,
inclusion with third-party software products, mass-mailings, and the
Windows Update facility. Any software received in any of these channels
after the original installation of a Windows Operating System Product
is distributed separately from that Product. Software can be considered
to be both part of a Windows Operating System Product and distributed
separately from that Product.
``Non-Microsoft Middleware Product,'' a defined term, is the
concept used, among other places, to identify software that may be
installed in lieu of a Microsoft Middleware Product, as provided in
Section III.H. Generally speaking, ``Non-Microsoft Middleware'' is
third-party software that, similar to the browser, has the potential to
create a competitive threat to Microsoft's Windows monopoly by lowering
the applications barrier to entry. A Non-Microsoft Middleware Product
is any software that both meets the definition of Non-Microsoft
Middleware and has at least one million copies distributed in the
United States within the previous year. This requirement of a minimal
amount of actual distribution of such products is intended to avoid
Microsoft's affirmative obligations--including the API disclosure
required by Section III.D. and the creation of the mechanisms required
by Section III.H.--being triggered by minor, or even nonexistent,
products that have not established a competitive potential in the
market and that might even be unknown to Microsoft development
personnel.
``Non-Microsoft Middleware'' is any software: (I) Not licensed,
distributed or sold by Microsoft; (ii) that is capable of running on a
Windows Operating System Product; (iii) that itself provides APIs that
can be invoked by ISVs to obtain a range of functionality; and (iv)
that, if ported to or made to work with
[[Page 59465]]
a non-Microsoft Operating System, could make it easier for software
applications that invoke its functionality to be ported to or run on
such non-Microsoft Operating Systems.
It was important to provide some limitations on these and other,
related definitions, because not all software that exposes APIs would
qualify as ``middleware'' with competitive significance for purposes of
this case. While it is critical that meaningful, future middleware
products be captured by the Proposed Final Judgment, such products may
not always be readily identifiable as such. Without limitations on the
definition, any software developer would be able to claim that any
software product was middleware and thereby insist on exercising
options and alternatives provided by the Proposed Final Judgment. The
limits in the definitions ensure that the provisions of the Proposal
Final Judgment apply to products that can credibly be said to pose,
alone or in combination with other products, nascent threats to the
applications barrier to entry.
The definition of ``Trademarked'' is designed to ensure that the
Microsoft Middleware and the Microsoft Middleware Products that
Microsoft distributes (either for free or for sale) to the market as
commercial products are covered by the Proposed Final Judgment. The
definition of Trademarked in all respects applies equally to both
trademarks and service marks.
The definition has two categories. The first category covers
products distributed in commerce under distinctive names or logos other
than by the Microsoft or the Windows names by
themselves. In order for such products to be Trademarked within the
meaning of this definition, Microsoft must claim the name under which
the product is distributed, or by which the product is identified, as a
trademark or service mark in one of the following ways: (1) By marking
the name with trademark notices in connection with a product
distributed in the United States; (2) by filing an application for
trademark protection for the name in the United States Patent and
Trademark Office; or (3) by asserting the name as a trademark in the
United States in a demand letter or lawsuit. As long as Microsoft makes
a claim in one of these three ways, for any name other than
Microsoft or Windows by itself, the definition is
satisfied. For example, products distributed in commerce under, or
identified by, the Windows Media name are covered.
The second category covers products distributed in commerce under
generic or descriptive terms or generic or descriptive terms in
combination with either the Microsoft or the
Windows name, where such terms of combinations of terms do
not meet any of the three requirements for being claimed as a trademark
or service mark outlined in connection with the first category.
Microsoft expressly disclaims all rights in, and abandons any rights it
may acquire in the future to, such generic or descriptive terms or
combinations of generic or descriptive terms with either the
Microsoft or the Windows name. Products falling
within this second category are neither Microsoft Middleware nor
Microsoft Middleware Products. The second category does not exempt from
coverage as Trademarked any product distributed in commerce under, or
identified by, marks that consist of any combination of generic or
descriptive terms and a distinctive logo or other stylized
presentation. For example, the mark MEDIA, although a generic term,
would not fall within the second category if it were presented as a
part of a distinctive logo or another stylized presentation because the
mark itself would not be either generic or descriptive.
The portion of this definition relating to Microsoft's disclaimer
of certain trademarks or service marks and its abandonment of any
rights to such trademarks or service marks in the future is designed to
ensure that, to the extent that Microsoft distributes a product in
commerce under generic or descriptive terms or generic or descriptive
terms in combination with either the Microsoft or the
Windows name and claims on that basis that such product does
not fall within the definition of Microsoft Middleware or Microsoft
Middleware Product, it must forever disclaim and abandon any rights to
the name under which any such product is distributed in commerce.
``Windows Operating System Product'' means the software
commercially distributed by Microsoft for use with Personal Computers
under the names Windows 2000 Professional, Windows XP Home and
Professional, and successors to these products. In general terms, it
refers to Microsoft's line of ``desktop'' operating systems, as opposed
to its server or other operating systems. Windows Operating System
Product applies to software marketed under the listed names and
anything marketed as their successors, regardless of how that software
code is distributed, whether the software code is installed all at once
or in pieces, or whether different license(s) apply.
While the software code that comprises a Windows Operating System
Product is determined by Microsoft's packaging decisions (i.e., by what
it chooses to ship as ``Windows''), software code that is part of a
Windows Operating System Product can also meet the requirements of
other definitions, such as those for Microsoft Middleware and Microsoft
Middleware Product. For example, Internet Explorer is both part of a
Windows Operating System Product and a Microsoft Middleware Product.
B. Prohibited Conduct and Anticipated Effects of the Proposed Final
Judgment
Appropriate injunctive relief in an antitrust case should: (1) End
the unlawful conduct; (2) ``avoid a recurrence of the violation'' and
others like it; and (3) undo its anticompetitive consequences. See
Nat'l Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679, 697
(1978); United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316,
326 (1961); Int'l Salt Co. v. United States, 332 U.S. 392, 401 (1947);
United States v. Microsoft Corp., 253 F.3d 34, 103, 107 (D.C. Cir.
2001). Restoring competition is the ``key to the whole question of an
antitrust remedy,'' du Pont, 366 U.S. at 326. Competition was injured
in this case principally because Microsoft's illegal conduct maintained
the applications barrier to entry into the personal computer operating
system market by thwarting the success of middleware that would have
assisted competing operating systems in gaining access to applications
and other needed complements. Thus, the key to the proper remedy in
this case is to end Microsoft's restrictions on potentially threatening
middleware, prevent it from hampering similar nascent threats in the
future and restore the competitive conditions created by similar
middleware threats. The Proposed Final Judgment imposes a series of
prohibitions on Microsoft's conduct that are designed to accomplish
these critical goals of an antitrust remedy.
1. Section III.A.
Section III.A. ensures that OEMS have the contractual and economic
freedom to make decisions about distributing and supporting non-
Microsoft software products that have the potential to weaken
Microsoft's personal computer operating system monopoly without fear of
coercion or retaliation by Microsoft. The District Court found, and the
Court of Appeals upheld, that OEMs are a crucial channel for the
distribution and ultimate usage of non-Microsoft Middleware Products
such as browsers. Accordingly, it is critical that the OEMs, through
whom the large majority of
[[Page 59466]]
copies of Microsoft's Windows Operating System Products reach
consumers, are free to choose to distribute and promote middleware
without interference from Microsoft.
Section III.A. broadly prohibits any sort of Microsoft retaliation
against an OEM based on the OEM's contemplated or actual decision to
support non-Microsoft software. Specifically, Microsoft is barred from
retaliating by altering its existing commercial relations with an OEM
based on the OEM's work with Non-Microsoft Middleware or Operating
Systems. The existing Microsoft-OEM relationship provides a baseline
against which any changes Microsoft makes in its treatment of that OEM
for prohibited reasons can be detected and assessed. Microsoft is
further prohibited from retaliating against OEMs by withholding newly-
introduced forms of non-monetary ``Consideration'' (a defined term
referring to the various means available to Microsoft by which it can
retaliate against or reward another firm; specifically, preferential
licensing terms; technical, marketing, and sales support; enabling
programs; product information; information about future plans;
developer support; hardware or software certification or approval; or
permission to display trademarks, icons or logos). For example, if
Microsoft begins a new technical program or a new logo or software
certification program that is not yet part of its existing commercial
relations with an OEM, Microsoft cannot withhold the new Consideration
from the OEM because the OEM is shipping or promoting products that
compete with Microsoft Middleware or Operating Systems. Microsoft
similarly cannot punish the OEM by withholding participation in a
successor version of an existing form of Consideration, for example, in
a logo program for calendar year 2003. This effectively bars Microsoft
from using either money or the wide range of economic and commercial
levers at its disposal to restrain OEM's support of competing software.
Section III.A. is also broad in the range of OEM activities which
Microsoft is prohibited from affecting through retaliation or coercion.
Microsoft cannot retaliate against an OEM because Microsoft knows that
the OEM either is or is contemplating: (I) Developing, distributing,
promoting, using, selling, or licensing any software that competes with
Microsoft Middleware or a Microsoft Operating System, or any product or
service that distributes or promotes Non-Microsoft Middleware; (ii)
shipping personal computers that have more than one operating system or
that will ``dual boot'' into different operating systems; or (iii)
exercising any other options or alternatives that are assured to OEMs
by other provisions of the Proposed Final Judgment. Thus, OEMs will be
assured the freedom to make independent decisions about the middleware
and other operating systems they install, distribute and promote based
on the demands of their customers and not on fear of retaliation by, or
coercion from, Microsoft.
Section III.A. does permit Microsoft to provide Consideration to an
OEM for a particular Microsoft product or service where the
Consideration is commensurate with the level or amount of the OEM's
development, distribution, promotion or licensing of that product or
service. Thus, Microsoft is limited to providing Consideration for a
specific Microsoft product or service in return for the OEM supporting
that product or service. Moreover, Microsoft can base such
Consideration only on the absolute level or amount of the OEM's support
for the Microsoft product or service, rather than on any relative level
or amount.
Finally, Section III.A. helps ensure the freedom of OEMs to make
decisions about the software they install and promote free from
Microsoft's influence by protecting the OEMs from having their vital
licenses to Windows Operating System Products canceled without notice.
Microsoft is barred from terminating the licenses of any of the 20
largest and most competitively significant OEMs (defined as ``Covered
OEMs'') without first giving written notice of the reasons for the
proposed termination and not less than a 30-day opportunity to cure
(except for a Covered OEM that has already received two such notices
during the term of its license agreement). Without such protection, the
threat that key OEMs could suddenly lose their Windows license, and
that such loss is at Microsoft's discretion, could act as a powerful
deterrent against OEMs taking the risk of promoting and distributing
software that competes with Microsoft's.
2. Section III.B.
In order to ensure freedom for the 20 Covered OEMs from the threat
of Microsoft retaliation or coercion, Section III.B. requires that
Microsoft's Windows Operating System Product licenses with such OEMs
contain uniform terms and conditions, including uniform royalties.
These royalties must be established by Microsoft in advance on a
schedule that is available to Covered OEMs and the Plaintiffs.
Windows license royalties and terms are inherently complex and easy
for Microsoft to use to affect OEMs' behavior, including what software
the OEMs will offer to their customers. By eliminating any opportunity
for Microsoft to set a particular OEM's royalty or license terms as a
way of inducing that OEM to decline to promote non-Microsoft software
or retaliating against that OEM for its choices to promote non-
Microsoft software, this provision will ensure that OEMs can make their
own independent choices. The provision permits Microsoft to employ
volume discounts, but requires that such discounts be based on pre-set,
legitimate volume levels.
Section III.B. also prohibits Microsoft from using market
development allowances (``MDAs'') or programs or other discounts to
reward or retaliate against particular OEMs for the choices they make
about installing and promoting Non-Microsoft Middleware or Operating
Systems or for any other purpose that is inconsistent with the
provisions of the Proposed Final Judgment. If Microsoft utilizes MDAs
or similar discounts, they must be available and awarded uniformly to
the ten largest OEMs on one discount scale and separately to the ten
next largest on the same or another discount scale. In addition, the
discounts must be based on objective, verifiable criteria that are
applied uniformly. These restrictions ensure that Microsoft cannot use
MDAs or other discounts to in any way discourage or prevent OEMs from
choosing to favor, promote, or ship software that could threaten
Microsoft's monopoly or otherwise from exercising the options and
alternatives assured to OEMs by the Proposed Final Judgment.
Section III.B. is limited to the 20 OEMs with the highest worldwide
volume of licenses of Windows Operating System Products. Those OEMs
together account for a substantial percentage of all Windows licenses
and, consequently, ensuring their freedom to distribute and promote
particular types of software that could erode Microsoft's monopoly is
competitively significant.
3. Section III.C.
Section III.C. of the Proposed Final Judgment prohibits conduct--
e.g., Microsoft's restrictions on an OEM's ability to remove or install
desktop icons, folders and Start menu entries and to modify the initial
boot sequence and to make certain alterations to the desktop--that the
Court of Appeals found to be anticompetitive and unjustified. Section
III.C. is designed to ensure that OEMs have the freedom to
[[Page 59467]]
configure the personal computers they sell by pre-installing, featuring
and promoting Non-Microsoft Middleware or non-Microsoft Operating
Systems, products that over time could help lower the applications
barrier to entry. This Section prevents Microsoft from restricting a
wide variety of actions OEMs may take to offer rival middleware to
consumers and to feature that middleware in ways that increase the
likelihood that consumers will choose to use it. Assuring this
flexibility for OEMs is important to prevent the recurrence of conduct
found to be illegal by the Court of Appeals and to help restore the
competitive conditions that Microsoft's conduct undermined.
Flexibility in Offering and Promoting Non-Microsoft Middleware: The
first three subsections of Section III.C. prohibit Microsoft from
restricting by agreement (any contract, requirement or understanding)
OEMs from pre-installing, distributing, promoting or launching
automatically Non-Microsoft Middleware or related products or services.
Thus, for example, Microsoft may not include terms in a license
agreement, Windows OEM preinstallation kit instructions, MDAs or other
programs, or any other contractual document, that restrict OEMs'
freedom to install and feature Non-Microsoft Middleware in the ways
specified in subsections III.C.1-3.
These subsections prevent Microsoft from restricting the freedom of
OEM's to install and display icons, shortcuts, or menu entries both for
Non-Microsoft Middleware and, more broadly, for any other product or
service (including IAP products or services) that distributes, uses,
promotes or supports Non-Microsoft Middleware. For example, an OEM may
promote or install third-party offers for Internet access, subscription
on-line music services, or Web-based applications that use or support
Non-Microsoft Middleware such as an alternate browser, audio-video
client software, or Java Virtual Machine. Subsection III.C.1. ensures
that OEMs are free to install such products and services and to place
icons, shortcuts or menu entries for them on the Windows desktop or
Start menu.
This subsection also provides OEMs the flexibility to display such
icons, shortcuts, or menu entries anywhere else in Windows where a list
of icons, shortcuts or menu entries for applications are generally
displayed. For example, OEMs must be free to feature Non-Microsoft
Middleware in the system tray and quick launch bar, ``right-click''
lists, ``open with'' lists and lists that appear based on an action or
an event, such as connecting hardware or inserting an audio CD.
Microsoft may specify that certain lists of icons, shortcuts, or menu
entries are limited to products with particular types of functionality;
for example, Microsoft may require that OEMs not place icons for media
players or browsers in control panel windows that are limited to
system-utility type functions, so long as any such requirements apply
equally to Microsoft and non-Microsoft products. Thus, by way of
example, Microsoft may reserve a particular list for multimedia
players, but cannot specify either that the listed player be its own
Window Media Player or that, whatever multimedia player an OEM chooses
to list in that entry, it be capable of supporting a particular
proprietary Microsoft data format. Such non-generic specification,
which would have the effect of restricting the display of competing
Non-Microsoft Middleware, would not be ``non-discriminatory'' as
required by subsection III.C.1.
Subsection III.C.2. prevents Microsoft from restricting an OEM's
ability to distribute or promote Non-Microsoft Middleware by installing
and displaying on the Windows desktop shortcuts of any size or shape,
so long as the shortcut is not of a size or shape that effectively
impairs the functionality of the user interface. Thus, Microsoft could
prevent an OEM from installing a large ``shortcut'' that covered the
Start button or obscured the entirety of the Windows user interface,
but could not generally ban OEMs from installing large or differently-
shaped shortcuts.
Subsection III.C.3. requires that Microsoft permit OEMs to
configure their products to launch Non-Microsoft Middleware
automatically at the conclusion of the first boot sequence or
subsequent boot sequences or upon connection to or disconnection from
the Internet, if Microsoft has configured any of its Microsoft
Middleware Products that provide similar functionality to do so. Thus,
if Microsoft configured its products automatically to launch
functionality provided by a Microsoft Middleware Product on boot-up or
in conjunction with an Internet session, an OEM must be free instead to
launch automatically similar functionality of Non-Microsoft Middleware.
For example, if Microsoft configured its Windows Media Player
automatically to launch in a personal computer's memory upon boot-up or
connection to the Internet, an OEM could instead automatically launch a
competing media player upon those same events.
The only other limitation Microsoft may impose on OEMs in this
circumstance is that any Non-Microsoft Middleware the OEM configures to
launch automatically cannot display a user interface that is not of
similar size and shape as the Microsoft Middleware Product user
interface that would otherwise launch automatically. For example, if
Windows Messenger automatically launches after connection to the
Internet, but only appears in the system tray, an OEM may configure a
competing instant messaging client to launch automatically at the same
time, but that product also must appear only in the system tray and not
display the full user interface.
Flexibility to Offer Alternate Operating Systems and ``Dual Boot''
Personal Computers: Subsection III.C.4. ensures that OEMs will be free,
if they choose, to offer users the option of launching other operating
Systems during the personal computer's boot-up, either from the initial
BIOS program or from a non-Microsoft boot loader that launches prior to
the start of the Windows Operating System Product. This provision
forbids Microsoft from stopping OEMs from offering ``dual-boot''
systems--computers that give users the choice of either launching a
Windows Operating System Product or another general- or special-purpose
Operating System--on the same personal computer.
OEM-Specific IAP Offers in the Bootup Sequence: Subsection III.C.5.
ensures that OEMs will be free to create and display in the initial
Windows boot sequence a customized offer for the user to choose his or
her IAP. Microsoft may limit such offers only by requiring that they
comply with ``reasonable technical specifications,'' including a
requirement that the initial boot sequence be completed upon conclusion
of any such offer. Because a user's IAP can be an important source of
choices about various middleware for the user, ensuring OEM freedom to
offer customized IAP offers during the initial boot process can have
substantial competitive value.
No Contractual Restrictions on OEMs Exercising Other Options in the
Decree: Finally, subsection III.C.6. prohibits Microsoft from
restricting by agreement an OEM's right to exercise any of the
technical configuration options that Microsoft must make available to
OEMs under Section III.H., discussed below. This ensures that Microsoft
cannot prohibit or impede by contract an OEM's access to or use of what
Microsoft must make available through technical facilities in its
Windows Operating System Products.
4. Section III.D.
Section III.D. of the proposed Final Judgment requires Microsoft to
disclose
[[Page 59468]]
to ISVs, IHVs, IAPs, ICPs and OEMs all of the interfaces and related
technical information that Microsoft Middleware uses to interoperate
with any Windows Operating System Product. This provision ensures that
developers of competing middleware--software that over time could begin
to erode Microsoft's Operating System monopoly--will have full access
to the same interface and related information as Microsoft Middleware
has to interoperate with Windows Operating System Products. Microsoft
will not be able to hamper the development or operation of potentially
threatening software by withholding interface information or permitting
its own products to use hidden or undisclosed interfaces.
Section III.D. requires disclosure of ``Application Programming
Interfaces'' or ``APIs,'' which are the interfaces, including any
associated callback interfaces, that Microsoft Middleware running on a
Windows Operating System Product uses to call upon that Windows
Operating System Product in order to obtain services from it.
``Interfaces'' includes, broadly, any interface, protocol or other
method of information exchange between Microsoft Middleware and a
Windows Operating System Product.
Section III.D. also requires that Microsoft disclose
``Documentation,'' which means all the technical information regarding
the identification and means of using APIs that a programmer of
ordinary skill requires to make effective use of those APIs.
Documentation refers to such information that is of the sort and to the
level of specificity, precision and detail that Microsoft currently
provides to ISVs and others through the Microsoft Developer's Network
(``MSDN''). Through its MSDN service, Microsoft presently makes widely
available on the Internet an extensive and detailed catalog of
technical information that includes, among other things, information
about most Windows APIs for use by developers to create various Windows
applications. MSDN access is presently broadly available to developers
and other interested third parties. If in the future Microsoft uses
another mechanism for disclosure of such information, that mechanism
must be similar in scope and availability to that provided today via
MSDN.
Microsoft Must Disclose All APIs and Related Documentation: Section
III.D. requires Microsoft to disclose to ISVs, IHVs, IAPs, ICPs and
OEMs the APIs and related Documentation that any Microsoft Middleware
uses to interoperate with a Windows Operating System Product. Third
parties may then use those APIs and related Documentation for the
purpose of ensuring that their products interoperate with Windows
Operating System Products. Microsoft is to provide these disclosures
via MSDN or similar mechanisms.
Microsoft's initial obligation to provide the disclosures of APIs
and related Documentation under this section arises when Microsoft
releases the upcoming first Service Pack for Windows XP, or twelve
months after November 6, 2001 (the date the Proposed Final Judgment was
presented to the Court), whichever occurs first. Thereafter, Microsoft
is under a continuing obligation to disclose additional APIs and
Documentation. Whenever Microsoft develops an updated version of a
Windows Operating System Product, it must disclose all relevant APIs
and Documentation in a ``Timely Manner,'' meaning at the time Microsoft
first releases a widespread beta test version of that Windows Operating
System Product (i.e., one made available to 150,000 or more beta
testers). If, alternatively, Microsoft develops a new ``major version''
of Microsoft Middleware, it must disclose any APIs and Documentation
used by that Middleware to interoperate with any Windows Operating
System Product not later than the release of the last major beta
version of that middleware (i.e., the version before the release of any
``release candidate'' version of the middleware). This dual-timing
trigger mechanism is important to ensure that ISVs and other third
parties learn of all relevant APIs and the information needed
effectively to use them well in advance of the actual commercial
releases of the relevant Microsoft software, so that the third parties
can ensure that their own competing products function on and
interoperate with Windows.
The effect of Section III.D. is to assure to Non-Microsoft
Middleware meaningful access to the same services provided by the
operating system as those available to Microsoft Middleware. Microsoft
Middleware will not have access to any hidden or proprietary features
of Windows Operating System Products that might allow it to operate
more effectively. For example, going forward under this provision, the
APIs and related Documentation for the Secure Audio Path digital rights
management service that is part of Windows XP must be disclosed and
made available for use by competing media players in interoperating
with Windows XP.
5. Section III.E.
Section III.E. of the Proposed Final Judgment ensures that ISVs
will have full access to, and be able to use, the protocols that are
necessary for software located on a server computer to interoperate
with, and fully take advantage of, the functionality provided by any
Windows Operating System Product. The competitive significance of most
Non-Microsoft Middleware, including the browser and Java Virtual
Machine against which much of Microsoft's illegal conduct was directed,
was and will continue to be highly dependent on content, data and
applications residing on servers and passing over networks such as the
Internet or corporate networks to that middleware running on personal
computers. Section III.E. will prevent Microsoft from incorporating
into its Windows Operating System Products features or functionality
with which its own server software can interoperate, and then refusing
to make available information about those features that non-Microsoft
servers need in order to have the same opportunities to interoperate
with the Windows Operating System Product.
The terms ``Communications Protocols'' and ``server operating
system product'' are used throughout this Section. ``Communications
Protocols'' are what Microsoft must make available to third parties.
Communications Protocol is broadly defined to mean the set of rules for
information exchange to accomplish predefined tasks between a Windows
Operating System Product and a sever operating system product connected
through any type of network, including, but not limited to, a local
area network, wide area network, or the Internet. These rules govern
the format, semantics, timing, sequencing, and error control of
messages exchanged over a network. Every protocol that is implemented
in a Windows Operating System Product and that can be used to
interoperate with servers without other software being added to that
Windows Operating System Product must be made available by Microsoft
for third parties to license at all layers of the communications stack.
The term ``server operating system product'' includes, but is not
limited to, the entire Windows 2000 Server product families and any
successors. All software code that is identified as being incorporated
within a Microsoft server operating system and/or is distributed with
the server operating system (whether or not its installation is
optional or is subject to supplemental license agreements) is
encompassed by
[[Page 59469]]
the term. For example, a number of server software products and
functionality, including Internet Information Services (a ``web
server'') and Active Directory (a ``directory server''), are included
in the commercial distribution of most versions of Windows 2000 Server
and fall within the ambit of ``server operating system product.''
Microsoft Must Make Available All Communications Protocols:
Starting nine months after submission of the Proposed Final Judgment to
the Court, Section III.E. will impose on Microsoft a continuing
obligation to license on reasonable and non-discriminatory terms the
Communications Protocols implemented in a Windows Operating System
Product that are used by a Microsoft server operating system product to
interoperate with that Windows Operating System Product without the
addition of other software to the client computer. If a Microsoft
server interoperates with a Windows Operating System Product such as
Windows 2000 Professional or Windows XP Home or Professional using any
Communications Protocol that is part of that client operating system
(that is, without additional software code being added to the client),
then that Protocol must be made available to third parties. Protocols
implemented in Windows Operating System Products on or after November
6, 2001 (the date this Protocol Final Judgment was submitted to the
Court), must always be available for license. If, in the future,
Microsoft chooses not to implement a new or modified protocol in a
Windows Operating System Product, but instead only distributes the code
that implements that protocol along with its server software or
otherwise separately from the client operating system, as other server
software vendors must do, then Microsoft will not be required by this
Section to license that protocol. Because the Communications Protocols
must be licensed ``for use'' by such third parties, the licensing
necessarily must be accompanied with sufficient disclosure to allow
licenses fully to utilize all the functionality of each Communications
Protocol.
This provision will protect opportunities for the development and
use of Non-Microsoft Middleware by ensuring that competing, non-
Microsoft server products on which such Middleware can be hosted and
served will have the same access to and ability to interoperate with
Windows Operating System Products as do Microsoft's server operating
systems. Thus, if a Windows Operating System Product is using all the
Communications Protocols that it contains to communicate with two
servers, one of which is a Microsoft server and one of which is a
competing server that has licensed and fully implemented all the
Communications Protocols, the Windows Operating System Product should
behave identically in its interaction with both the Microsoft and non-
Microsoft servers.
Section III.E. will permit seamless interoperability between
Windows Operating System Products and non-Microsoft servers on a
network. For example, the provision requires the licensing of all
Communications Protocols necessary for non-Microsoft servers to
interoperate with the Windows Operating System Products' implementation
of the Kerberos security standard in the same manner as do Microsoft
servers, including the exchange of Privilege Access Certificates.
Microsoft must license for use by non-Microsoft server operating system
products the Communications Protocols that Windows Operating System
Products use to enable network services through mechanisms such as
Windows server message block protocol/common Internet file system
protocol communications, as well as Microsoft remote procedure calls
between the client and server operating systems. Communications
Protocols that permit a runtime environment (e.g., a Java Virtual
Machine and associated class libraries or competing functionality such
as the Common Language Runtime) to receive and execute code from a
server also will be required to be licensed for use by non-Microsoft
servers if those protocols are implemented in a Windows Operating
System Product.
Section III.E. must be read in conjunction with subsection
III.J.1.a., which exempts from these licensing requirements certain
very limited and specific portions or layers of Communications
Protocols which would, if disclosed, compromise the system security
provided by Microsoft anti-piracy, anti-virus, software licensing,
digital rights management, encryption and authentication features. The
exception provided by subsection III.J.1.a. is a narrow one, limited to
specific end-user implementations of security items such as actual
keys, authorization tokens or enforcement criteria, the disclosure of
which would compromise the security of ``a particular installation or
group of installations'' of the listed security features. For example,
this subsection permits Microsoft to withhold limited information
necessary to protect particular installations of the Kerberos and
Secure Audio Path features of its products (e.g., keys and tokens
particular to a given installation), but does not permit it to withhold
any capabilities that are inherent in the Kerberos and Secure Audio
Path features as they are implemented in a Windows Operating System
Product. This is a critical distinction, because it ensures that
Section III.E. will make these features available to competing software
and hardware developers and permit them to offer competing
implementations of these features, and products that rely on them, that
can do the same things as Microsoft implementations of these features,
while protecting the integrity of actual, particular end-user
implementations of those systems.
6. Section III.F.
Section III.F. prohibits Microsoft from retaliating against
software and hardware developers based upon either: (i) Those
developers' development use, distribution, promotion or support of any
software that competes with Microsoft Middleware or Operating System
software or any software that runs on such competing software; or (ii)
those developers' attempts to exercise the options or alternatives
provided for under the Proposed Final Judgment. This section redresses
conduct by Microsoft specifically found unlawful by the District Court
and the Court of Appeals. It prohibits any retaliatory action by
Microsoft, while at the same time affording Microsoft a limited
opportunity to enter into certain contractual agreements with software
developers that limit the developers' ability to promote such competing
software if such limitations are reasonably necessary to, and of
reasonable scope and duration in relation to, certain bona fide
contractual obligations of the software developer.
Subsection III.F.1. embodies the basic prohibitions against
retaliation contained in Section III.F. Subsection III.F.1.a.
explicitly prohibits Microsoft from retaliating against software or
hardware developers that choose to develop, use, distribute, promote or
support software that competes with Microsoft Platform Software or any
software that runs on such competing software. Similarly, Subsection
III.F.1.b. makes explicit that Microsoft is precluded from engaging in
conduct that frustrates the purpose of the provisions contained in the
Proposed Final Judgment. Thus, Subsection III.F.1.b. ensures that ISVs
and IHVs are free to exercise the options and alternatives available to
them under the Proposed Final Judgment without fear of retaliation from
Microsoft for doing so.
[[Page 59470]]
Subsection III.F.2. prohibits agreements relating to Windows
Operating System Products in which a grant of Consideration by
Microsoft is conditioned upon a software developer refraining from
developing, using, distributing, or promoting any software that
competes wither with Microsoft Platform Software or any software that
runs on such competing software. This subsection contains a limited
exception that permits Microsoft to enter into such agreement where
such agreements are reasonably limited in scope and duration and
reasonably necessary to effectuate bona fide contractual relationships
between Microsoft and any ISV relating to the use, distribution or
promotion of Microsoft software or the development of software, for, or
in conjunction, with Microsoft. This subsection prevents Microsoft from
entering into agreements with an ISV pursuant to which, for no bona
fide purpose, the ISV is prevented from developing, using, distributing
or promoting software that rivals Microsoft's, while still permitting
ISVs, as they choose, to benefit from legitimate agreements to use or
promote Microsoft products. For example, Microsoft could enter into an
agreement with an ISV pursuant to which it provides funds to the ISV
that can only be used to promote Microsoft software and not rival
software; such a restriction would be ``reasonably necessary to and of
reasonable scope and duration in relation to a bona fide contractual
obligations of the ISV. * * *''
Finally, subsection III.F.3. makes clear that nothing in Section
III.F. prohibits Microsoft from enforcing either its agreements with
ISVs and IHVs or its legitimate intellectual property rights unless
doing so is inconsistent with any provision of the Proposed Final
Judgment. This subsection again emphasizes that Microsoft may not take
any actions, including those relating to the enforcement activities
identified in this subsection, that frustrate the purpose of the
provisions contained in the Proposed Final Judgment.
7. Section III.G.
Section III.G. of the Proposed Final Judgment prohibits Microsoft
from entering into exclusionary agreements with a variety of firms.
Subsection III.G.1 forbids agreements in which Microsoft grants
Consideration to any IAP, ICP, ISV, IHV or OEM conditioned on that
firm's exclusive distribution, promotion, use or support of Microsoft
Middleware or Windows Operating Systems Products (defined as
``Microsoft Platform Software''). This prohibition will forbid
Microsoft from using either money or the wide range of commercial
blandishments at its disposal (encompassed in the defined term
``Consideration'') to hinder the development and adoption of products
that, over time, could emerge as potential platform threats to the
Windows monopoly. Thus, this provision would bar Microsoft from
entering into agreements like the ``First Wave'' agreements with ISV's
whose provisions regarding Java and the browser the Court of Appeals
found to be exclusive in effect and illegal.
Subsection III.G.1. further prohibits agreements in which Microsoft
grants Consideration conditioned on a firm's distribution, promotion,
use or support of Microsoft Middleware or Operating Systems Products in
a fixed percentage, since such agreements in practice can serve to
exclude rival products. Microsoft is permitted to utilize fixed
percentage contracts only in the specific case where the other party to
the agreement expressly represents that it is ``commercially
practicable'' for it to undertake equally extensive or greater
distribution, promotion, use or support of non-Microsoft software that
competes with Microsoft Platform Software. For example, Microsoft could
not grant preferential marketing, technical or other support to an ISV
on the condition that the ISV ship the Windows Media Player along with
70% of the shipments of the ISV's products, unless the ISV
affirmatively states that it is commercially practicable for it also to
ship competing media players with at least the same (or greater) number
of its shipments. This provision is necessitated by the business
reality that a fixed percentage requirement, even one that on its face
requires less than full exclusivity, frequently will operate as an
exclusive or near-exclusive requirement in practice because the other
party is unable, due to capacity or other resource constraints, also to
deal with competing products. On the other hand, when the other
percentage requirement is less likely to operate as an exclusive, and
may have pro-competitive benefits.
Subsection III.G.1. requires that Microsoft obtain any such
``commercially practicable'' representation from firms only in good
faith, in other words, with a reasonable belief that the representation
is accurate. Plainly, Microsoft could not in ``good faith'' make this
representation a standard part of its agreements with all IAPs, ICPs,
ISVs, IHVs or OEMs, nor could it insist on or coerce such a
representation where the third party did not independently and
affirmatively evaluate and conclude that the representation would be
true. Such statements must be genuine and bona fide, and the decision
whether or not to make them is entirely within the judgment of the
third party.
Subsection III.G.2. prohibits Microsoft from entering into any
agreement that conditions placement on the Windows desktop or anywhere
else in a Windows Operating System Product of an IAP's or ICP's
software, services, content or other material on its agreement to
refrain from distributing, promoting, or using software that competes
with Microsoft Middleware. The Court of Appeals upheld the conclusion
that Microsoft violated Section 2 by explicitly conditioning valuable
consideration--specifically the provision of easy access to IAP's
services from the Windows desktop--on the IAPs' agreements to restrict
distribution and promotion of the competing Navigator browser and
instead to promote Microsoft's Internet Explorer exclusively. 253 F.3d
at 68-69. Such agreements are barred by this subsection.
The restrictions in Section III.G. will not interfere with
Microsoft's ability to engage in legitimate joint activities with ISV's
IHVs, IAPs, ICPs or OEMs. Microsoft may enter into bona fide joint
ventures or joint development or services arrangements for the creation
of new or materially improved products, technologies or services that
prohibit the other party from competing with the object of the joint
venture for a reasonable period of time, but only so long as the
arrangements involve the legitimate and substantial shared contribution
of resources that necessarily characterize procompetitive
collaborations. By limiting the joint agreement exception to activities
that meet these conditions, Section III.G. ensures that Microsoft
cannot use the exception to attempt to evade the prohibitions and to
engage in exclusionary contracts in the course of normal commercial
relations between it and ISVs, IHVs, IAPs, ICPs and OEMs.
Finally, Section III.G. does not apply to agreements in which
Microsoft licenses intellectual property in from a third party. This
licensing-in exception would, for instance, permit Microsoft to license
new technology from an ISV for incorporation into Windows on the
condition that the ISV not license the same technology for
incorporation into any other personal computer operating system. Such
an exception is consistent with the competitive goals of the Proposed
Final Judgment because it preserves Microsoft's incentive to invest in
successfully using and promoting the intellectual property that it
licenses from others. This licensing-in exception
[[Page 59471]]
to Section III.G. does not permit Microsoft to enter into agreements,
otherwise prohibited by Section III.G., that contain overboard terms
not reasonably related to the licensing-in of intellectual property.
8. Section III.H.
Section III.H. of the Proposed Final Judgment addresses Microsoft's
illegal use of license restrictions and other actions (such as the
withdrawal of removal options from OEMs and end users) to exclude rival
middleware products. This Section ensures that OEMs will be able to
choose to offer and promote, and consumers will be able to choose to
use, Non-Microsoft Middleware Products such as Internet browsers, media
players, instant messaging programs, and email software. In particular,
this Section requires Microsoft to provide the ability for OEMs
(through standard preinstallation kits) and end users (through a
mechanism such as an Add/Remove utility) to customize their personal
computers by removing access to, and automatic invocation of, Microsoft
Middleware Products, and by replacing those products with competing
Non-Microsoft Middleware Products.
Because Microsoft must make certain technical changes to its
Windows 2000 and Windows XP Windows Operating System Products to comply
with Section III.H., its requirements will become effective upon the
release of the first Service Pack for Windows XP or 12 months after
submission of the Proposed Final Judgment to the Court, whichever is
earlier.
With respect to any new (i.e., post-Windows XP) Windows Operating
System Product, Microsoft's obligations under this Section will be
determined based on the Microsoft Middleware Products that exist 7
months prior to the last beta test version of that new Windows
Operating System Product. This time period similarly is intended to
give Microsoft the opportunity to make necessary product changes.
For a discussion of the definitions of ``Non-Microsoft Middleware
Product,'' ``Non-Microsoft Middleware'' and ``Microsoft Middleware
Product,'' terms which are used throughout this Section, see Section
IV.A., supra.
End User Access Requirements: Subsection III.H.1. requires
Microsoft to allow end users and OEMs to enable or remove access to,
and enable or disable automatic invocations of, any Microsoft
Middleware Product and Non-Microsoft Middleware Product. Consumers must
be given the ability to make or reverse choices and to switch easily
back and forth between the configurations. For example, Microsoft
cannot offer end users or OEMs an option of eliminating access to or
default invocation of all Non-Microsoft Middleware Products unless
Microsoft permits an equally-obvious and accessible option to undo this
choice and restore all Non-Microsoft Middleware Products and defaults.
The mechanism used to offer these choices must be unbiased; that
is, it must not present the choices of removing or enabling access or
defaults in any way that favors Microsoft's products over third-party
products. The mechanism must offer a separate choice for each
middleware product, though it may also offer a choice of enabling all
of the Non-Microsoft Middleware Products or all of the Microsoft
Middleware Products as a group.
Microsoft must allow the enabling or removal of access to Microsoft
Middleware Products and Non-Microsoft Middleware Products via the
desktop and Start Menu, as well as anywhere else in a Windows Operating
System Product where lists of icons, shortcuts or menu entries are
generally displayed. For instance, Microsoft must allow Non-Microsoft
Middleware Products to appear in the system tray and quick launch bar,
``right-click'' lists, ``open with'' lists, and lists that appear based
on an event, such as inserting an audio CD. Microsoft may restrict the
types of applications that go in these lists only based on
functionality, as long as the restrictions are non-discriminatory with
respect to non-Microsoft and Microsoft products. For example, Microsoft
could require that programs be capable of interacting with or playing
audio files in order to be listed when an audio CD is inserted. Because
these functionality requirements must be non-discriminatory, competing
Non-Microsoft and Microsoft Middleware Products will always be given
the same opportunity for placement in these points of access.
Automatic (``Default'') Launching of Competing Middleware:
Subsection III.H.2. requires Microsoft to allow end users, OEMs and
Non-Microsoft Middleware Products to designate Non-Microsoft Middleware
Products to be invoked automatically in place of Microsoft Middleware
Products, and vice versa. Microsoft is required to provide these points
for automatically launching competing middleware, commonly referred to
as ``defaults,'' in every case where the displaced Microsoft Middleware
Product would be invoked in a separate Top-Level Window and display
either all of that product's user interface elements or its Trademark.
This requirement is designed to ensure that access to defaults exists
whenever the alternative Microsoft product would be launched as the
full ``product'' (e.g., Internet Explorer as the Internet browser),
rather than just a portion of its underlying functionality being
launched to perform functions in Windows itself (such as code also used
by Internet Explorer being used to display part of the Windows user
interface), or otherwise where the end user might not necessarily be
aware that he or she was using a specific Microsoft Middleware Product.
Whereas up to now it has been completely in Microsoft's discretion
where, and even if, ``default'' launching of competing products occurs,
Subsection III.H.2. will ensure that Microsoft must allow competing
programs to be automatically invoked in numerous competitively
significant instances.
Preservation of OEM Configuration: Subsection III.H.3. prohibits
Microsoft from designing its Windows Operating System Products to
automatically alter an OEM's configuration choices--such as
``sweeping'' the unused icons the OEM has chosen to place on the
Windows desktop--without first seeking confirmation from the user, and
from attempting any such alteration before at least 14 days after the
consumer has first booted his or her personal computer. Thus, for
example, in Windows XP, the Clean Desktop Wizard cannot run at all
until 14 days after the first boot and then not without seeking the
user's confirmation to move the unused icons. Additionally, Microsoft
cannot change the manner in which a Windows Operating System Product
makes automatic alterations other than in new versions of a Windows
Operating System Product.
Finally, subsection III.H. permits Microsoft to override existing
defaults to Non-Microsoft Middleware Products only when: (I) A
Microsoft Middleware Product would be invoked solely for use in
interoperating with a server maintained by Microsoft (outside the
context of general web browsing--for example, in the case of the
Windows Help feature of Windows); or (ii) the designated Non-Microsoft
Middleware Product fails to implement a reasonable technical
requirement that is necessary for valid technical reasons to supply the
end user with functionality consistent with a Windows Operating System
Product, In the latter case, the valid technical reasons must be
described in a reasonably prompt manner to any ISV that requests them.
[[Page 59472]]
9. Small III.I.
Section III.I. requires Microsoft to offer necessary related
licenses for the intellectual property that is required to disclose
pursuant to the terms of the Proposed Final Judgment (e.g., the
disclosures required pursuant to Sections III.D. and III.E.). This
Section is designed to ensure that such intellectual property may
actually be used by an entity to which the information is disclosed; it
prohibits Microsoft from thwarting the intended goals of the disclosure
provisions either by withholding necessary intellectual property
licenses or by providing such licenses in an unreasonable or
discriminatory fashion. The overarching goal of this Section is to
ensure that Microsoft cannot use its intellectual property rights in
such a way that undermines the competitive value of its disclosure
obligations, while at the same time permitting Microsoft to take
legitimate steps to prevent unauthorized use of its intellectual
property.
Subsections III.I.1 and III.I.4 are designed specifically to
prevent Microsoft from using its intellectual property rights to
frustrate the intended effectiveness of the Proposed Final Judgment's
disclosure provisions. Subsection III.I.1. requires that any licenses
granted pursuant to this Section be made on reasonable and non-
discriminatory terms. Microsoft may not impose unreasonable or
discriminatory royalties or other terms as a mechanism for subverting
the disclosure or other requirements of the Proposed Final Judgment,
which are essential to the efficacy of the relief it affords.
Similarly, subsection III.I.4 is designed to guarantee the
effectiveness of the disclosure provisions by prohibiting Microsoft
from including any terms in any licenses granted pursuant to this
Section that subvert the terms of the Proposed Final Judgment.
While the Department's foremost concern regarding Section III.I. is
to ensure the effectiveness of the disclosure provisions of the
Proposed Final Judgment, it also recognizes that Microsoft has a
legitimate interest in limiting its intellectual property licensing to
those licenses that are property related to the terms of the Proposed
Final Judgment. Subsections III.I.2. and III.I.3 are thus designed to
address this issue. Subsection III.I.2. makes clear that licenses
granted pursuant to this Section III.I. need be no broader than
necessity to permit ISVs, IHVs, IAPs, ICPs or OEMs to exercise the
options or alternatives provided under the Proposed Final Judgment.
Likewise, subsection III.I.3 permits Microsoft to preclude the
assignment, transfer or sublicensing of rights by Microsoft pursuant to
Section III.I., provided that any such preclusion is reasonable and
non-discriminatory as required by subsection III.I.1.
Subsection III.I.5. provides that, to the extent that an ISV, IHV,
IAP, ICP, or OEM has any intellectual property relating to its exercise
of the options or alternatives provided by the revised proposed Final
Judgment, then that ISV, IHV, IAP, ICP, or OEM may be required to grant
Microsoft a license to any such intellectual property rights on
reasonable and nondiscriminatory terms, if such a cross-license is
necessary for Microsoft to provide the options or alternatives set
forth in the revised proposed Final Judgment and exercised by the
particular ISV, IHV, ICP or OEM. This subsection is thus designed to
ensure that Microsoft is able fully to comply with the terms of the
revised proposed Final Judgment without creating greater infringement
liability for itself than it would otherwise have. This subsection
limits Microsoft's access to third-party intellectual property rights
through the expressed limitations on the scope of any such cross-
licenses. Therefore, Microsoft will only be entitled to obtain such a
license if a license to the ISV's, IHV's, ICPs, IAP's or OEM's
intellectual property is necessary for Microsoft to do its part in
ensuring the effective exercise of the options or alternatives set
forth in the revised proposed Final Judgment. For example, a company
might have a patent on a feature that relates to the interrelationship
between the company's system and the operating system, such as a
feature that manages operating system resources by making particular
calls to the operating system. If, pursuant to the Final Judgment,
Microsoft is required to disclose interfaces that might be used by
others to support a similar feature in the same fashion, and if the
patent-holder seeks a license to exercise any options provided under
this Final Judgment, Microsoft is correspondingly entitled by this
provision to obtain a limited license to the patent so that Microsoft
can comply with its obligation to disclose and license the interface
without subjecting itself to claims of direct or contributory
infringement of the patent.
10. Section III.J.
Section III.J. addresses several security-related issues that may
arise from the broad disclosures required of Microsoft by the Proposed
Final Judgment. Subsection III.J.1.a. permits Microsoft to withhold
from disclosure or licensing certain specific, limited portions of
APIs, Documentation, and Communications Protocols that would, if
disclosed, compromise the system security provided by a particular
installation or group of installations of Microsoft anti-piracy, anti-
virus, software licensing, digital rights management, encryption or
authentication features. This is a narrow exception, limited so
specific end-user implementations of security items such as actual
keys, authorization tokens or enforcement criteria, the disclosure of
which would compromise the security of ``a particular installation or
group of installations'' of the listed security features. For example,
this subsection permits Microsoft to withhold limited information
necessary to protect particular installations of the Kerberos and
Secure Audio Path features of its products (e.g., keys and tokens
particular to a given installation), but does not permit it to withhold
any capabilities that are inherent in the Kerberos and Secure Audio
Path features as they are implemented in a Windows Operating System
Product.
Subsection III.J.1.b. is intended to permit Microsoft to comply
with lawful orders of official government agencies not to disclose, on
security grounds, certain APIs or information that Microsoft otherwise
would be required to disclose pursuant to this Proposed Final Judgment.
This exception only exempts Microsoft from its disclosure obligation in
the narrow situation where the direction not to disclose is made
lawfully by a government agency of competent jurisdiction, and only to
the extent and within the scope of that specific jurisdiction.
Subsection III.J.2. permits Microsoft to take certain limited steps
to ensure that any disclosure of licensing of APIs, Documentation, or
Communications Protocols related to anti-piracy systems, anti-virus
technologies, license enforcement mechanisms, authentication/
authorization security, or third party intellectual property protection
mechanisms it makes pursuant to this Proposed Final Judgment is to
third parties that have a legitimate need for and do not pose a
significant risk of misusing that information. Subsection III.J.2.a.
allows Microsoft to condition such disclosure or licensing on the
recipient or licensee: (a) Having no history of software counterfeiting
or piracy or willful violations of intellectual property rights; (b)
having a reasonable business need for the information for a planned or
shipping product; (c) meeting reasonable and objective standards for
the authenticity and viability of its business; and (d) having its
programs
[[Page 59473]]
verified by a third party to ensure compliance with Microsoft
specifications for use of the information.
Subsection III.J.2., by its explicit terms, applies only to
licenses for a small subset of the APIs and Communications Protocols
that Microsoft will have to disclose, namely the specified types of
security-related information. Except with respect to the small subset
of information covered by this subsection, Microsoft's obligations to
make disclosures of, or to license, APIs and Communications Protocols
as otherwise required by the Proposed Final Judgment, including the
requirements of Sections III.D. and III.E., are unaffected by this
subsection. The requirements of this subsection cannot be used as a
pretext for denying disclosure or licensing, but instead are limited to
the narrowest scope of what is necessary and reasonable, and are
focused on screening out only individuals or firms that should not have
access to our use of the specified security-related information either
because they have a history of engaging in unlawful conduct related to
computer software (e.g., they have been found to have engaged in a
series of willful violations of intellectual property rights or of one
or more violations consisting of conduct such as counterfeiting), do
not have any legitimate basis for needing the information, or are using
the information in a way that threatens the proper operation and
integrity of the systems and mechanisms to which they relate.
B. Section IV--Enforcement, Technical Committee and Internal Compliance
Program
Section IV of the Proposed Final Judgment establishes standards and
procedures by which the settling Plaintiffs may obtain access to
documents and information from Microsoft related to its compliance with
the Final Judgment, and sets forth a procedure for enforcing the Final
Judgment. Section IV also establishes a Technical Committee to
facilitate evaluation of Microsoft's obligations and compliance, and
mandates that Microsoft appoint an Internal Compliance Officer to
administer and supervise Microsoft's compliance with the Final
Judgment.
1. Enforcement Authority
The United States and individual Plaintiff States each have
authority to enforce the Proposed Final Judgment. Plaintiff States will
coordinate their enforcement efforts through an enforcement committee,
and in consultation with the United States. Enforcement by the United
States or plaintiff States may include any legal actions or proceedings
that may be appropriate to a particular situation, including petitions
in criminal or civil contempt, petitions for injunctive relief to halt
or prevent violations, motions for declaratory judgment to clarify or
interpret particular provisions, and motions to modify the Final
Judgment. While Microsoft will be given a reasonable opportunity to
cure violations of Sections III.C., III.D., III.E. and III.H. of the
Proposed Final Judgment prior to the filing of enforcement petitions,
ex post abatement of violations will not be a defense to enforcement,
through contempt actions or otherwise, of any knowing, willful or
systematic violations by Microsoft or other persons specified in
Section II of the Proposed Final Judgment.
To facilitate monitoring of compliance with the Final Judgment,
Microsoft must make available to Plaintiffs, upon request, records and
documents in its possession, custody or control relating to matters
contained in the Final Judgment. Microsoft must also make its personnel
available for interviews regarding such matters. In addition, Microsoft
must prepare written reports relating to the Final Judgment upon
request.
2. Technical Committee
The Proposed Final Judgment establishes a three-person Technical
Committee (``TC'') to monitor Microsoft's compliance with its
obligations under the Proposed Final Judgment, and to assist in
enforcement and compliance. The TC does not, however, have independent
enforcement authority. That authority remains with the United States
and the Plaintiff States, just as it would if there were no TC to
assist.
TC members will be experts in software design and programming. The
Proposed Final Judgment specifies the procedures for establishing the
TC as well as its substantive powers. The TC may employ or retain such
staff or consultants, including technical staff, as may be necessary to
assist the TC in carrying out its duties.
a. TC Establishment: One TC member each will be nominated by
Plaintiffs and by Microsoft, and after the Plaintiff and Microsoft
nominees are approved and appointed by the Court, those TC members will
then nominate the third TC member for the Court's approval and
appointment. Each TC member will serve for an initial 30-month term,
after which the party that selected the TC member may either request
that the Court reappoint the TC member, or may nominate a replacement.
A TC member may be removed at any time if the United States in its sole
discretion determines that the TC member has failed to act diligently
and consistently with the purposes of the Proposed Final Judgment. In
the event of a vacancy, the party who originally nominated that TC
member will nominate a replacement for approval by the Court.
After appointment by the Court, each TC member will enter into a
Technical Committee services agreement with the United States. The TC
services agreements will specify the rights, powers, and authority of
each TC member, and will provide for compensation at Microsoft's
expense and upon such terms and conditions as Plaintiffs approve. The
TC services agreements will contain ancillary confidentiality and pre-
and post-employment non-compete provisions necessary to prevent
conflicts of interest that could prevent a TC member from performing
his or her duties in a fair and unbiased manner. In addition to paying
the TC members' fees and expenses as specified in the TC services
agreement, Microsoft will indemnify and hold harmless the TC and TC
members from any damages, losses, claims, liabilities or expenses
arising from the TC's activities, except to the extent that such
damages, losses, liabilities or expenses result from misfeasance, gross
negligence, willful or wanton acts or bad faith. Microsoft will also
provide the TC with permanent offices, telephones, and other support
facilities at Microsoft's corporate campus in Redmond, Washington, and
at other Microsoft facilities as requested by the TC.
b. TC Duties: The TC will report to Plaintiffs, and will not be
under the control or authority of Microsoft in any way. The TC will
receive and investigate complaints or inquiries about Microsoft's
compliance with the Proposed Final Judgment from third parties,
Plaintiffs, or Microsoft's Compliance Officer. The TC has the power and
authority to monitor Microsoft's compliance with the proposed Final
Judgment, and will consult with Plaintiffs regarding its
investigations. The TC will meet with Microsoft's Compliance Officer at
least once during each investigation to allow Microsoft to respond to
the substance of any complaints and to attempt to resolve them
informally. This ``dispute resolution'' function reflects the
recognition that the market will benefit from rapid, consensual
resolution of issues, where possible. It complements, but does not
supplant, Plaintiffs' other
[[Page 59474]]
methods of enforcement. If the TC concludes that a complaint is
meritorious, the TC will so advise Plaintiffs and Microsoft and propose
a remedy. The TC may also communicate with third parties who have made
complaints or inquiries about how they or Microsoft might resolve such
complaints or inquiries, provided that the TC complies with its
confidentiality obligations as explained below. Thus, for example, the
TC may explain to a third party various ways of implementing a right
granted by the Proposed Final Judgment.
The Plaintiffs and third parties may, but are not required to,
submit complaints about Microsoft's compliance with the Proposed Final
Judgment to the Compliance Officer. The Compliance Officer will devise
a procedure acceptable to the Plaintiffs for submitting such
complaints, and post the procedure on Microsoft's Internet website. Any
complaint received by the Compliance Officer must be resolved or
rejected within thirty days after receipt. The Compliance Officer will
promptly advise the TC of the nature of the complaint and its
disposition.
Every six months during the term of the Proposed Final Judgment,
the TC will prepare written reports summarizing its activities and
Microsoft's business practices reviewed. Additionally, whenever the TC
has reason to believe Microsoft may have failed to comply with the
Proposed Final Judgment, the TC will immediately notify the Plaintiffs
in writing and provide relevant details.
The TC will have the power to obtain information from Microsoft in
connection with its investigations and duties. The TC may require
Microsoft, upon request, to make available records and documents in
Microsoft's possession, custody or control, and to provide physical
access to Microsoft facilities, systems and equipment. Microsoft must
also make its personnel available to the TC for interviews. In
addition, Microsoft must prepare written reports, data, and other
information upon request. The TC will have access to all of Microsoft's
computer software source code, subject to a confidentiality agreement
whose terms are to be approved by Plaintiffs. The United States
anticipates that the TC may also require Microsoft to submit for its
use all ancillary documentation, tools, test suites, compilers or other
materials used in conjunction with the source code to which Microsoft
personnel have access. The TC may study, interrogate and interact with
Microsoft's source code in connection with performing its duties.
Information obtained from any source by the TC, any TC member, or
any TC employee or consultant will remain confidential and will not be
disclosed to any person other than the Plaintiffs, Microsoft or the
Court. All such information, and any report or recommendations prepared
by the TC, will be treated as Highly Confidential under the Protective
Order in this case, except as may be otherwise specified by further
order of the Court. The TC may preserve the anonymity of any third
party complainant in its discretion or when requested to do so by that
third party or by Plaintiffs.
Finally, no work product, findings or recommendations of the TC may
directly be admitted in any enforcement proceeding before the Court,
and TC members may not testify or comment publicly regarding any matter
related to the TC's activities or the Proposed Final Judgment.
Plaintiffs, however, are not precluded from utilizing, relying on, or
making derivative use of the TC's work product, findings or
recommendations in connection with any activities relating to
enforcement of this Proposed Final Judgment. For example, Plaintiffs
may use information obtained from the TC as the basis for commencing a
compliance inquiry or investigation.
3. Internal Compliance Program
The Proposed Final Judgment requires Microsoft to maintain an
antitrust compliance program to help ensure compliance with the
Proposed Final Judgment. Microsoft must designate an internal
Compliance Officer, who may be assisted by other Microsoft employees,
with responsibility for administering Microsoft's antitrust compliance
program and ensuring compliance with the Proposed Final Judgment. The
Compliance Officer will be responsible for reviewing Microsoft's
activities for compliance with the Proposed Final Judgment, and
ensuring that Microsoft's internal notification and education
responsibilities pursuant to the Proposed Final Judgment are carried
out.
Microsoft, through the Compliance Officer, must distribute a copy
of the Proposed Final Judgment and additional informational materials
to all of present and future officers and directors. Microsoft must
also obtain from each person who receives the Proposed Final Judgment a
certification that he or she has read the Proposed Final Judgment and
agrees to abide by its terms, and has been advised and understands that
he or she must comply with the Final Judgment and that failure to do so
may result in conviction for contempt of court. The Proposed Final
Judgment further requires Microsoft to maintain an internal mechanism
whereby the recipients of the Proposed Final Judgment are briefed
annually on the meaning and requirements of the Proposed Final Judgment
and the United States' antitrust laws and advising them that
Microsoft's legal advisors are available to confer with them regarding
any question concerning compliance with either the Proposed Final
Judgment or the United States antitrust laws.
C. Section V--Termination of the Decree
Section V of the Proposed Final Judgment provides that, unless the
Court grants an extension, the Final Judgment will expire five years
after the date of entry by the Court. This time frame provides
sufficient time for the conduct remedies contained in the Proposed
Final Judgment to take effect in this evolving market and to restore
competitive conditions to the greatest extent possible. Section V
further provides that upon a finding by the Court that Microsoft has
engaged in a pattern of willful and systematic violations, Plaintiffs
may request a one-time extension of the Final Judgment of an additional
two years, along with such other relief as the Court may deem
appropriate. This provision is designed to supplement the government's
traditional authority to bring contempt actions. By permitting
Plaintiffs to seek a two-year extension upon a showing that Microsoft
has engaged in a pattern of willful and systematic violations, this
provision is designed to ensure that Microsoft will comply in good
faith with the terms of the Final Judgment.
V. Alternatives to the Proposed Final Judgment
The United States considered a number of alternatives to the
Proposed Final Judgment. The United States is satisfied, however, that
the requirements and prohibitions contained in the Proposed Final
Judgment, supported by strong compliance and enforcement procedures,
provide a prompt, certain and effective remedy for the violations
Microsoft has committed.
First, the United States considered litigation of the issue remedy
in the District Court. The United States balanced the strength of the
provisions obtained in the Proposed Final Judgment; the need for prompt
relief in a case in which illegal conduct has long gone unremedied; the
strength of the parties' respective positions in a remedies hearing and
the uncertainties inherent in litigation; and the time and expense
required for litigation of the
[[Page 59475]]
remedy. The United States determined that the Proposed Final Judgment,
once implemented by the Court, will achieve the purposes of stopping
Microsoft's unlawful conduct, preventing its recurrence, and restoring
competitive conditions in the personal computer operating system
market, while avoiding the time, expense and uncertainty of a litigated
remedy. Given the substantial likelihood that Microsoft would avail
itself of all opportunities for appellate review of any non-consensual
judgment, the United States estimated that a litigated result would not
become final for at least another two years. The remedies contained in
the Proposed Final Judgment are not only consistent with the relief the
United States might have obtained in litigation, but they have the
advantages of immediacy and certainty.
Second, the United States considered the remedies set forth in the
Final Judgment entered by the District Court on June 7, 2000. That June
2000 Final Judgment, which ultimately was vacated by the Court of
Appeals, mandated the structural break-up of Microsoft into separate
operating system and applications businesses and, during the pre-break-
up period, interim conduct requirements. After remand to the District
Court, the United States informed the Court and Microsoft that it had
decided, in light of the Court of Appeals opinion and the need to
obtain prompt, certain and effective relief, that it would not further
seek a break-up of Microsoft into two businesses. During the settlement
discussions that resulted in the Proposed Final Judgment, the United
States considered the interim conduct provisions in the June 2000 Final
Judgment. The provisions in the Proposed Final Judgment are modeled
after those earlier provisions, with modifications, additions and
deletions that take into account the current and anticipated changes in
the computer industry, as well as the decision of the Court of Appeals,
which reversed certain of the District Court's liability findings.
Finally, the United States received and carefully considered
numerous remedy proposals, encompassing a broad range of relief, from
industry participants and other interested individuals.
Remedies proposed and considered included variations on the
following:
A requirement that Microsoft license the Windows source
code to OEMs to enable them to modify, compile and distribute modified
versions of the Windows Operating System for certain limited purposes,
such as automatically launching Non-Microsoft Middleware, operating
systems or applications; setting such non-Microsoft Middleware as the
default; and facilitating interoperability between Non-Microsoft
Middleware and the Windows Operating System.
A requirement that Microsoft disclose the entire source
code for the Windows Operating System and Microsoft Middleware,
possibily within a secure facility for viewing and possibly without
such a facility.
A requirement that Microsoft must carry certain Non-
Microsoft Middleware, including but not limited to the Java Virtual
Machine, in its distribution of the Windows Operating System.
A requirement that Microsoft manufacture and distribute
the Windows Operating System without any Microsoft Middleware or
corresponding functionality included.
A requirement that Microsoft continue to support fully
industry standards if it chooses or claims to adopt them or extends or
modifies their implementation.
A requirement that Microsoft waive any rights to
intellectual property in related APIs, communications interfaces and
technical information if the Court finds that Microsoft exercised a
claim of intellectual property rights to prevent, hinder, impair or
inhibit middleware from interoperating with the operating system or
other middleware.
The United States carefully weighed the foregoing proposals, as
well as others received or conceived, considering their potential to
remedy the harms proven at trial and upheld by the Court of Appeals;
their potential to impact the market beneficially or adversely; and the
chances that they would be imposed promptly following a remedies
hearing. The United States ultimately concluded that the requirements
and prohibitions set forth in the Proposed Final Judgment provided the
most effective and certain relief in the most timely manner.
VI. Remedies Available to Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages suffered, as well as costs and reasonable attorney's fees.
VII. Procedures Available for Modification of the Proposed Final
Judgment
The parties have stipulated that the Proposed Final Judgment may be
entered by this Court after compliance with the provisions of the APPA,
provided that the United States has not withdrawn its consent. The APPA
conditions entry of the decree upon this Court's determination that the
Proposed Final Judgment is in the public interest.
As provided by sections 2(b) and (d) of the APPA, 15 U.S.C. 16(b)
and (d), any person may submit to the Department written comments
regarding the Proposed Final Judgment. Any person who wishes to comment
should do so within sixty days of publication of this Competitive
Impact Statement in the Federal Register.
The Department will evaluate and respond to the comments. All
comments will be given due consideration by the Department, which
remains free to withdraw its consent to the Proposed Final Judgment at
any time prior to entry. The comments and the responses of the
Department will be filed with the Court and published in the Federal
Register.
Written comments should be submitted to: Renata Hesse, Trial
Attorney, Antitrust Division, U.S. Department of Justice, 601 D Street,
NW., Suite 1200, Washington, DC 20530, Facsimile: (202) 616-9937 or
(202) 307-1454, Email: [email protected].
While comments may also be sent by regular mail, in light of recent
events affecting the delivery of all types of mail to the Department of
Justice, including U.S. Postal Service and other commercial delivery
services, and current uncertainties concerning when the timely delivery
of this mail may resume, the Department strongly encourages, whenever
possible, that comments be submitted via email or facsimile.
The Proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any other necessary or appropriate for modification,
interpretation, or enforcement of the Final Judgment. As previously set
forth, the Proposed Finale Judgment would expire five years from the
date of its entry.
VIII. Standard of Review Under the APPA for the Proposed Final Judgment
The APPA requires that proposed final judgments in antitrust cases
brought by the United States be subject to a 60-day comment period,
after which the Court shall determine whether entry of the proposed
final judgment ``is in the public interest.'' In making that
determination
the court may consider:
[[Page 59476]]
(1) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, and any other
considerations bearing upon the adequacy of such judgment;
(2) The impact of entry of such judgment upon the public
generally and individuals alleging specific injury from the
violations set forth in the complaint including consideration of the
public benefit, if any, to be derived from a determination of the
issues at trial.
15 U.S.C. 16(e) (emphasis added). As the Court of Appeals for the
District of Columbia Circuit held, the APPA permits a court to
consider, among other things, the relationship between the remedy
secured and the specific allegations set forth in the government's
complaint, whether the decree is sufficiently clear, whether
enforcement mechanisms are sufficient, and whether the decree may
positively harm third parties. United States v. Microsoft Corp., 56
F.3d 1448, 1457-62 (D.C. Cir. 1995).
In conducting this inquiry, ``the Court is nowhere compelled to go
to trial or to engage in extended proceedings which might have the
effect of vitiating the benefits of prompt and less costly settlement
through the consent decree process.'' \3\ Rather,
[a]bsent a showing of corrupt failure of the government to discharge
its duty, the Court, in making its public interest finding, should *
* * carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.
United States v. Mid-America Dairymen, Inc., 1997 WL 4352 at *8, 1997-1
Trade Cas. para.61,508, at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d 456, 462 (9th Cir. 1988), quoting United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir.), cert denied, 454 U.S. 1083 (1981);
see also Microsoft Corp., 56 F.3d at 1458, Precedent requires that:
the balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.\4\
The Proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' (citations
omitted).'' United States v. American Tel. and Tel Co., 552 F. Supp.
131, 151, (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460
U.S. 1001 (1983), qoting Gillette Co., 406 F. Supp. at 716; United
States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985).
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in the complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because ``[t]he
court's authority to review the decree depends entirely on the
government's exercising its prosecurtorial discretion by bringing the
case in the first place,'' it follows that the court ``is only
authorized to review the decree itself,'' and not to ``effectively
redraft the complaint'' to inquire into other matters that the United
States might have but did not pursue. Id. at 1459-60. This is
particularly true where, as here, the court's review of the decree is
in-formed not merely by the allegations contained in the Complaint, but
also by the extensive factual and legal record resulting from the
district and appellate court proceedings.
IX. Determinative Material/Documents
No materials and documents of the type described in the section
2(b) of the APPA were considered in formulating the Proposed Final
Judgment. Consequently, none are being filed with this Competitive
Impact Statement.
Dated: November 15, 2001.
Respectfully submitted,
Phillip R. Malone,
Renata B. Hesse,
Paula L. Blizzard,
Jacqueline S. Kelley,
David Blake-Thomas,
Attorneys, U.S. Department of Justice, Antitrust Division, 901
Pennsylvania Avenue, NW., Washington, DC 20530, (202) 514-8276.
[FR Doc. 01-29498 Filed 11-27-01; 8:45 am]
BILLING CODE 4410-11-M