[Federal Register Volume 67, Number 52 (Monday, March 18, 2002)]
[Notices]
[Pages 12090-12208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5354]



[[Page 12089]]

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Part II





Department of Justice





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Antitrust Division



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United States v. Microsoft Corporation; Notices

  Federal Register / Vol. 67, No. 52 / Monday, March 18, 2002 / 
Notices  

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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Microsoft Corporation; Notice of Availability of 
Public Comments; Memorandum of the United States in Support of Entry of 
Proposed Final Judgment; Response of the United States to Public 
Comments on the Revised Proposed Final Judgment; Stipulation and Second 
Revised Proposed Final Judgment; and United States' Memorandum 
Regarding Modifications Contained in Second Revised Proposed Final 
Judgment

    In United States v. Microsoft Corp., Civil Action No. 98-1232, 
pending in the United States District Court for the District of 
Columbia, the United States hereby publishes: (1) Memorandum of the 
United States in Support of Entry of Proposed Final Judgment; (2) 
Response of the United States to Public Comments on the Revised 
Proposed Final Judgment; (3) Stipulation and Second Revised Proposed 
Final Judgment; and (4) United States' Memorandum Regarding 
Modifications Contained in Second Revised Proposed Final Judgment.
    The United States is concurrently publishing in the Federal 
Register a complete list of the names of all individuals or entities 
submitting public comments; the number of pages of each comment; a 
unique tracking number assigned to each comment so that each comment 
may be located on the Department of Justice's website; and an index to 
the comments organized by six categories based primarily on the level 
of detail of the comment.
    In addition to the publication in the Federal Register of the 
materials published herein, electronic copies of all comments are 
available on the Department of Justice's website at www.usdoj.gov/atr/cases/ms-comments.htm. Interested persons may also request a copy of 
the one or more CD-ROMs containing the full text of the comments by 
contacting the Department of Justice in Washington, DC at Antitrust 
Documents Group, 325 7th Street NW., Ste. 215 North, Washington, DC 
20530, Telephone: (202) 514-2481, Fax: (202) 514-3763. The United 
States will provide free of charge one copy of this CD-ROM or set of 
CD-ROMs to each individual person and five copies to each library or 
other institution that requests it. The United States will provide, at 
cost, additional copies above these limits to individuals or 
institutions upon request. The United States has filed the comments on 
CD-ROM with the Clerk of the United States District Court for the 
District of Columbia.

Memorandum in Support of Entry of Proposed Final Judgment

In the United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Microsoft Corporation, 
Defendant; Memorandum of the United States in Support of Entry of the 
Proposed Final Judgment.

[Civil Action No. 98-1232 (CKK)]

    Next Court Deadline: March 6, 2002; Tunney Act Hearing.
Charles A. James,
Assistant Attorney General.
Deborah P. Majoras,
Deputy Assistant Attorney General.
Phillip R. Malone,
Renata B. Hesse,
David Blake-Thomas,
Paula L. Blizzard,
Kenneth W. Gaul,
Adam D. Hirsh,
Jacqueline S. Kelley,
Steven J. Mintz,
Barbara Nelson,
David Seidman,
David P. Wales,
Attorneys.

U.S. Department of Justice, Antitrust Division, 601 D Street NW., 
Suite 1200, Washington, DC 20530, (202) 514-8276.

Philip S. Beck,
Special Trial Counsel.

February 27, 2002.

Table of Contents

Table of Contents
Table of Authorities
Background
Discussion
I. The Tunney Act Governs the Court's Disposition of the Revised 
Proposed Final Judgment
II. The United States Has Complied With All Tunney Act Procedural 
Prerequisites to the Court's Public Interest Determination
    A. Summary Of Compliance
    B. The United States Fully Complied With All Tunney Act 
Requirements Regarding The CIS
    1. ``The Nature And Purpose Of The Proceeding''
    2. ``A Description Of The Practices Or Events Giving Rise To The 
Alleged Violation Of The Antitrust Laws''
    3. ``An Explanation Of The Proposal For A Consent Judgment, 
Including An Explanation Of Any Unusual Circumstances Giving Rise To 
Such Proposal Or Any Provision Contained Therein, Relief To Be 
Obtained Thereby, And The Anticipated Effects On Competition Of Such 
Relief''
    4. ``The Remedies Available To Potential Private Plaintiffs 
Damaged By The Alleged Violation In The Event That Such Proposal For 
The Consent Judgment Is Entered In Such Proceeding''
    5. ``A Description Of The Procedures Available For Modification 
Of Such Proposal''
    6. ``A Description And Evaluation Of Alternatives To Such 
Proposal Actually Considered By The United States''
    7. Including Information Not Required By The Tunney Act Cannot 
Result In A Noncompliant CIS
    C. The United States Fully Complied With All Tunney Act 
Requirements Regarding Determinative Documents
    D. The United States Fully Complied With All Tunney Act 
Requirements Regarding Publication of Summaries In Newspapers
    E. The United States Has Fully Complied With The Tunney Act 
Requirement That It Respond To Public Comments
    F. The United States Will Fully Comply With the Tunney Act 
Requirement That It Publish the Comments and Response
    G. The Second Revised Proposed Final Judgment Needs No Separate 
Round Of Public Comment And Response
III. The Court Must Enter the Proposed Decree if It Is Within the 
Reaches of the Public Interest
    A. Whether The Proposed Decree Is Within The Reaches Of The 
Public Interest Is Determined By The Test Of Microsoft I
    B. The Court's Task In Entering A Consent Decree Differs From 
Adjudicating A Remedy
IV. Entry of the Revised Proposed Final Judgment is in the Public 
Interest
    A. The Revised Proposed Final Judgment Satisfies The Goals Of An 
Antitrust Remedy And Properly Addresses All Bases Of Liability 
Affirmed By The Court Of Appeals
    a. Stops The Unlawful Conduct
    b. Prevents Recurrence Of Unlawful Conduct
    c. Restores Competitive Conditions To The Market
    B. The Revised Proposed Final Judgment Compares Favorably To The 
Initial Final Judgment
    1. The Revised Proposed Final Judgment Relies On Conduct 
Restrictions, Rather Than Structural Relief
    2. Remedying Tying Is No Longer An Objective
    3. The New Conduct Restrictions Compare Favorably To Those In 
The Initial Final Judgment
    a. Substantive Provisions Included In Both The Initial Final 
Judgment And The Revised Proposed Final Judgment
    b. The RPFJ Contains Provisions Not Included In The Initial 
Final Judgment
    C. The Revised Proposed Final Judgment Creates Competitive 
Conditions
V. The Court Should Make its Public Interest Determination and Enter 
the Decree as Expeditiously as Possible
    A. The Court Should Not Hold An Evidentiary Hearing
    B. The Court Should Not Delay Entry Of The Decree Pending The 
Remedies Hearing In New York v. Microsoft
    1. Linking This Case To The Remedies Hearing In New York Would 
Be Bad Law And Bad Policy
    2. The Claimed Benefits Of Linkage Are Illusory

[[Page 12091]]

Conclusion
Appendix A: Comparison of Court of Appeals' Findings on Liability to 
Provisions of the Revised Proposed Final Judgment
Appendix B: United States v. Microsoft Corp.--Newspaper Notice
Appendix C: Declaration of David S. Sibley

Table of Authorities

Prior Decisions in This Case

Microsoft Corp. v. United States, 122 S. Ct. 350 (2001) (Denying 
Certiorari)
Microsoft Corp. v. United States, 530 U.S. 1301 (2000) (Declining to 
Accept Appeal)
United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en 
banc) (per curiam) (Appellate Decision)
United States v. Microsoft Corp., 2001 WL 931170 (D.C. Cir. Aug. 17, 
2001) (en banc) (per curiam) (Denying Stay of Mandate)
United States v. Microsoft Corp., 97 F. Supp. 2d 59 (D.D.C. 2000) 
(Initial Final Judgment)
United States v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000) 
(Conclusions of Law)
United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) 
(Findings of Fact)

Cases

Adams v. Bell, 711 F.2d 161 (D.C. Cir. 1983)
American Can Co. v. Mansukhani, 814 F.2d 421 (7th Cir. 1987)
American Water Works Ass'n v. EPA, 40 F.3d 1266, 1274 (D.C. Cir. 
1974)
Andrx Pharms., Inc. v. Biovail Corp. Int'l, 256 F.3d 799 (D.C. Cir. 
2001), petition for certiorari filed, 70 U.S.L.W. 3465 (Jan. 11, 
2002), (No. 01-1050)
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977)
Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129 
(1967)
Commissioner v. Lundy, 516 U.S. 235 (1996)
Fifth & Walnut, Inc. v. Loew's Inc., 176 F.2d 587 (2d Cir. 1949)
Ford Motor Co. v. United States, 405 U.S. 562 (1972)
Gustafson v. Alloyd Co., 513 U.S. 561 (1995)
Hartford-Empire Co. v. United States, 323 U.S. 386 (1945)
Hyperlaw, Inc. v. United States, 1998 WL 388807, 159 F.3d 636 (D.C. 
Cir. 1998) (unpublished table decision)
In re IBM Corp., 687 F.2d 591 (2d Cir. 1982)
International Salt Co. v. United States, 332 U.S. 392 (1947)
Janus Films, Inc. v. Miller, 801 F.2d 578 (2d Cir. 1986)
Local No. 93, International Association of Firefighters v. City of 
Cleveland, 478 U.S. 501 (1986)
Maryland v. United States, 460 U.S. 1001 (1983)
Massachusetts School of Law at Andover, Inc. v. United States, 118 
F.3d 776 (D.C. Cir. 1997)
Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979)
Pennsylvania Department of Corrections v. Yeskey, 524 U.S. 206 
(1998)
Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367 (1992)
Sorenson v. Secretary of Treasury, 475 U.S. 851, 860 (1986)
South Dakota v. Yankton Sioux Tribe, 522 U.S. 329 (1998)
Sullivan v. Stroop, 496 U.S. 478 (1990)
United States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), aff'd mem. 
sub. nom. Maryland v. United States, 460 U.S. 1001 (1983)
United States v. Alex. Brown & Sons, 963 F. Supp. 235 (S.D.N.Y. 
1997), aff'd sub nom. United States v. Bleznak, 153 F.3d 16 (2d Cir. 
1998)
United States v. Alex. Brown & Sons, 169 F.R.D. 532 (S.D.N.Y. 1996), 
aff'd sub nom. United States v. Bleznak, 153 F.3d 16 (2d Cir. 1998)
United States v. Armour & Co., 402 U.S. 673 (1971)
United States v. Automatic Data Processing, Inc., 1996-1 Trade Cas. 
(CCH) para. 71,361 (D.D.C. 1996)
United States v. Bechtel Corp., 648 F.2d 660 (9th Cir. 1981)
United States v. Blackstone Capital Partners II Merchant Banking 
Fund, 1999-1 Trade Cas. (CCH) para. 72,484 (D.D.C. 1999)
United States v. Borden Corp., 347 U.S. 514 (1954)
United States v. Central Contracting Co., 537 F. Supp. 571 (E.D. Va. 
1982)
United States v. City of Miami, 614 F.2d 1322 (5th Cir. 1980)
United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316 (1961)
United States v. Enova Corp., 107 F. Supp. 2d 10 (D.D.C. 2000)
United States v. Figgie International Inc., 1997-1 Trade Cas. (CCH) 
para. 71,766 (D.D.C. 1997)
United States v. Foodmaker, Inc., 1996-2 Trade Cas. (CCH) para. 
71,555 (D.D.C. 1996)
United States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)
United States v. Grinnell Corp., 384 U.S. 563
United States v. Input/Output, Inc., 1999-1 Trade Cas. (CCH) para. 
72,528 (D.D.C. 1999)
United States v. Mahle GmbH, 1997-2 Trade Cas. (CCH) para. 71,868 
(D.D.C. 1997)
United States v. Microsoft Corp., 56 F.3d 1448 (D.C. Cir. 1995)
United States v. National Lead Co., 332 U.S. 319 (1947)
United States v. Oregon State Medical Society, 343 U.S. 326 (1952)
United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948)
United States v. RCA, 46 F. Supp. 654 (D. Del. 1942), appeal 
dismissed, 318 U.S. 796 (1943)
United States v. Swift & Co., 286 U.S. 106 (1932)
United States v. Loewen Group Inc., 1998-1 Trade Cas. (CCH) para. 
72,151 (D.D.C. 1998)
United States v. Titan Wheel International, Inc., 1996-1 Trade Cas. 
(CCH) para. 71,406 (D.D.C. 1996)
United States v. Trump, 1988-1 Trade Cas. (CCH) para. 67,968 (D.D.C. 
1988)
United States v. United Artists Theatre Circuit, Inc., 1971 Trade 
Cas. (CCH) para. 73,751 (E.D.N.Y. 1971)
United States v. United Shoe Machinery Corp., 391 U.S. 244
United States v. Western Elec. Co., 900 F.2d 283 (D.C. Cir. 1990)
United States v. Western Elec. Co., 993 F.2d 1572 (D.C. Cir. 1993)
Utah Public Service Commission v. El Paso Natural Gas Co., 395 U.S. 
464 (1969)

Statutes and Rules

Sherman Act, 15 U.S.C. Sec. 1
Sherman Act, 15 U.S.C. Sec. 2
Clayton Act, Sec. 5(a), 15 U.S.C. Sec. 16(a)
Clayton Act, ch. 323, Sec. 5, 38 Stat. 730, 731 (1914)
Tunney Act (Antitrust Procedures and Penalties Act, Sec. 2), 15 
U.S.C. Sec. 16(b)-(h)
    15 U.S.C. Sec. 16(b)
    15 U.S.C. Sec. 16(c)
    15 U.S.C. Sec. 16(d)
    15 U.S.C. Sec. 16(e)
    15 U.S.C. Sec. 16(f)

15 U.S.C. Sec. 12(a)
15 U.S.C. Sec. 18a(g)
15 U.S.C. Sec. 21(l)
Expediting Act, 15 U.S.C. Sec. 29(b)
28 U.S.C. Sec. 455(a)
Fed. R. Civ. P. 41(a)(1)(ii)

Legislative Materials

119 Cong. Rec. 3452 (1973)
119 Cong. Rec. 24,600 (1973)
119 Cong. Rec. 24,604 (1973)
The Antitrust Procedures & Penalties Act: Hearings on S. 782 & S. 
1088 Before the Subcomm. on Antitrust & Monopoly of the Senate 
Committee on the Judiciary, 93d Cong. (1973)
Consent Decree Bills: Hearings on H.R. 9203, H.R. 9947, and S. 782 
Before the Subcomm. on Monopolies & Commercial Law of the House 
Comm. on the Judiciary, 93rd Cong. (1973)
H.R. Rep. No. 93-1463 (1974), reprinted in 1974 U.S.C.C.A.N. 6535
S. Rep. No. 93-298 (1973)

Miscellaneous

47 FR 21,214 (1982)
59 FR 59,426 (1994)
66 FR 59,452 (2001)
3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law (rev. ed. 
1996)
Maimon Schwarzschild, Public Law by Private Bargain: Title VII 
Consent Decrees and the Fairness of Negotiated Institutional Reform, 
1984 Duke L.J. 887, 903 (1984)
Note, The Scope of Judicial Review of Consent Decrees under the 
Antitrust Procedures and Penalties Act of 1974, 82 Mich. L. Rev. 153 
(1974)
Webster's Third International Dictionary (1981)

In the United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Microsoft Corporation, 
Defendant; Memorandum of the United States in Support of Entry of the 
Proposed Final Judgment.

[Civil Action No. 98-1232 (CKK)]

    Next Court Deadline: March 6, 2002, Tunney Act Hearing.
    The proposed final judgment, as revised and modified, represents 
the culmination of six years of investigation, litigation, appeals, and 
negotiation. It is a comprehensive remedy that puts into place 
meaningful, effective, and enforceable restrictions on Microsoft and, 
critically, comports with

[[Page 12092]]

both the legal standards for relief in an antitrust case and the 
decision by the Court of Appeals in this case. Just as important, it 
provides relief effective now. Failure to enter the proposed final 
judgment would mean that Microsoft's anticompetitive practices likely 
would continue unabated for several more years, an eternity in this 
ever-changing market. Accordingly, in the United States' best judgment, 
entry of the proposed final judgment is in the public interest.

Background

    1. On May 18, 1998, the United States filed a civil complaint 
alleging that Microsoft had engaged in anticompetitive conduct in 
violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1, 2. At 
Microsoft's request, the case was consolidated with a similar action 
brought by twenty \1\ states and the District of Columbia.\2\ The 
United States and the States jointly presented the case in a 78-day 
bench trial that began on October 19, 1998, and ended on June 24, 1999. 
The court heard testimony from 26 witnesses and admitted depositions of 
79 other witnesses and 2733 exhibits. On November 5, 1999, the court 
entered 412 findings of fact. United States v. Microsoft Corp., 84 F. 
Supp. 2d 9 (D.D.C. 1999) (``Findings of Fact''). On April 3, 2000, 
after the parties attempted unsuccessfully to settle the suit through 
months-long mediation before Judge Richard Posner,\3\ the district 
court entered its conclusions of law. 87 F. Supp. 2d 30 (D.D.C. 2000) 
(``Conclusions of Law''). On June 7, 2000, after further proceedings on 
remedy, the district court entered its final judgment. 97 F. Supp. 2d 
59 (D.D.C. 2000) (``Initial Final Judgment'' (IFJ)).
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    \1\ One State later withdrew, and another settled in July 2001.
    \2\ On February 1, 2002, this Court de-consolidated the cases. 
Order at 3 (Feb. 1, 2002).
    \3\ At the time, Judge Posner was Chief Judge of the United 
States Court of Appeals for the Seventh Circuit.
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    Plaintiffs never contended that Microsoft unlawfully obtained its 
monopoly in Intel-compatible personal computer (PC) operating systems. 
Plaintiffs alleged, and the district court ruled, that Microsoft 
successfully had engaged in anticompetitive acts to protect and 
maintain that monopoly, in violation of Section 2 of the Sherman Act. 
Conclusions of Law at 37-44. The district court also ruled that 
Microsoft had attempted to monopolize the Internet Web browser market, 
in violation of Section 2, and had tied its Web browser, Internet 
Explorer (IE), to its Windows operating system, in violation of Section 
1. Id. at 45-51. The district court rejected plaintiffs' claim that 
Microsoft's exclusive dealing contracts violated Section 1 of the 
Sherman Act. Id. at 51-54. To remedy the violations, the court ordered 
Microsoft to break up into separate operating system and applications 
businesses. Initial Final Judgment, 97 F. Supp. 2d at 64-65. The 
Initial Final Judgment also ordered transitional conduct restrictions 
until the structural relief became effective. Id. at 66-69.
    Microsoft filed notices of appeal,\4\ and the Court of Appeals, sua 
sponte, ordered that any proceedings before it be heard en banc. Order, 
No. 00-5212 (D.C. Cir., June 13, 2000). The district court certified 
the case for direct appeal to the Supreme Court pursuant to the 
Expediting Act of 1903, as amended, 15 U.S.C. 29(b), and stayed its 
judgment pending completion of the appellate process. Order (June 20, 
2000). The Supreme Court declined to accept the appeal and remanded the 
case to the Court of Appeals. Microsoft Corp. v. United States, 530 
U.S. 1301 (2000).
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    \4\ Plaintiffs did not cross-appeal the dismissal of their 
Section 1 claim alleging exclusive dealing.
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    2. After extensive briefing and two days of oral argument, the en 
banc Court of Appeals issued a unanimous and comprehensive decision 
affirming in part, reversing in part, and remanding in part for 
proceedings before a different district judge. United States v. 
Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam) 
(``Microsoft'').
    a. The Court of Appeals affirmed the district court's ruling that 
Microsoft maintained its operating system monopoly, in violation of 
Section 2 of the Sherman Act, by engaging in specific acts that impeded 
the emergence of two nascent ``middleware'' threats to that monopoly. 
Id. at 50-80.\5\ ``Middleware'' is platform software that runs on top 
of an operating system but simultaneously exposes its own application 
programming interfaces (APIs) so that applications can run on the 
middleware itself. Id. at 53; Findings of Fact, para. 28. An 
application written to rely exclusively on a middleware program's APIs 
could run on all operating systems on which that middleware runs (i.e., 
would be ``cross-platform''). The Court of Appeals found that 
middleware posed a potential threat to Microsoft's operating system 
monopoly because if enough applications developers (known as 
independent software vendors (ISVs)) wrote enough applications for 
widely used middleware, computer users no longer would be reluctant to 
choose a non-Windows operating system for fear that it would run an 
insufficient array of applications. Microsoft, 253 F.3d at 53. Over 
time, this widely used middleware might have the potential to erode the 
``applications barrier to entry'' that protected Microsoft's Windows 
monopoly.
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    \5\ The Court of Appeals also rejected Microsoft's procedural 
challenges to the trail court proceedings, finding the district 
court's actions ``comfortably within the bounds of its broad 
discretion to conduct trials as it sees fit.'' Microsoft, 253 F.3d 
at 98, 100-01.
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    Microsoft's anticompetitive acts centered on two particular 
middleware threats: Netscape's Web browser (Navigator), and Sun 
Microsystem's Java technologies. Microsoft set out to ensure that its 
own Web browser, IE, gained dominant usage so that ISVs would continue 
to focus their efforts on the Windows platform rather than the 
Navigator platform. Microsoft took steps to constrict Netscape's access 
to the distribution channels that led most efficiently to browser 
usage: pre-installation by computer manufacturers (known as original 
equipment manufacturers (OEMs)), distribution by Internet access 
providers (IAPs), and the ISVs themselves. Through restrictions placed 
in its Windows licenses to OEMs, exclusive deals with IAPs and ISVs, 
and a combination of inducements to--and threats of retaliation 
against--other third-parties, Microsoft sought to impede the emergence 
of middleware as a potential threat to its operating system monopoly. 
Id. at 58-74.
    Java technologies posed a middleware threat to Microsoft by 
enabling developers to write programs that could be ported to different 
operating systems with relative ease. In May 1995, Netscape announced 
that it would include a Sun-compliant Windows Java Virtual Machine 
(JVM), a key component of Java technologies, 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. Id. at 74. Thus, by 
limiting the usage of Navigator, Microsoft simultaneously would limit 
the distribution of Java. Microsoft, however, took additional steps 
directed specifically 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 (id. at 75); (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 (id. at 74-
75); and (3) other anticompetitive steps to

[[Page 12093]]

discourage developers from creating Java applications compatible with 
non-Microsoft JVMs (id. at 75-78).
    In affirming liability for monopoly maintenance, however, the Court 
of Appeals upheld 12 of the 20 district court findings that particular 
acts constituted bases for violations of Section 2. See id. at 59-78. 
In particular, the court rejected the findings that Microsoft had 
violated Section 2 by prohibiting OEMs from ``automatically launching a 
substitute user interface upon completion of the boot process'' (id. at 
63); overriding the user's choice of browser in certain circumstances 
(id. at 67); giving away its Internet Explorer browser to IAPs and ISVs 
(id. at 67-68, 71-72); offering IAPs a bounty for each customer the IAP 
signs up for service using the IE browser (id. at 67-68); developing 
and giving away the Internet Explorer Access Kit (IEAK) (id. at 68); 
entering into exclusive agreements with Internet Content Providers 
(ICPs) (id. at 71); and creating a JVM that runs faster on Windows but 
lacks the cross-platform attributes that Sun's (hence Navigator's) JVM 
possesses (id. at 74-75). In addition, and importantly, the Court of 
Appeals expressly rejected the district court's conclusion that, 
``apart from Microsoft's specific acts, Microsoft was liable under 
Sec. 2 based upon its general `course of conduct.' '' Id. at 78. The 
court found that the district court had failed to ``point to any series 
of acts, each of which harms competition only slightly but the 
cumulative effect of which is significant enough to form an independent 
basis for liability.'' Id.
    b. The Court of Appeals also reversed the district court's 
determination that Microsoft had attempted to monopolize the Web 
browser market in violation of Section 2. Id. at 80-84. The court found 
that plaintiffs had failed to define and prove a market for Web 
browsers, a necessary element of the claim. Id. at 81-82.
    c. The Court of Appeals vacated the district court's judgment on 
the Section 1 tying claim as well, and remanded that claim to the 
district court for reconsideration under the rule of reason. Id. at 84-
97. In so holding, the Court of Appeals held that the market for 
platform software presented unique issues under tying law. The ``nature 
of the platform software market affirmatively suggests that per se 
rules might stunt valuable innovation'' (1) because ``the separate-
products test is a poor proxy for net efficiency from newly integrated 
products; and (2) ``because of the pervasively innovative character of 
platform software markets, tying in such markets may produce 
efficiencies that courts have not previously encountered and thus the 
Supreme Court had not factored into the per se rule as originally 
conceived.'' Id. at 92-93. The court directed that on remand, 
plaintiffs would be limited to proving that the anticompetitive effects 
from tying outweigh the benefits in the tied product market, not just 
that those effects outweigh the benefits overall. Id. at 95. In 
addition, plaintiffs would be ``precluded from arguing any theory of 
harm that depends on a precise definition of browsers or barriers to 
entry . . . other than what may be implicit in Microsoft's tying 
arrangement.'' Id.
    d. In light of its determination that it had ``drastically'' (id. 
at 105, 107) altered the district court's conclusions on liability, and 
its finding that an evidentiary hearing on remedy was necessary prior 
to the district court's imposting a remedy (id. at 101-103), the Court 
of Appeals vacated the final judgment and remanded the case to the 
district court for further proceedings. Id. at 107. The court also 
offered guidance ``to advance the ultimate resolution of this important 
controversy.'' Id. at 105. Though recognizing that, ``[a]s a general 
matter, a district court is afforded broad discretion to enter that 
relief it calculates will best remedy the conduct it has found to be 
unlawful,'' id., the Court of Appeals directed this Court to 
``reconsider whether the use of the structural remedy of divestiture is 
appropriate with respect to Microsoft, which argues that it is a 
unitary company.'' Id.
    Critically, the Court of Appeals admonished the district court on 
remand to bear in mind the role of causation when fashioning relief, 
directing this Court to ``consider whether plaintiffs have established 
a sufficient causal connection between Microsoft's anticompetitive 
conduct and its dominant position in the [operating system] market.'' 
Id. at 106. Absent ``clear[]'' indication of a ``significant causal 
connection between the conduct and creation or maintenance of the 
market power,'' Microsoft's unlawful behavior ``should be remedied by 
`an injunction against continuation of that conduct.' '' Id. at 106 
(quoting 3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law para. 
650a, at 67 (rev. ed. 1996) (``Antitrust Law'')) (emphasis added by 
Court of Appeals). The court emphasized that it had ``found a causal 
connection between Microsoft's exclusionary conduct and its continuing 
position in the operating systems market only through inference,'' id. 
at 106-07, but that even the district court ``expressly did not adopt 
the position that Microsoft would have lost its position in the 
[operating system] market but for its anticompetitive behavior.'' Id. 
at 107 (quoting Findings of Fact, para. 411) (emphasis added). The 
court concluded that the remedy should be ``tailored to fit the wrong 
creating the occasion for the remedy.'' Id. at 107.
    e. Finally, the Court of Appeals concluded that the district 
judge's contacts with the press violated the Code of Conduct for United 
States Judges and warranted disqualification under 28 U.S.C. 455(a). 
Id. at 107-118. The court vacated the remedy on the additional basis 
that the district judge's misconduct infected the remedial phase. Id. 
at 117.
    3. After the Court of Appeals rejected Microsoft's petition for 
rehearing, Microsoft filed a petition for a writ of certiorari based on 
the Court of Appeals' failure to vacate the Findings of Fact and 
Conclusions of Law--and not just the remedy--in light of the district 
judge's misconduct. Petition for a Writ of Certiorari, No. 01-236 (Aug. 
7, 2001) (``Cert. Petition''). Although Microsoft's petition was 
limited to the issue of judicial misconduct, it promised a future 
petition on several issues relating to liability when the case becomes 
final--after the remand to the district court and another appeal to the 
D.C. Circuit. Id. at 15. On October 9, 2001, the Supreme Court denied 
Microsoft's petition. Microsoft Corp. v. United States, 122 S. Ct. 350 
(2001).
    Meanwhile, on the same day it filed its petition for certiorari, 
Microsoft moved the Court of Appeals to stay its mandate pending 
disposition of the-- petition by the Supreme Court. The Court of 
Appeals denied Microsoft's motion, United States v. Microsoft Corp., 
2001 WL 931170 (D.C. Cir. Aug. 17, 2001) (en banc) (per curiam), and 
issued its mandate on August 24, 2001. That same day, a random 
selection assigned the case to this Court.
    4. On September 6, 2001, plaintiffs advised Microsoft that they did 
not intend to pursue the Section 1 tying claim on remand, and that they 
did not intend to pursue on remand the restructuring of Microsoft into 
two separate companies. As explained to the Court in the Joint Status 
Report filed on September 20, 2001, Plaintiffs' goal was to achieve the 
expeditious imposition of relief that would effectively remedy 
Microsoft's illegal conduct. Joint Status Report at 21 (Sept. 20, 
2001).
    5. On September 28, 2001, this Court ordered the parties to 
``concentrate all of their resources'' on a new round of intense 
settlement negotiations and probable mediation. Order at 2-3 (Sept. 28, 
2001). The Court emphasized the importance of these efforts in light of

[[Page 12094]]

the passage of time--more than six years since plaintiffs'' claims 
arose and more than four years of litigation, id. at 2. The Court 
expressly directed plaintiffs to ``determine which portions of the 
former judgment remain appropriate in light of the appellate court's 
ruling and which portions are unsupported following the appellate 
court's narrowing of liability.'' Tr. 9/28/01 at 8. The Court also 
adopted a fast-track discovery and evidentiary hearing schedule in case 
the parties failed to settle. \6\
---------------------------------------------------------------------------

    \6\ Indeed, the evidentiary hearing in New York v. Microsoft 
Corp., No. 98-CV-1233 (CKK) (D.D.C), between the Non-Settling States 
and Microsoft is scheduled to begin on March 11, 2002. (Order at 2 
(Oct. 2, 2001).
---------------------------------------------------------------------------

    On November 2, 2001, following five weeks of intensive negotiation 
and mediation as ordered by the Court, the United States and Microsoft 
agreed on terms of a proposed final judgment. Stipulation at 1 (Nov. 2, 
2001). Further negotiations with several of the plaintiff States 
resulted in submission on November 6, 2001, by the United States, the 
Settling States, \7\ and Microsoft of the Revised Proposed Final 
Judgment (RPFJ). Pursuant to the requirements of Section 2 of the 
Antitrust Procedures and Penalties Act (``Tunney Act''), 15 U.S.C. 
16(b)-(h), the United States filed its Competitive Impact Statement 
(CIS) on November 15, 2001, and published the RPFJ, CIS, and 
description of the procedures for submitting public comments on the 
proposed decree in the Federal Register on November 28, 2001. 66 FR 
59,452 (2001). The public comment period closed on January 28, 2002--
with more than 30,000 comments submitted--and the United States'' 
response to those comments is being filed concurrently with this Motion 
and supporting Memorandum. Under the Tunney Act, this Court must now 
determine whether the RPFJ is in the ``public interest.'' 15 U.S.C. 
16(e).
---------------------------------------------------------------------------

    \7\ New York, Ohio, Illinois, Kentucky, Louisiana, Maryland, 
Michigan, North Carolina, and Wisconsin (the ``Settling States'')--
each a party to New York v. Microsoft Corp., No. 98-Cv-1233 (CKK) 
(D.D.C.)--have signed the Revised Proposed Final Judgment.
---------------------------------------------------------------------------

    6. On January 30, 2002, the Court ordered the parties to address 
``whether, in response to the comments received by the Department of 
Justice in accordance with 15 U.S.C. 16(b), the United States and 
Microsoft are considering any modifications of the Proposed Final 
Judgment.'' Order at 1 (Jan. 30, 2002). Responding in a Joint Status 
Report filed on February 7, 2002, the parties stated that they were 
considering making modifications and would submit any proposed 
modifications to the Court on or before February 27, 2002. Joint Status 
Report at 7 (Feb. 7, 2002). Simultaneously with this Memorandum, the 
parties have filed a Second Revised Proposed Final Judgment (SRPFJ), 
which includes modifications to which the United States, Microsoft, and 
the Settling States have agreed. \8\ This Memorandum is couched in 
terms of, and generally refers to, the proposed decree before 
modification (i.e., the RPFJ), addressing the modifications of the 
SRPFJ only as required. However, the decree the Court should enter is 
the modified version of the RPFJ--that is, the SRPFJ.
---------------------------------------------------------------------------

    \8\ The United States also filed, simultaneously with this 
Memorandum, a Memorandum Regarding Modifications Contained in Second 
Revised Proposed Final Judgment. As explained briefly below, see 
Section II.G, page 34, the SRPFJ is a logical outgrowth of the RPFJ, 
its incremental modifications responding to the public comments, and 
the overall result further advances the public interest.
---------------------------------------------------------------------------

Discussion

I. The Tunney Act Governs the Court's Disposition of the Revised 
Proposed Final Judgment

    By its express terms, the Tunney Act applies to ``[a]ny proposal 
for a consent judgment submitted by the United States for entry in any 
civil proceeding brought by or on behalf of the United States under the 
antitrust laws,'' 15 U.S.C. 16(b) (emphasis added), without regard to 
when the United States submits it. Moreover, the Court is required to 
make its Tunney Act public interest determination ``[b]efore entering 
any consent judgment proposed by the United States under this 
section.'' Id. Sec. 16(e) (emphasis added). The Revised Proposed Final 
Judgment on its face is a proposal for a consent judgment submitted by 
the United States for entry in a civil proceeding brought by the United 
States under the antitrust laws. By the plain and unambiguous statutory 
language, the Tunney Act applies and governs the Court's consideration 
of the RPFJ.
    The Tunney Act applies even though the parties proposed the RPFJ 
after trial and after the Court of Appeals affirmed Microsoft's 
liability for monopoly maintenance. These circumstances \9\ have led 
some to suggest, see AAI Tunney Act Comments, at 4-9 (MTC # 0030600); 
ProComp's Comments to the Proposed Final Judgment, at 1-2 (MTC # 
0030608) (``ProComp Comments''); Memorandum of Points and Authorities 
in Support of the California Plaintiffs' Motion to Intervene at 18-21 
(Jan. 23, 2002)) (``Cal. Plaintiffs'' Br.'')), that the Tunney Act does 
not apply to some proposals for consent judgments submitted by the 
United States for entry in a civil proceeding brought by the United 
States under the antitrust laws, including the RPFJ, because of the 
stage at which they are proposed. It has been variously suggested that 
the Act does not apply to proposals that arise after the taking of 
testimony begins (id. at 10, 18-19 n.9); after litigation to judgment 
(id. at 11, 18), apparently whether or not that judgment is vacated on 
appeal; and after litigation through judgment and appeal (id. at 18), 
again apparently without regard to the result on appeal.
---------------------------------------------------------------------------

    \9\ The United States has never before initiated a Tunney Act 
proceeding so late in a lawsuit although the settlement in the AT&T 
case came after the trial court had ``already heard what probably 
amounts to well over ninety percent of the parties's evidence.'' 
United States v. AT&T, 552 F. Supp. 131, 152 (D.D.C. 1982), aff'd 
mem. sub. nom. Maryland v. United States, 460 U.S. 1001 (1983). The 
AT&T court followed Tunney Act procedures without deciding that the 
Tunney Act applied to what the parties characterized as the 
modification of a consent decree in one case and the dismissal of a 
different case. See id. at 144-45.
---------------------------------------------------------------------------

    Because, then and now, most consent judgments in government 
antitrust cases are entered before trial, Congress undoubtedly focused 
on pre-trial consent judgments when it enacted the Tunney Act. But 
Congress knew that consent judgments could be proposed at later stages, 
see pages 15-16 below, and it did not exempt them from the Tunney Act. 
Even if Congress had failed to foresee later-arising proposals, in the 
face of an ``unambiguous statutory text [such a failure] is 
irrelevant,'' Pennsylvania Department of Corrections v. Yeskey, 524 
U.S. 206, 212 (1998), because application of an unambiguous statute 
``in situations not expressly anticipated by Congress'' merely shows 
the statute's breadth. Id. (citation and internal quotation marks 
omitted).
    The plain meaning of ``[a]ny proposal for a consent judgment'' is 
sufficient to support the conclusion that the Tunney Act applies here. 
But if one wants more support for reading ``any'' to mean ``any,'' that 
support is readily at hand. First, nothing in the language of the 
Tunney Act suggests that the Act reaches only proposals for consent 
judgments in government civil antitrust cases that are submitted at 
some appropriate time.\10\ And the context of the Tunney Act suggests a 
broad reading

[[Page 12095]]

of the statute's coverage--at the very least, a reading not limited to 
consent judgments before testimony is taken.\11\ The term ``Tunney 
Act'' refers to Sections 5(b)-(h) of the Clayton Act. Section 5(a), 
originally enacted in 1914 as Section 5, gives prima facie evidence 
effect to certain consent decrees, subject to the proviso that the 
section does not give that effect to ``consent judgments or decrees 
entered before any testimony has been taken.'' 15 U.S.C. Sec. 16(a). If 
Congress in 1914 had understood the words ``consent judgments or 
decrees'' to refer only to ones entered before any testimony had been 
taken, there would have been no need to draw the distinction, and the 
proviso would have been surplusage.\12\ See South Dakota v. Yankton 
Sioux Tribe, 522 U.S. 329, 347 (1998) (``the Court avoids interpreting 
statutes in a way that ``renders some words altogether redundant'' ') 
(quoting Gustafson v. Alloyd Co., 513 U.S. 561, 574 (1995)). Had 
Congress used the term ``consent judgment'' in Section 5(b) of the 
Clayton Act to mean something different than its meaning in Section 
5(a), it surely would have said so. See Commissioner v. Lundy, 516 U.S. 
235, 250 (1996) (``the normal rule of statutory construction [is] that 
identical words used in different parts of the same act are intended to 
have the same meaning'') (quoting Sullivan v. Stroop, 496 U.S. 478, 484 
(1990), and Sorenson v. Secretary of Treasury, 475 U.S. 851, 860 (1986) 
(internal quotation marks omitted)).
---------------------------------------------------------------------------

    \10\ It has been suggested that the Tunney Act provision 
permitting a court to consider, as part of its public interest 
determination, ``the public benefit, if any, to be derived from a 
determination of the issues at trial,'' 15 U.S.C. 16(e)(2), limits 
the reach of the Act to pre-trial settlements. See Cal. Plaintiffs' 
Br. at 18. But that subsection demonstrates only that a consent 
decree may be proposed prior to trial, not that the Act is limited 
to pre-trial proposals. Indeed, in this case, the alternative to 
entry of the RPFJ likely would be trial of outstanding remedy 
issues. Pursuant to the statute, the Court may properly consider 
``the public benefit, if any'' of requiring determination of those 
issues at trial.
    \11\ The United States has consistently maintained that Tunney 
Act procedures are not required with respect to judgments addressing 
only claims for civil penalties under the antitrust laws. The 
antitrust laws do not provide civil penalties for violation of their 
substantive, competition-regulating, provisions. There are civil 
penalties under the ``antitrust laws'' as defined in the Clayton 
Act, see 15 U.S.C. 12(a) (defining ``antitrust laws''), only for 
failure to comply with provisions relating to premerger notification 
and waiting periods, id. Sec. 18a(g), and for violation of certain 
orders issued by certain federal agencies (not including the 
Department of Justice), id. 21(l). Courts in this district have 
consistently entered agreed upon settlements for civil penalties 
under 15 U.S.C. 18a(g) without employing Tunney Act procedures; each 
such entered judgment states that its entry is in the public 
interest. See, e.g., United States v. Input/Output, Inc., 1999-1 
Trade Cas. (CCH) para. 72,528 (D.D.C. 1999); United States v. 
Blackstone Capital Partners II Merchant Banking Fund, 1999-1 Trade 
Cas. (CCH) para. 72,484 (D.D.C. 1999); United States v. Loewen Group 
Inc., 1998-1 Trade Cas. (CCH) para. 72,151 (D.D.C. 1998); United 
States v. Mahle GmbH, 1997-2 Trade Cas. (CCH para. 71,868 (D.D.C. 
1997); United States v. Figgie Int'l Inc., 1997-1 Trade Cas. (CCH) 
para. 71,766 (D.D.C. 1997); United States v. Foodmaker, Inc., 1996-2 
Trade Cas. (CCH) para. 71,555 (D.D.C. 1996); United States v. Titan 
Wheel Int'l, Inc., 1996-1 Trade Cas. (CCH) para. 71,406 (D.D.C. 
1996); United States v. Automatic Data Processing, Inc., 1996-1 
Trade Cas. (CCH) para. 71,361 (D.D.C. 1996); United States v. Trump, 
1988-1 Trade Cas. (CCH) para. 67,968 (D.D.C. 1988). In each case, 
the United States noted the issue in a motion for entry of judgment, 
explaining to the court that it believed Tunney Act procedures were 
not required.
    \12\ As enacted in 1914, the prima facie evidence provision made 
even clearer congressional understanding that there could be consent 
judgments or decrees entered after testimony had been taken. The 
text included this additional proviso, rendered superfluous by the 
passage of time: Provided further, This section shall not apply to 
consent judgments or decrees rendered in criminal proceedings or 
suits in equity, now pending, in which the taking of testimony has 
been commenced but has not been concluded, provided such judgments 
or decrees are rendered before any further testimony is taken.
    Clayton Act, ch. 323, Sec. 5, 38 Stat. 730, 731 (1914). This 
language not only clearly contemplates consent judgments or decrees 
entered after some testimony has been taken, but also gives prima 
facie evidence effect to some of them.
---------------------------------------------------------------------------

    Second, Congress clearly was aware that consent judgments could 
arise relatively late in the course of an antitrust case. Not only were 
there examples ready at hand involving well-known antitrust cases, see, 
e.g., Fifth & Walnut, Inc. v. Loew's Inc., 176 F.2d 587, 592-93 (2d 
Cir. 1949) (consent decrees with some defendants entered on remand, 
after Supreme Court affirmed liability in part and reversed in part in 
United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948)),\13\ 
but the legislative history contained prominent references to the 
possibility. Representative Hutchinson, then the ranking minority 
member of the House Judiciary Committee and of its Monopolies and 
Commercial Law subcommittee, inserted into the hearing record a 
statement plainly recognizing that circumstances arising during 
prosecution of a case might make settlement seem appropriate.\14\ And 
Thomas Kauper, then Assistant Attorney General-Antitrust Division, 
specifically noted in his testimony that ``a consent decree . . . may 
come after trial.'' The Antitrust Procedures & Penalties Act: Hearings 
on S. 782 & S. 1088 Before the Subcomm. on Antitrust & Monopoly of the 
Senate Committee on the Judiciary, 93d Cong. 117 (1973) (``Senate 
Hearings'') (testimony of Thomas E. Kauper).
---------------------------------------------------------------------------

    \13\ See also Utah Pub. Serv. Comm'n v. El Paso Natural Gas Co., 
395 .S. 464, 467-68 (1969) (Supreme Court refers to a decree it had 
rejected (for failure to comply with its mandate) as a ``consent 
decree'' even though it had been agreed to following a trial on the 
merits and a Supreme Court determination of liability).
    \14\ ``[S]uppose that during the prosecution of a case against 
an oil company the government decided to settle for less relief than 
it could win on the merits because of the adverse impact full relief 
might have on a recently intervening energy crisis.'' Consent Decree 
Bills: Hearings on H.R. 9203, H.R. 9947, and S. 782 Before the 
Subcomm. on Monopolies & Commercial Law of the House Comm. on the 
Judiciary, 93rd Cong. 41 (1973) (``House Hearings'') (statement of 
Hon. Edward Hutchinson).
    Similarly, Miles Kirkpatrick, who had recently stepped down as 
chairman of the FTC, testified at the same hearings about 
circumstances under which the government might file a proposed 
consent decree ``with relief significantly different from that 
originally claimed.'' These circumstances included ``the post 
complaint realization by the Antitrust Division that there are 
certain aspects of its case that do not have the strengths that were 
initially believed to be present: that realization could come . . . 
after the partial trial of the case itself.'' Id. at 145 (statement 
of Miles W. Kirkpatrick) (emphasis added.)
---------------------------------------------------------------------------

    Finally, a reading of the statutory language that precludes its 
application at this stage would lead to anomalous results. Nothing 
plausibly explains why Congress would want a court to enter consent 
judgments in the later stages of government civil antitrust cases 
without following Tunney Act procedures--publication of the decree and 
CIS, a public comment period, and so forth. Nor is it plausible that 
Congress intended, sub silentio, to prohibit courts from entering 
consent judgments at certain stages of the litigation. Courts have long 
entered consent judgments reached after the taking of evidence, after 
determinations of liability, and even after affirmance of liability by 
the Supreme Court, as the Paramount Pictures history just cited 
demonstrates. Moreover, the Supreme Court has expressly acknowledged 
the authority of the Attorney General to settle cases at any stage. See 
Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 136 
(1967) (Court does ``not question the authority of the Attorney General 
to settle suits after, as well as before, they reach here'').
    We do not, of course, suggest that this Court approach its public 
interest determination in this proceeding as if the RPFJ had been filed 
simultaneously with the complaint. The trial record, Findings of Fact, 
Conclusions of Law, and appellate decisions in this case all exist, and 
the Tunney Act does not require the Court to ignore them. But as we 
discuss below, see pages 39-42, the history of this case does not 
change the nature of the Court's public interest determination; it 
changes only the circumstances in and to which that standard is 
applied.

II. The United States Has Complied With All Tunney Act Procedural 
Prerequisites to the Court's Public Interest Determination

    With the filing today of the public comments and the government's 
responses, the United States has completed all of the steps required of 
it before the Court enters a proposed consent judgment under the Tunney 
Act, 15 U.S.C. 16(b)-(d), except for the publication of those comments 
and responses. We expect to publish as required, in the manner 
described below in Section II.F, and we will promptly

[[Page 12096]]

notify the Court when we have done so. The United States will then have 
complied completely with the requirements of the Act.\15\
---------------------------------------------------------------------------

    \15\ Although the United States has fully complied with each 
Tunney Act requirement, even substantial compliance that fulfills 
the purposes of the statute would suffice, for a court should 
``decline to read the . . .'' statute as making strict technical 
compliance with the [Tunney Act] a condition to final entry of the 
decree.'' United States v. Bechtel Corp., 648 F.2d 660, 664 (9th 
Cir. 1981).
---------------------------------------------------------------------------

A. Summary Of Compliance

    On November 6, 2001, the United States (together with the Settling 
States and Microsoft) submitted to the Court the Revised Proposed Final 
Judgment. The United States filed its Competitive Impact Statement with 
the Court on November 15, 2001, and published the RPFJ and CIS in the 
Federal Register on November 28, 2001 (66 FR 59,452), as required by 15 
U.S.C. 16(b); \16\ see also Order at 2-3 (Nov. 8, 2001) (``Nov. 8 
Order''). The CIS included each of the six required recitals, see 15 
U.S.C. 16(b)(1)-(6),\17\ as well as other material. Copies of the RPFJ 
and CIS were made available to the public at the Court's website.\18\ 
The United States also made them available at the Department of Justice 
website. Because there were no ``materials and documents which the 
United States considered determinative in formulating'' the proposed 
judgment (``determinative documents''), 15 U.S.C. 16(b), the United 
States was not required to make copies of such documents available at 
the Court.\19\ The United States furnished copies of the CIS to those 
who requested them.\20\
---------------------------------------------------------------------------

    \16\ ``Any proposal for a consent judgment submitted by the 
United States for entry in any civil proceeding brought by or on 
behalf of the United States under the antitrust laws shall be filed 
with the district court before which such proceeding is pending and 
published by the United States in the Federal Register at least 60 
days prior to the effective date of such judgment.'' 15 U.S.C. 
16(b).
    ``Simultaneously with the filing of such proposal, unless 
otherwise instructed by the court, the United States shall file with 
the district court, publish in the Federal Register, and thereafter 
furnish to any person upon request, a competitive impact 
statement.'' Id.
    \17\ Section 16(b) requires that the CIS ``recite'':
    (1) The nature and purpose of the proceeding;
    (2) A description of the practices or events giving rise to the 
alleged violation of the antitrust laws;
    (3) An explanation of the proposal for a consent judgment, 
including an explanation of any unusual circumstances giving rise to 
such proposal or any provision contained therein, relief to be 
obtained thereby, and the anticipated effects on competition of such 
relief;
    (4) The remedies available to potential private plaintiffs 
damaged by the alleged violation in the event that such proposal for 
the consent judgment is entered in such proceeding;
    (5) A description of the procedures available for modification 
of such proposal; and
    (6) A description and evaluation of alternatives to such 
proposal actually considered by the United States.
    15 U.S.C. 16(b).
    \18\ See 15 U.S.C. 16(b) (materials ``shall also be made 
available to the public at the district court and in such other 
districts as the court may subsequently direct''). This Court did 
not direct that any materials be made available at any other 
district court.
    \19\ See supra note 18.
    \20\ See supra note 16.
---------------------------------------------------------------------------

    As required by 15 U.S.C. 16(c) and the Court's Order of November 8, 
2001, the United States published in the Washington Post (November 16-
22, 2001), the San Jose Mercury News (November 17-23, 2001), and the 
New York Times (November 17-23, 2001) a notice complying with the 
requirements of that statutory provision and the Order.\21\
---------------------------------------------------------------------------

    \21\ Section 16(c) provides:
    The United States shall also cause to be published, commencing 
at least 60 days prior to the effective date of the judgment 
described in subsection (b) of this section, for 7 days over a 
period of 2 weeks in newspapers of general circulation of the 
district in which the case has been filed, in the District of 
Columbia, and in such other districts as the court may direct--
    (i) A summary of the terms of the proposal for the consent 
judgment,
    (ii) A summary of the competitive impact statement filed under 
subsection (b) of this section,
    (iii) And a list of the materials and documents under subsection 
(b) of this section which the United States shall make available for 
purposes of meaningful public comment, and the place where such 
materials and documents are available for public inspection.
    15 U.S.C. 16(c). The Court designated three newspapers, 
including one of general circulation in the District of Columbia. 
Nov. 8 Order at 2.
---------------------------------------------------------------------------

    On November 28, 2001, the United States published procedures for 
submitting comments on the RPFJ. 66 FR 59,452 (2001). The 60-day public 
comment period (see 15 U.S.C. 16(d)), began the same day and ended on 
January 28, 2002.\22\ During that period, the United States received 
over 30,000 public comments. See Joint Status Report 3-4 (Feb. 7, 
2002). The United States is filing those comments and its response to 
them, see 15 U.S.C. 16(b), (d),\23\ simultaneously with the filing of 
this Memorandum. The United States believes that it will have completed 
all Tunney Act procedural requirements when it publishes the public 
comments and its response to these comments in the manner described 
below in Section II.F. The United States will notify the Court when 
publication occurs.
---------------------------------------------------------------------------

    \22\ Section 16(d) provides:
    During the 60-day period as specified in subsection (b) of this 
section, and such additional time as the United States may request 
and the court may grant, the United States shall receive and 
consider any written comments relating to the proposal for the 
consent judgment submitted under subsection (b) of this section. The 
Attorney General or his designee shall establish procedures to carry 
out the provisions of this subsection, but such 60-day time period 
shall not be shortened except by order of the district court upon a 
showing that (1) extraordinary circumstances require such shortening 
and (2) such shortening is not adverse to the public interest.
    15 U.S.C. 16(d). The United States treated as Tunney Act 
comments various communications received between the first business 
day following submission of the initial Proposed Final Judgment to 
the Court and the beginning of the statutory comment period.
    \23\ ``Any written comments relating to such proposal and any 
responses by the United States thereto, shall also be filed with 
such district court and published by the United States in the 
Federal Register within such sixty-day period.'' 15 U.S.C. 16(b).
    ``At the close of the period during which such comments may be 
received, the United States shall file with the district court and 
cause to be published in the Federal Register a response to such 
comments.'' 15 U.S.C. 16(d).
---------------------------------------------------------------------------

B. The United States Fully Complied With All Tunney Act Requirements 
Regarding the CIS

    The CIS filed by the United States in this case fully satisfies all 
Tunney Act requirements. In enacting the Tunney Act, Congress sought, 
among other things, ``to encourage additional comment and response by 
providing more adequate notice [concerning a proposed consent judgment] 
to the public,'' S. Rep. No. 93-298, at 5 (1973) (``Senate Report''); 
H.R. Rep. No. 93-1463, at 7 (1974) (``House Report''), reprinted in 
1974 U.S.C.C.A.N. 6535, 6538; the CIS is the primary means by which 
Congress sought to do so. Introducing his bill, Senator Tunney 
explained that the six items of information required in a CIS would 
``explain to the public[,] particularly those members of the public 
with a direct interest in the proceeding, the basic data about the 
decree to enable such persons to understand what is happening and make 
informed comments o[r] objections to the proposed decree during the 60-
day period.'' 119 Cong. Rec. 3452 (1973) (remarks of Sen. Tunney) 
(``Tunney Remarks'').\24\ The purpose could be achieved, Senator Tunney 
suggested, without adding greatly to the government's workload because 
the six prescribed items ``do not require considerably more information 
than the complaint, answer and consent decree themselves would provide 
and, therefore, would not be burdensome requirements.'' Senate Hearings 
at 3 (statement of Sen. Tunney) (``Tunney Statement'').
---------------------------------------------------------------------------

    \24\ Senator Tunney also noted that the need to file a CIS would 
help to focus the parties' attention during settlement negotiations. 
Tunney Remarks, 119 Cong. Rec. at 3452.
---------------------------------------------------------------------------

    The CIS in this case succeeded beyond all expectations in achieving 
the

[[Page 12097]]

congressional goal.\25\ As noted above, over 30,000 public comments 
were submitted, a number apparently beyond the wildest imaginings of 
the Tunney Act's sponsor in 1973, see House Hearings at 45 (testimony 
of Sen. Tunney) (predicting that ``in the typical case, you will have 
[no public comments], but perhaps you will have 10 to 15 in a highly 
controversial case''). Indeed, the number of comments received on the 
RPFJ exceed the number received in the AT&T case by more than an order 
of magnitude, see United States v. AT&T, 552 F. Supp. 131, 135 (D.D.C. 
1982) (``over six hundred comments''), aff'd mem. sub. nom. Maryland v. 
United States, 460 U.S. 1001 (1983); 47 FR 21,214, 21,214-24 (1982) 
(listing name and address of each commentor on proposed AT&T decree, 
with length of comment in pages).\26\
---------------------------------------------------------------------------

    \25\ We attribute this success not only to the CIS itself, but 
also to the Internet's contribution to making the CIS, the RPFJ, the 
decisions of this Court and the Court of Appeals, and a wealth of 
other material readily available to the American public, far more 
available than mere publication in the Federal Register and 
distribution of paper copies by the United States and through this 
Court and other district courts would have accomplished. See ABA 
Section of Antitrust Law, Report to the Council of the Section of 
Antitrust Law Re: Proposed ``Antitrust Procedures and Penalties 
Act,'' reprinted in Senate Hearings at 427,431 (citing ``the minimal 
attention which the average citizen devotes to the daily contents of 
the Federal Register''). The United States posted the RPFJ and the 
CIS on the Department of Justice website; they also were (and 
continue to be) available to PACER account holders at the Court's 
website; and they therefore are instantly available at any hour of 
day or night to anyone in the world with an Internet connection.
    \26\ By contrast, the Department's 1994 consent decree with 
Microsoft generated only five public comments. See 59 FR 59,426, 
59,427 (1994).
---------------------------------------------------------------------------

    Although many of the comments received are unlikely to contribute 
new insights concerning the RPFJ,\27\ approximately 2,900--a number 
nearly five times the total number of comments in AT&T--contain ``a 
degree of detailed substance concerning the RPFJ.'' Joint Status Report 
at 4 (Feb. 7, 2002). Although the Court has only just received the full 
set of comments, the United States provided the Court with an advance 
installment of 47 of the most extensive comments on February 14, 2002. 
The Court therefore is aware already of substantial evidence that the 
public did not lack the raw material for formulating ``informed 
comments o[r] objections to the proposed decree'' (Tunney Remarks, 119 
Cong. Rec. at 3452).
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    \27\ As previously noted, Joint Status Report at 3 (Feb. 7, 
2002), over 1,000 comments were unrelated to this case or the RPFJ, 
nearly 3,000 are form letters, and nearly 20,000 contain an overall 
view of the RPFJ but no particularized discussion of it.
---------------------------------------------------------------------------

    Having established that the CIS in this case richly fulfilled the 
statutory purpose, we turn to whether its content met the formal 
requirements of the statute. In addressing that question, we proceed 
through the six recitals the statute specifies, and then address 
additional aspects of CIS content. As the statute requires, the CIS 
``recite[s]':
1. ``The Nature and Purpose of the Proceeding''
    Section I of the CIS, CIS at 2, describes the nature and purpose of 
the proceeding, as the statute requires. 15 U.S.C. 16(b)(1). We are 
aware of no suggestion that this description is inadequate or otherwise 
fails to satisfy the statutory requirement.
2. ``A Description of The Practices Or Events Giving Rise to the 
Alleged Violation Of The Antitrust Laws''
    Section III of the CIS, CIS at 5-17, describes the practices giving 
rise to Microsoft's antitrust violation.\28\ We are aware of no 
suggestion that this recital is inadequate or otherwise fails to 
satisfy the statutory requirement.
---------------------------------------------------------------------------

    \28\ Considerably more detail can be found in the Findings of 
Fact, Conclusions of Law, and the Court of Appeals' opinion, all 
readily available on the Internet.
---------------------------------------------------------------------------

3. ``An Explanation of the Proposal for a Consent Judgment, Including 
An Explanation of Any Unusual Circumstances Giving Rise to Such 
Proposal or Any Provision Contained Therein, Relief To Be Obtained 
Thereby, and the Anticipated Effects on Competition of Such Relief''
    Section IV of the CIS, CIS 17-60, the bulk of the document, 
explains the proposed consent judgment, provision by provision, in 
considerable detail. Subsection B, CIS 24-60, links the underlying 
theory of violation in the case (``[c]ompetition was injured in this 
case principally because Microsoft's illegal conduct maintained the 
applications barrier to entry . . . by thwarting the success of 
middleware that would have assisted competing operating systems''), id. 
at 24, to the primary remedial approach adopted (``the key to the 
proper remedy in this case is to end Microsoft's restrictions on 
potentially threatening middleware [and] prevent it from hampering 
similar nascent threats in the future'' and thereby ``restore the 
competitive conditions created by similar middleware threats''). Id. 
The remainder of the subsection explains how particular provisions 
contribute to this remedial strategy, and therefore to the anticipated 
competitive effect of the proposed judgment. See, e.g., id. at 33 
(explaining role of required interface disclosures in overall remedial 
strategy and remedial impact).
    Although, as commentors point out, e.g., Comments of the Progress & 
Freedom Foundation on the Revised Proposed Final Judgment and the 
Competitive Impact Statement, 16-17 (MTC # 0030606) (``P&FF Comment''), 
the 40-plus-page analysis offered in the CIS is less elaborated and 
detailed than might be required by Executive Order for a cost/benefit 
analysis of a major executive branch regulatory analysis, that is 
irrelevant because the analysis plainly satisfies the requirements of 
the Tunney Act. The CIS meets the statutory requirement and provides 
``the basic data about the decree to enable [members of the public] to 
understand what is happening and make informed comments o[r] objections 
to the proposed decree.'' Tunney Remarks, 119 Cong. Rec. at 3452.\29\ 
There has been no sign that any alleged inadequacy handicapped 
potential commentors. P&FF, for example, was able to reach its 
conclusion--with which we disagree--that the RPFJ is not an adequate 
remedy despite these alleged inadequacies of the CIS. The Court will 
have ample information to conclude that entry of the decree is in the 
public interest.\30\
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    \29\ No Executive Order governs the content of a CIS, and the 
Tunney Act nowhere refers to cost/benefit analysis. We are also 
unaware of any requirement that a court, before imposing a remedy in 
a case litigated to final judgment or before entering a consent 
judgment, either itself perform such an analysis or insist that the 
parties do so.
    \30\ For purposes of its public interest determination, the 
Court, of course, is not limited to the information in the CIS, but 
instead has available as well the trial record, the Court of 
Appeals' decision, the public comments, and the United States' 
response to public comments. And the Court can easily obtain 
additional information, whether by requesting it from the parties, 
or through the flexible procedures specified in the Tunney Act, see 
15 U.S.C. 16(f).
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4. ``The Remedies Available to Potential Private Plaintiffs Damaged by 
the Alleged Violation in the Event That Such Proposal for the Consent 
Judgment Is Entered in Such Proceeding''
    Section 6 of the CIS, CIS at 63, identifies the remedies available 
to private plaintiffs, with concise reference to damage actions under 
the federal antitrust laws, which may provide some private plaintiffs 
with a remedy.\31\ The proposed judgment does not itself provide any 
remedy that can be invoked

[[Page 12098]]

by potential private plaintiffs who may have been damaged by violations 
alleged in this case, and so the CIS does not refer to any such remedy. 
The description complies with the terms of the statute, and there is no 
ground for requiring more.
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    \31\ The CIS does not address potential remedies available under 
state law or the laws of foreign countries. We do not believe that 
the Tunney Act plausibly can be read to require this. Indeed, 
requiring that the United States in effect provide legal advice 
regarding the laws of 50 states, let alone over a hundred foreign 
jurisdictions, would be unreasonably burdensome, take us far outside 
our area of expertise, and provide little or no benefit to anyone.
---------------------------------------------------------------------------

    It has been suggested that the CIS should go into more details with 
respect to private remedies and, specifically,\32\ that it should 
address any impact the RPFJ might have on the collateral estoppel 
effect of the findings of fact and the conclusions of law in this case, 
and on the prima facie evidence effect of a final judgment under the 
Clayton Act, see 15 U.S.C. 16(a). But nothing in the language of the 
Tunney Act requires the United States to offer, in the CIS or 
elsewhere, its views about legal questions that may arise in subsequent 
litigation.\33\ The Tunney Act does not direct the United States to 
discuss the effect of the proposed judgment on private litigation; 
rather, it requires only a recital of the remedies available to private 
plaintiffs. The evidentiary or collateral estoppel effect of 
determinations this Court makes is a question to be addressed by the 
courts in which future litigants might seek to use those 
determinations. See AT&T, 552 F. Supp. at 211 (declining to ``enter any 
specific decision or finding regarding'' applicability of prima facie 
evidence aspect of 16(a) because ``the ultimate decision with respect 
to this issue must rest with the court in which such litigation may be 
brought''); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331 (1979) 
(granting trial courts broad discretion to determine whether offensive 
collateral estoppel should be applied in matters before them). It is 
not a question for this Court or for the United States to determine. 
The United States does not seek to inject itself into private 
litigation by making public statements in other forums, and its views 
with respect to matters contested in such cases carry no determinative 
legal effect.
---------------------------------------------------------------------------

    \32\ This point was raised, for example, in a lawsuit filed by 
one commentor, the American Antitrust Institute, American Antitrust 
Institute v. Microsoft Corp., No. 02-CV-0138 (CKK) (D.D.C., filed 
Jan. 24, 2002) (``AAI''), and in a Memorandum filed in this Court 
and attached to a filed comment, Comments of Relpromax Antitrust 
Inc., Ex. 11, at 3 (MTC # 00030631).
    \33\ The United States did, however, discuss related issues 
recently. See Memorandum of Plaintiff United States in Response to 
the California Plaintiffs' Motion for Intervention, or in the 
Alternative, for Leave to File a Brief Amicus Curiae in the Tunney 
Act Settlement Proceedings Currently Pending in this Court, at 4-8 
(Feb. 11, 2002).
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5. ``A Description of the Procedures Available for Modification of Such 
Proposal''
    Section VII of the CIS, CIS at 63-65, notes that the United States 
may withdraw its consent to the RPFJ prior to its entry and informs the 
public of procedures for submitting written comments regarding the 
RPFJ. That describes the procedure available for modifying the proposal 
prior to entry of the judgment, as required. The section then 
describes, briefly, the procedure for modifying the judgment after 
entry. We are aware of no suggestion that this description is 
inadequate or otherwise fails to satisfy the statutory requirement.
6. ``A Description and Evaluation of Alternatives To Such Proposal 
Actually Considered by the United States''
    Section V of the CIS, CIS at 60-63, describes alternatives the 
United States considered and rejected,\34\ and indicates the reasons 
why they were rejected. It explains why we viewed the RPFJ as a 
superior alternative to continued litigation. See id. at 60-61. It 
describes why, following remand, the United States decided not to 
continue to seek a break-up of Microsoft, a remedy that would have 
required further litigation and delay and would likely not have been 
achieved. See id. at 61; see also pages 63-65 below. The CIS explains 
the reasons for differences between the interim conduct provisions of 
the Initial Final Judgment (vacated by the Court of Appeals) and the 
provisions of the RPFJ. See id. at 61-62; see also pages 66-70 below. 
And it lists a number of other remedy proposals, the criteria used to 
evaluate them, and the results of that evaluation. Id. at 63.
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    \34\ As the CIS makes clear, CIS at 63, it does not describe 
literally every remedial proposal considered, no matter how 
fleetingly, and rejected. The statute does not impose such a 
requirement, which would be unduly burdensome and serve no useful 
purpose. As Senator Tunney said, the CIS ought to provide ``some of 
the alternatives that were considered by the Department.'' Senate 
Hearings at 108 (remarks of Sen. Tunney) (emphasis added).
---------------------------------------------------------------------------

    To be sure, the description and the evaluations of alternatives 
presented are brief.\35\ But they are consistent with Senator Tunney's 
purpose of providing ``basic data about the decree to enable [members 
of the public with a direct interest] to understand what is happening 
and make informed comments o[r] objections to the proposed decree,'' 
Tunney Remarks, 119 Cong. Rec. at 3452, and with his understanding that 
the statutory requirements would not be burdensome. See Tunney 
Statement, Senate Hearings at 3. Indeed, the sheer volume and 
comprehensiveness of the comments received suggest that the level of 
detail was more than adequate to stimulate informed public comment 
about the proposed remedy and about the relative merits of alternative 
remedies.
---------------------------------------------------------------------------

    \35\ The CIS does not document the evaluative process, as might 
be suitable in a technical report or an article prepared for 
publication in a scholarly journal of economics. Instead, the CIS 
reports the ``result of evaluating,'' Webster's Third International 
Dictionary 786 (1981) (defining ``evaluation''), together with 
evaluative criteria.
---------------------------------------------------------------------------

    A commentor contends, in separate litigation, that the CIS is 
inadequate because it ``failed to explain adequately how alternative 
remedies (those not being pursued in the [R]PFJ) would have affected 
competition in the marketplace.'' AAI, Complaint para. 19. See also 
P&FF Comment, at 15 (criticizing CIS for failing to evaluate likely 
impacts on competition of alternative remedies). The Tunney Act, 
however, does not require any explanation of how alternative remedies 
would have affected competition in the marketplace. That is no 
accident. The version of Senator Tunney's bill reported out of the 
Senate Committee would indeed have required that CIS recitations 
include ``the anticipated effects on competition of such 
alternatives.'' Senate Report at 9 (proposed 15 U.S.C. 16(b)(6)). But 
on the Senate floor, Senator Hruska offered an amendment to strike that 
requirement, stating:

    There is no reason . . . to require the staff of the Antitrust 
Division . . . to make a public prediction as to the competitive 
effects of various alternatives which it has considered. It is 
sufficient if the various alternatives are disclosed to the court 
and to the public.

119 Cong. Rec. 24,604 (1973).\36\ Senator Tunney agreed with the 
amendment's ``basic intent,'' and the Senate adopted it by voice vote. 
Id.
---------------------------------------------------------------------------

    \36\ Senator Hruska explained that ``[t]hese anticipated effects 
quite clearly can be speculated upon by the district court 
considering a proposed consent judgment or by other interested 
parties.'' 119 Cong. Rec. 24,604 (1973).
---------------------------------------------------------------------------

7. Including Information Not Required by the Tunney Act Cannot Result 
in a Noncompliant CIS
    Several commentors contend that the CIS is inadequate because it 
contains material beyond that required by the statute and the 
additional material is incorrect or insufficient. That some commentors 
wish that the CIS contained more or different material, even though not 
required by statute, provides no basis for concluding that the CIS is 
deficient. Thus, Section VIII, CIS at 65-68, provides a brief 
discussion of the standards courts apply in determining whether entry 
of a proposed consent judgment is in the public interest.

[[Page 12099]]

Intended to provide general information to the public, cf. pages 35-46 
below (more substantial discussion of legal standard intended for the 
Court), Section VIII has been the target of several commentors. E.g., 
Comments of Software & Information Industry Association on Proposed 
Final Judgment, at 11 (MTC # 0030614) (``SIIA Comments'') (contending 
that legal standard commentor finds in CIS is ``simply the wrong 
standard of review for the remedy in this case''). The Court will 
determine the standard of review it will apply and, as discussed below, 
see pages 35-46, the appropriate standard of review corresponds to the 
standard expressed in the CIS. But because there is no requirement that 
the CIS discuss the standard of review at all, any alleged shortcomings 
of that discussion in the CIS are no basis for finding that the CIS 
fails to satisfy the statutory requirements.
    Similarly, the CIS contains two sentences explaining that the 
United States is not filing any determinative documents in this case 
because there are none within the meaning of the statute. CIS at 68. 
One commentor has alleged, in a separate lawsuit, that the CIS is 
deficient because the disclosure in this discussion is inadequate, AAI 
Complaint para. 27, and in particular because that discussion does not 
include our ``definition or interpretation'' of the word 
``determinative,'' id. para. 28. Because the CIS is not required to 
discuss determinative documents (and the statute does not require the 
United States to provide an interpretation or definition of the term 
``determinative''), this allegation provides no basis for concluding 
that the CIS fails to comply with the statute.

C. The United States Fully Complied With All Tunney Act Requirements 
Regarding Determinative Documents

    The United States did not file any determinative documents with the 
Court, see 15 U.S.C. 16(b), did not otherwise make determinative 
documents available to the public, and did not list any determinative 
documents in the required newspaper notices, see id. Sec. 16(c)(iii), 
for one simple reason: there are no such documents in this case. 
Moreover, although not required to do so, we stated as much in the CIS. 
See CIS at 68.
    Commentors have nevertheless, and without any basis, questioned our 
compliance. One commentor, without further explanation, suggests we 
failed to comply with the statute because ``no documents considered 
determinative in formulating the RPFJ throughout the negotiation 
process were disclosed as required by 15 U.S.C. 16(b).'' Relpromax 
Comment, Ex. 11, at 3. As noted above, another, in a separate lawsuit, 
challenged our failure to provide a definition of ``determinative'' in 
the CIS, implying that under the commentor's preferred definition, 
there were in fact determinative documents. See Memorandum in Support 
of Motion for Preliminary Injunction and Expedited Hearing at 16-19 
(Jan. 31, 2002), AAI.
    There are no ``determinative'' documents in this proceeding. The 
Court of Appeals addressed the definition of ``determinative 
documents'' in a recent Tunney Act case. See Mass. School of Law at 
Andover, Inc. v. United States, 118 F.3d 776 (D.C. Cir. 1997) 
(``MSL''). The United States had argued that the statute referred to 
documents ``that individually had a significant impact on the 
government's formulation of relief--i.e., on its decision to propose or 
accept a particular settlement.'' Id. at 784 (quoting brief of the 
United States). The court concluded that the statutory language ``seems 
to point toward the government's view . . . and confines Sec. 16(b) at 
the most to documents that are either `smoking guns' or the exculpatory 
opposite.'' Id. The court added that ``[t]he legislative history in 
fact supports the government's still narrower reading.'' Id. In this 
case, the United States did not consider any document to be a ``smoking 
gun or its exculpatory opposite'' with a significant impact on our 
formulation of our decision regarding the RPFJ, and so there were no 
determinative documents.\37\
---------------------------------------------------------------------------

    \37\ In the separate lawsuit it filed, a commentor relies on the 
concept of determinative documents applied in United States v. 
Central Contracting Co., 537 F. Supp. 571, 575 (E.D. Va. 1982), 
under which, even if documents are individually not determinative, 
they can be determinative ``in the aggregate.'' AAI Mem. at 17 n.10. 
We do not believe there are determinative documents in this case 
even under Central Contracting. But in any event, Central 
Contracting's broad definition of determinative documents has not 
been followed by any Tunney Act court, has been squarely repudiated 
by one district court, United States v. Alex. Brown & Sons, 169 
F.R.D. 532, 541 (S.D.N.Y. 1996) (``Central Contracting's broad 
definition of `determinative documents' may conflict with Congress' 
intent to maintain the viability of consent decrees'') (cited with 
approval in MSL, 118 F.3d at 785), aff'd sub nom. United States v. 
Bleznak, 153 F.3d 16 (2d Cir. 1998), and cannot be reconciled with 
decisions of this Circuit and the Second Circuit. See MSL, 118 F.3d 
at 784; Bleznak, 153 F.3d at 20 (citing MSL and quoting `` `smoking 
gun' or exculpatory opposite'' with approval). Central Contracting 
is simply not good law in this regard.
---------------------------------------------------------------------------

D. The United States Fully Complied With All Tunney Act Requirements 
Regarding Publication of Summaries in Newspapers

    As noted above, the United States published notices in three 
newspapers for the periods required by the Tunney Act and this Court's 
Order of November 8, 2001. The notice (the text of which is attached as 
Appendix B) contained ``a summary of the terms of the proposal for the 
consent judgment'' as required by 16 U.S.C. 16(c)(i), and ``a summary 
of the competitive impact statement'' as required by 16 U.S.C. 
16(c)(ii).\38\ Although required to do so by neither statute nor Order, 
the notice also stated where copies of the complaint, the RPFJ, and the 
CIS could be viewed and obtained and where comments could be sent. 
Because there were no determinative documents, the notice did not list 
them. See 15 U.S.C. 16(c)(iii). The United States complied with the 
newspaper notice requirements of the Tunney Act, and no commentor has 
suggested otherwise.
---------------------------------------------------------------------------

    \38\ The summary of the CIS included in the notice is brief, but 
sufficient to serve what we understand to be its purpose. The Senate 
Judiciary Committee added the newspaper provision to a bill that 
already included Federal Register publication of the CIS and 
proposed decree. Senate Report at 1-2 (Amendment No. 5). It did so 
``to enhance the degree of notice afforded the public,'' since 
``[p]ublication in the Federal Register alone was not felt to be 
meaningful public notice.'' Id. at 3. The notice in this case was 
plainly sufficient to put the public on notice of a proposed 
settlement of a major antitrust case potentially of interest; of the 
availability of additional information concerning that settlement; 
and of the opportunity to comment on the proposed judgment. Whatever 
else may be true of United States v. Microsoft, it is surely true 
that the proposed settlement has been amply noticed by the public at 
large.
---------------------------------------------------------------------------

E. The United States Has Fully Complied With the Tunney Act Requirement 
That It Respond to Public Comments

    The Tunney Act requires that the United States respond to public 
comments and file its response with the Court ``[a]t the close of the 
period during which such comments may be received.'' 15 U.S.C. 16(d). 
The statutory language allows the United States ``some additional time 
after the end of [the comment period] to prepare and file responses,'' 
United States v. Bechtel Corp., 648 F.2d 660, 664 (9th Cir. 1981), and 
this Court allowed 30 days. Nov. 8 Order at 3. The comment period 
closed on January 28, 2002, and we are filing our responses with the 
Court, concurrently with this Memorandum, on February 27, 2002, thereby 
complying with the requirement.

[[Page 12100]]

F. The United States Will Fully Comply With the Tunney Act Requirement 
That It Publish the Comments and Response

    In light of the Court's Memorandum and Order of February 22, 2002, 
denying as non-justiciable at that time the United States' Motion for 
Leave of Court to Adopt an Alternative Procedure for Comment 
Publication (``Alternative Procedure Motion''), the United States will 
pursue two parallel approaches to compliance with the remaining 
requirement of the Tunney Act, publication of the public comments and 
our response thereto in the Federal Register. Approach 1 will consist 
of the steps set forth in our Alternative Procedure Motion and the 
United States' Supplement to Prior Motion for Leave of Court to Adopt 
an Alternative Procedure for Comment Publication (``Supplement''), 
filed February 21, 2002, with one difference in timing. Even with the 
additional demands of simultaneously pursuing Approach 2, described 
below, the posting of the full text of the 32,329 public comments 
described in the Alternative Publication Motion \39\ on the Department 
of Justice's website will likely be accomplished by March 4, 2002. We 
estimate that all of the other steps described in our Alternative 
Procedure Motion and Supplement will be completed by March 15, 2002. In 
the view of the United States, completion of these steps will 
constitute full, and certainly no less than substantial,\40\ compliance 
with the statutory requirement that comments be published in the 
Federal Register, for the reasons set forth in our Alternative 
Procedure Motion and Supplement.\41\
---------------------------------------------------------------------------

    \39\ See Alternative Publication Motion at 6 (descriptions of 
comments to be published and of a small category of wholly unrelated 
or duplicate comments that will not be published).
    \40\ See supra note 15.
    \41\ See Alternative Publication Motion at 2, 9-11; Supplemental 
at 2-3 & n.1.
---------------------------------------------------------------------------

    Approach 2, which we will pursue in addition to and simultaneous 
with Approach 1, consists of publication in the Federal Register of the 
full text of the public comments. We will begin the process of 
publication of the comments in their entirety by providing the full 
text to the Federal Register no later than March 1, 2002; the Federal 
Register will then commence its process of preparing the text for 
publication.\42\ We estimate that publication of the full text of the 
comments in the Federal Register, if ultimately necessary, will occur 
approximately six weeks after submission to the Federal Register.
---------------------------------------------------------------------------

    \42\ During approximately the first three to four weeks of this 
period before publication occurs, it would still be possible to 
terminate the remaining publication process and save a significant 
portion of the total cost of full publication.
---------------------------------------------------------------------------

G. The Second Revised Proposed Final Judgment Needs No Separate Round 
of Public Comment and Response

    The Tunney Act does not require a new round of publication and 
comment in light of the SRPFJ. The publication and comment provisions 
of the Act serve ``to enable the district court to make'' its public 
interest determination. Hyperlaw, Inc. v. United States, 1998 WL 
388807, at *3, 159 F.3d 636 (D.C. Cir. 1998) (unpublished table 
decision). Accordingly, a ``court should treat notice and comment under 
the Tunney Act as analogous to agency rulemaking notice and comment.'' 
Id. (quotation marks omitted). Applying that analogy, ``there is no 
need for successive rounds of notice and comment on each revision,'' 
provided the final decree ``is a `logical outgrowth' of the proposed 
decree. . . . Further notice and comment should be required only if it 
`would provide the first opportunity for interested parties to offer 
comments that could persuade the agency to modify its [proposal].' '' 
Id. (quoting American Water Works Ass'n v. EPA, 40 F.3d 1266, 1274 
(D.C. Cir. 1974)).
    The proposed decree as modified is a logical outgrowth of the RPFJ 
and so requires no further notice and comment. As explained in the 
United States' Memorandum Regarding Modifications Contained in Second 
Revised Proposed Final Judgment, each of the modifications clarifies 
decree language in response to public comments on the RPFJ. They thus 
are in fact a natural outgrowth of the notice and comment process. 
Taken separately or together, the modifications do not fundamentally 
change the RPFJ. All contribute to the public interest. The purpose of 
the notice and comment has thus been well satisfied, and further notice 
and comment would merely delay the court's public interest 
determination without sound reason.\43\
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    \43\ Entry of a decree following modification without a new 
round of notice and comment is conventional in Tunney Act practice. 
For example, after notice and comment in AT&T, the court said it 
would enter the decree as in the public interest if the parties 
agreed to a number of modifications, and the Court entered the 
modified decree without a new round of notice and comment. AT&T, 552 
F. Supp. at 225-26; see also MSL, 118 F.3d at 778.
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III. The Court Must Enter the Proposed Decree if It Is Within the 
Reaches of the Public Interest

    Courts have long applied a public interest standard in determining 
whether to enter an antitrust consent decree. See, e.g., United States 
v. RCA, 46 F. Supp. 654, 655 (D. Del. 1942) (decision to enter a 
consent decree ``involves a determination by the chancellor that it is 
equitable and in the public interest''), appeal dismissed, 318 U.S. 796 
(1943). That standard is now embodied in the Tunney Act, 15 U.S.C. 
16(e) (``the court shall determine that the entry of such judgment is 
in the public interest'' before entering it); see AT&T, 552 F. Supp. at 
149 n.74 (Tunney Act ``represents an endorsement of the morningline of 
cases in which courts examined proposed consent decrees to determine 
whether they were in the public interest''); House Report at 11, 1974 
U.S.C.C.A.N. at 6542 (``Preservation of antitrust precedent, rather 
than innovation in the usage of the phrase, `public interest,' is, 
therefore, unambiguous'').
    The court of appeals in United States v. Microsoft Corp., 56 F.3d 
1448 (D.C. Cir. 1995) (``Microsoft I''), set forth the factors that a 
Tunney Act court's public interest determination entails. That inquiry 
differs fundamentally from the inquiry a court conducts in resolving, 
by adjudicated judgment, a dispute between the litigants before it. 
Regardless of the stage at which the parties resolved their disputes 
and reached a settlement in this case, the Court's task is to determine 
whether it would be in the public interest to enter that settlement as 
a judgment, not to devise its own remedy.

A. Whether the Proposed Decree Is Within the Reaches of the Public 
Interest Is Determined by the Test of Microsoft I

    In determining whether the proposed decree is in the public 
interest, \44\ a district court properly considers whether ``the 
remedies [are] so inconsonant with the allegations charged as to fall 
outside of the `reaches of the public interest.' '' Microsoft I, 56 
F.3d at 1461. In Microsoft I, and again in MSL, 118 F.3d at 783, the 
D.C. Circuit explained that this inquiry entails consideration of four 
specific factors:

    \44\ The statute lists a number of factors a court ``may 
consider,'' 15 U.S.C. 16(e) (emphasis added); id. Sec. 16(e)(1)-)2) 
(listing factors), but consideration of these factors is entirely 
discretionary. Senate Report at 6.
---------------------------------------------------------------------------

    The district court must examine the decree in light of the 
violations charged in the complaint and should withhold approval 
only [1] if any of the terms appear ambiguous, [2] if the 
enforcement mechanism is inadequate, [3] if third parties will be 
positively injured, or [4] if the decree otherwise makes ``a mockery 
of judicial power.'' See [Microsoft I, 56 F.3d] at 1462.

MSL, 118 F.3d at 783.

    The inquiry with respect to the first two factors, ambiguity and

[[Page 12101]]

enforceability, is straightforward and governed by a reasonableness 
standard, not a search for perfection. As the Court of Appeals 
explained, ``the district judge who must preside over the 
implementation of the decree is certainly entitled to insist on that 
degree of precision concerning the resolution of known issues as to 
make his task, in resolving subsequent disputes, reasonably 
manageable.'' Microsoft I, 56 F.3d at 1461-62. Similarly, the Court's 
consideration of the ``compliance mechanisms,'' id. at 1462--see also 
15 U.S.C. 16(e)(1) (``provisions for enforcement'')--is addressed to 
real and foreseeable problems relating to ``actual compliance.'' 
Microsoft I, 56 F.3d at 1462.
    The third factor a Tunney Act court properly considers is whether a 
decree would inflict ``positive injury'' on third parties, id. at 1461 
n.9, 1462. In so doing, the Court must distinguish between positive 
injury and injury from a decree's ``mere failure to secure better 
remedies for a third party'' for whatever reason. MSL, 118 F.3d at 780. 
The Court ``should not reject an otherwise adequate remedy simply 
because a third party claims it could be better treated.'' Microsoft I, 
56 F.3d at 1461 n.9.
    The heart of a district court's public interest determination, 
however, is whether the proposed remedy adequately meets the 
requirements for an antitrust remedy, AT&T, 552 F. Supp. at 153, or 
instead whether ``the discrepancy between the remedy and undisputed 
facts of antitrust violations could be such as to render the decree `a 
mockery of judicial power,' '' MSL, 118 F.3d at 782 (quoting Microsoft 
I, 53 F.3d at 1462). The requirements of an antitrust remedy are 
familiar. As the Court of Appeals noted in remanding this case:

    A remedies decree in an antitrust case must seek to ``unfetter a 
market from anticompetitive conduct, Ford Motor Co.[ v. United 
States], 405 U.S. [562, ] 577 [(1972)], to ``terminate the illegal 
monopoly, deny to the defendant the fruits of its statutory 
violation, and ensure that there remain no practices likely to 
result in monopolization in the future,'' United States v. United 
Shoe Mach. Corp., 391 U.S. 244, 250 . . . (1968); see also United 
States v. Grinnell Corp., 384 U.S. 563, 577 . . . (1966).

253 F.3d at 103.

    As the Court of Appeals also emphasized, however, the `` `[m]ere 
existence of an exclusionary act does not itself justify full feasible 
relief against the monopolist to create maximum competition.' '' id. at 
106 (quoting 3 Antitrust Law para. 650a, at 67). Thus, in Microsoft I, 
the Court of Appeals, while noting the familiar standard that an 
antitrust remedy should ``pry open to competition a market that has 
been closed by defendants' illegal restraints,'' 56 F.3d at 1460 
(quoting Int'l Salt Co. v. United States, 332 U.S. 392, 401 (1947)), 
clearly required that the scope of the appropriate remedy be related to 
the anticompetitive effects of the illegal conduct. Although an 
antitrust conduct remedy is not limited to enjoining precisely the 
conduct found to be unlawful, e.g., Hartford-Empire Co. v. United 
States, 323 U.S. 386, 409 (1945); AT&T, 522 F. Supp. at 150 n.80, 
nevertheless ``the remedies must be of the `same type or class' '' as 
the violations, and the court is not at liberty to enjoin `all future 
violations of the antitrust laws, however, unrelated to the violations 
found by the court.' '' Microsoft I, 56 F.3d at 1460. \45\
---------------------------------------------------------------------------

    \45\ Nor may relief in a civil antitrust case be punitive. See 
United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 326 
(1961); United States v. Oregon State Med. Soc'y, 343 U.S. 326, 333 
(1952); United States v. Nat'l Lead Co., 332 U.S. 319, 338 (1947).
---------------------------------------------------------------------------

    This Court's assessment of the adequacy of the RPFJ also must take 
into account the risks and uncertainties of further litigation that 
would be required before there could be an adjudicated final judgment, 
safe from further challenge on appeal, that would remedy the 
anticompetitive harm attributable to conduct found to violate the 
Sherman Act. The Court of Appeals explained in Microsoft I that it is 
``inappropriate for the judge to measure the remedies in the decree as 
if they were fashioned after trial. Remedies which appear less than 
vigorous may well reflect an underlying weakness in the government's 
case, and for the district court to assume that the allegations in the 
complaint have been formally made out is quite unwarranted.'' Id. at 
1461. \46\
---------------------------------------------------------------------------

    \46\ Congress intended that the statutory ``public interest'' 
concept encompass ``compromises made for non-substantive reasons 
inherent in the process of settling cases through the consent decree 
procedure.'' House Report at 12, 1974 U.S.C.C.A.N. at 6542.
---------------------------------------------------------------------------

    This case differs from Microsoft I in that there have been both 
findings of fact and conclusions of liability affirmed on appeal. But 
the difference is one of degree, not kind. Although the Court of 
Appeals in this case affirmed the district court's judgment of 
liability for monopolization, it emphasized that neither it, nor the 
district court, had so far found ``a causal connection between 
Microsoft's exclusionary conduct and its continuing position in the 
operating systems market,'' 253 F.3d at 106-07, sufficient to justify 
structural relief (although it did not rule out the possibility that 
this Court would find such a connection on remand). Absent such a 
causal connection, the court continued, only conduct relief is 
justified. \47\ Id. at 106. Moreover, the Court of Appeals vacated the 
district court's judgment of liability with respect to tying, id. at 84 
(leaving open the possibility of further litigation on remand using a 
more demanding standard); reversed as to attempted monopolization, id. 
at 80-84; and limited the scope of the conduct found to constitute 
illegal monopolization, id. at 67 (overriding of user's choice of 
default browser), 71 (deals with ICPs), 75 (development and promotion 
of a JVM), 78 (course of conduct considered separately). The remedy 
ultimately imposed on remand, the court directed, ``should be tailored 
to fit the wrong creating the occasion for the remedy.'' Id. at 107.
---------------------------------------------------------------------------

    \47\ Among the goals of an antitrust decree are ``terminat[ing] 
the illegal monopoly'' and ``deny[ing] to the defendant the fruits 
of its statutory violation.'' Microsoft, 253 F.3d at 103 (internal 
quotation omitted). But plaintiffs never alleged, and neither this 
Court nor the Court of Appeals found, that Microsoft acquired its 
monopoly unlawfully. See id. at 58 (Microsoft ``violated Sec. 2 by 
engaging in a variety of exclusionary acts . . . to maintain its 
monopoly''); see also Microsoft I, 56 F.3d at 1452. Thus, whether, 
and to what extent, Microsoft now has an ``illegal monopoly'' 
depends on whether its unlawful conduct increased or extended 
Microsoft's monopoly--that is, whether the fruits of its statutory 
violations included increments to the magnitude or duration of its 
market power. Again, neither the district court nor the Court of 
Appeals found this direct causal connection between the conduct and 
the continuance of the monopoly.
---------------------------------------------------------------------------

    In the absence of a settlement, therefore, the United States would 
face the prospect of extended litigation with respect to the numerous 
issues related to relief in this case. An appeal likely would follow 
the conclusion of the proceedings in this Court. Microsoft also might 
choose to seek Supreme Court review of the Court of Appeals' decision 
affirming its liability for monopoly maintenance. See Cert. Petition at 
15 (listing issues for future petition). Despite the Findings of Fact 
and Conclusions of Law, and despite the Court of Appeals' affirmance of 
a number of the holdings, including liability for monopolization, the 
ultimate outcome of continued litigation is uncertain, and the path of 
litigated remedy proceedings would be both risky and costly in terms of 
resources that might otherwise be devoted to other antitrust 
enforcement concerns. \48\
---------------------------------------------------------------------------

    \48\ See Note, The Scope of Judicial Review of Consent Decrees 
under the Antitrust Procedures and Penalities Act of 1974, 82 Mich. 
L. Rev. 153, 175 n. 142 (1974) (``The legislative history of the 
[Tunney Act] should make the courts sensitive to the efficient 
allocation of the Department's resources in making their public 
interest determinations.'')

---------------------------------------------------------------------------

[[Page 12102]]

    Thus, although the litigation risks the United States faces here 
are not identical to the litigation risks it faces when it negotiates a 
settlement prior to trial, the teaching of Microsoft I remains 
applicable. This Court's evaluation of the RPFJ is properly informed by 
the public interest in a certain and timely remedy for Microsoft's 
unlawful conduct and must take account of the uncertainties and risks 
of further litigation, an inquiry that properly respects the realistic 
choices the United States faced in deciding to settle the case on the 
negotiated terms of the RPFJ.
    Moreover, in making its determination, the Court properly accords 
significant weight to the United States' predictive judgments as to the 
efficacy of remedial provisions. Indeed, such deference is proper even 
outside the consent decree context. See Ford Motor Co. v. United 
States, 405 U.S. 562, 575 (1972) (``'once the Government has 
successfully borne the considerable burden of establishing a violation 
of law, all doubts as to the remedy are to be resolved in its favor''') 
(quoting United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 
334 (1961)). Similarly, it is proper to defer to the United States as 
representative of the public interest when the parties are requesting 
entry of an agreed-upon judgment. \49\
---------------------------------------------------------------------------

    \49\ See, e.g., United States v. Paramount Pictures, Inc., 334 
U.S. 131, 177 (1948); United States v. Borden Corp., 347 U.S. 514, 
518 (1954); Bechtel, 648 F.2d at 666.
---------------------------------------------------------------------------

    As the Court of Appeals has explained, the degree of deference the 
trial court gives to ``the government's predictions as to the effect of 
the proposed remedies'' in a Tunney Act proceeding may vary with the 
extent of the court's familiarity with the market and other factors, 
Microsoft I, 56 F.3d at 1461. But, as the Court of Appeals also 
emphasized, even a court that has extensive relevant expertise should 
not lightly reject the government's predictions. For example, in the 
case of the AT&T decree--``a decree the oversight of which had been the 
business of a district judge for several years,'' Microsoft I at 1460--
the court of appeals instructed that the district judge should not 
reject an agreed-upon modification of the decree unless it had 
``'exceptional confidence that adverse antitrust consequences [would] 
result--perhaps akin to the confidence that would justify a court in 
overturning the predictive judgments of an administrative agency.'''' 
Id. (quoting United States v. Western Elec. Co., 993 F.2d 1572, 1577 
(D.C. Cir. 1993)). Indeed, if courts do not give appropriate deference 
to the United States' views, Tunney Act proceedings will become 
equivalent to the proceedings that lead to adjudicated judgments with 
adjudicated remedies.

B. The Court's Task in Entering a Consent Decree Differs From 
Adjudicating a Remedy

    The fact of settlement here determines the Court's role in this 
proceeding and the inquiry it must make. Because the parties to this 
case have agreed to the Revised Proposed Final Judgment, the Court now 
faces a task that differs fundamentally from the task the Court of 
Appeals envisioned when it remanded United States v. Microsoft Corp. 
\50\ The Court of Appeals anticipated the necessity of ``a relief-
specific evidentiary hearing,'' providing a basis for ``judicial 
resolution'' of factual issues in dispute between the United States and 
Microsoft--although it recognized that no such hearing would be 
required if the parties did not dispute the facts. Microsoft, 253 F.3d 
at 101. Moreover, anticipating continued litigation between the parties 
over issues related to relief, the Court of Appeals contemplated that 
this Court would exercise its ``broad discretion to enter that relief 
it calculates will best remedy the conduct it has found to be 
unlawful,'' id. at 105, in light of its findings as to the causal 
connection between that conduct and the maintenance of Microsoft's 
market power, id. at 103-07. That is, the Court of Appeals envisioned 
that this lawsuit would terminate in an ``adjudicated judgment,'' with 
the wording of that judgment ``determined by the judge, who may draft 
it, accept the draft proposed by the winning party, or adopt portions 
of draft language proposed by any of the parties,'' Janus Films, Inc. 
v. Miller, 801 F.2d 578, 581-82 (2d Cir. 1986), to achieve the result 
the Court views as appropriate--subject to review on appeal.
---------------------------------------------------------------------------

    \50\ Some of the States that are plaintiffs in New York v. 
Microsoft Corp., No. 98-CV-1233, have settled with Microsoft on 
identical terms, while others have not settled and continue to 
litigate. We do not address here the nature of the task the Court 
now faces in New York.
---------------------------------------------------------------------------

    The parties, however, have chosen to forgo, at least conditionally, 
their rights to continue litigating to an adjudicated judgment, as well 
as their rights to further appellate review.\51\ In order to achieve a 
prompt and certain resolution of this case (see CIS at 2, 60-61), they 
have chosen the alternative means of terminating litigation ``by 
agreement of the parties,'' Janus Films, 801 F.2d at 581, a choice that 
is clearly permissible at this stage of the litigation. See Cascade 
Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 136 (1967) 
(government antitrust case in which the Supreme Court noted that it did 
``not question the authority of the Attorney General to settle suits 
after, as well as before, they reach here''); see also Fifth & Walnut, 
Inc. v. Loew's Inc., 176 F.2d 587, 592-93 (2d Cir. 1949) (consent 
decrees with some defendants entered on remand, while other defendants 
continued to litigate, after Supreme Court affirmed liability in part 
and reversed in part in United States v. Paramount Pictures, Inc., 334 
U.S. 131 (1948)).\52\
---------------------------------------------------------------------------

    \51\ More particularly, each party has conditionally abandoned 
the right to seek from the Court a remedy order to which the other 
has not agreed; each has abandoned the right to seek appellate 
review of the remedy order; and Microsoft has abandoned the right to 
seek Supreme Court review of the liability determinations and 
factual findings in this case (No. 98-1232) that were affirmed by 
the Court of Appeals. See United States v. Armour & Co., 402 U.S. 
673,681 (1971) (parties to a consent decree ``waive their right to 
litigate the issues involved in the case'') These abandonments are 
conditional, because the United States has expressly reserved the 
right to withdraw its consent to the RPFJ prior to entry 
(Stipulation para.1 (Nov. 6, 2001)), and the consent of both parties 
is contingent upon the Court's approval of the RPFJ (id.para.2).
    \52\ In principle, the parties could have simply agreed between 
themselves on a purely contractual version of the RPFJ and 
terminated the litigation, without the Court's further action, by 
stipulation of dismissal, see Fed. R. Civ. P. 41(a)(1)(ii); Janus 
Films, 801 F.2d at 582; Michigan Note, 83 Mich. L. Rev. at 168n.98 
(as an alternative to a consent decree, government could ``settle 
the case by contract with the defendant''); see also In re IBM 
Corp., 687 F.2d 591, 600-03 (2d Cir. 1982) (Tunney Act does not 
apply to stipulations of dismissal). That alternative was 
unacceptable to the United States, which insisted, for various 
reasons including the availability of enforcement ``by citation for 
contempt of court,'' that the agreement carry ``the legal force and 
character of a judgment entered after a trial.'' Local No. 93, Int'l 
Ass'n of Firefighters v. City of Cleveland, 478 U.S. 501, 518 
(1986); see Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 
378 (1992) (consent decree ``is an agreement that the parties desire 
and expect will be reflected in, and be enforceable as, a judicial 
decree that is subject to the rules generally applicable to other 
judgments and decrees.''). Cf. United States v. United Artists 
Theatre Circuit, Inc., 1971 Trade Cas. (CCH) para.73,751, at 91,183 
(E.D.N.Y. 1971) (in case where government sought preliminary 
injunction, government advised the court ``that it was its policy 
not to accept stipulations unless `So Ordered' '').
---------------------------------------------------------------------------

    In these circumstances, the parties themselves have resolved their 
differences, and the Court therefore does not have the classic judicial 
task of ``[r]esolving contested disputes'' of fact, law, and remedy. 
Maimon Schwarzschild, Public Law by Private Bargain: Title VII Consent 
Decrees and the Fairness of Negotiated Institutional Reform, 1984 Duke 
L.J. 887, 903 (1984). Rather, the Court's task is only to determine 
whether to perform the ``judicial act,'' United States v. Swift &

[[Page 12103]]

Co., 286 U.S. 106, 115 (1932), of entering the decree proposed by the 
parties for entry as the Court's decree.
    In cases involving only private interests, the decision to enter 
settling parties' agreements as judgments requires little judicial 
attention. See United States v. City of Miami, 614 F.2d 1322, 1330 (5th 
Cir. 1980) (``In what can be termed ``ordinary litigation,'' that is, 
lawsuits brought by one private party against another private party 
that will not affect the rights of any other persons, settlement of the 
dispute is solely in the hands of the parties. . . . [T]he court need 
not and should not get involved''); Janus Films, 801 F.2d at 582 
(``court normally has only a limited role so long as the dispute 
affects only private interests''). But in considering whether it 
``should enter a consent decree affecting the public interest,'' Adams 
v. Bell, 711 F.2d 161, 170 n.40 (D.C. Cir. 1983) (en banc), ``[t]he 
court has a larger role.'' Janus Films, 801 F.2d at 582. Most 
fundamentally, the reason for that larger role is that a court of 
equity must avoid letting its decree become ``an instrument of wrong'' 
to the public. Swift, 286 U.S. at 115.\53\
---------------------------------------------------------------------------

    \53\ Cf. United States v. Microsoft Corp., 56 F.3d 1448, 1460 
(D.C. Cir. 1995) (analogizing public interest determination to 
decision on decree modification, where ``a court should not reject 
an agreed-upon modification unless `it has exceptional confidence 
that adverse antitrust consequences will result' '') (citation 
omitted).
---------------------------------------------------------------------------

    The Court's role in making a public interest determination differs 
from its role in formulating an adjudicated judgment. Because the Court 
``is evaluating a settlement, it is not as free to exercise its 
discretion in fashioning a remedy,'' AT&T, 552 F. Supp. at 151, as it 
would be in a case litigated to an adjudicated judgment. The Court is 
not ``empowered to reject [the remedies sought] merely because [it] 
believe[s] other remedies [are] preferable.'' Microsoft I, 56 F.3d at 
1460. In this procedural setting, the Court's ``function is not to 
determine whether the resulting array of rights and liabilities `is the 
one that will best serve society,' but only to confirm that the 
resulting settlement is ``within the reaches of the public interest.'' 
' ''' Id. (quoting United States v. Western Elec. Co., 900 F.2d 283, 
309 (D.C. Cir. 1990) (emphasis in original), in turn quoting Bechtel, 
648 F.2d at 666, in turn quoting United States v. Gillette Co., 406 F. 
Supp. 713, 716 (D. Mass. 1975)).
    This standard reflects not only the proper role of a court of 
equity asked to lend its authority to the parties' agreement, but also 
the critical role that consent decrees play in effective public 
antitrust enforcement. See Senate Report at 5 (``the consent decree is 
of crucial importance as an enforcement tool, since it permits the 
allocation of resources elsewhere''); 119 Cong. Rec. 24,600 (1973) 
(Statement of Sen. Gurney) (Tunney Act ``is designed to enhance the 
value and effectiveness of the consent decree as a tool of public 
policy''). A consent decree, such as the RPFJ, is the product of 
negotiation. The parties weigh the benefits of prompt and certain 
resolution of the case against the possibility that continued 
litigation might improve their respective positions. Settlements 
potentially offer the public the benefits of more timely and certain 
relief, as well as significant savings in judicial and prosecutorial 
resources. But if courts refused to enter any consent decree that did 
not match precisely the relief the court would have imposed in the 
absence of a settlement, ``defendants would have no incentive to 
consent to judgment and this element of compromise would be destroyed. 
The consent decree would thus as a practical matter be eliminated as an 
antitrust enforcement tool, despite Congress' directive that it be 
preserved.'' AT&T, 552 F. Supp. at 151.
    Thus, even in the AT&T case, a case of unparalleled public 
importance in which the trial court had unusual familiarity with both 
the evidence and the legal arguments of the parties, see id. at 152, 
the court determined to approve the parties' settlement ``[i]f the 
[proposed] decree meets the requirements for an antitrust remedy.'' Id. 
at 153. The court made clear that it intended to follow that standard 
whether or not the proposed decree corresponded to the decree the court 
itself would have imposed had the parties pushed forward to an 
adjudicated judgment. See id. at 166 n.147 (noting that if the case 
``were to proceed to final judgment and liability were found, the Court 
might determine that [certain measures not part of the proposed decree] 
are appropriate remedies, either as alternatives to the divestiture of 
the Operating Companies or in addition to such divestiture'').

IV. Entry of the Revised Proposed Final Judgment Is in the Public 
Interest

    The RPFJ is a sound and appropriate response to the violations 
found by the district court and affirmed by the court of appeals, 
recognizing, as it must, the substantial narrowing of the case that has 
taken place since its commencement in 1998. In fashioning appropriate 
relief, the United States was bound to confine its remedial proposals 
to the sole basis of liability sustained by the Court of Appeals--i.e., 
specific acts by Microsoft to impede the emergence of middleware as a 
threat to the operating system monopoly. The United States also was 
mindful of the risks associated with tampering too greatly with market 
mechanisms or seeking to dictate some preferred view of how these 
markets should develop. While Microsoft's violations must be redressed, 
the purpose of an antitrust decree is to restore and preserve 
competition, not to displace competition with a regulatory regime.
    The RPFJ meets the goals of public antitrust enforcement. First, it 
prohibits the conduct found by the court of appeals to be unlawful. The 
RPFJ contains specific affirmative prohibitions addressing each of the 
12 practices the court determined to be acts of monopoly maintenance. 
This being a monopolization decree, the RPFJ then goes beyond the 
specific unlawful acts to provide fencing-in relief to address other 
practices that Microsoft might use to replicate the adverse effects of 
the offending conduct. For example, although there was no finding that 
Microsoft had priced its operating systems in an unlawful manner, the 
RPFJ requires uniform pricing and terms to the major OEM's to prevent 
retaliatory discrimination against those who might promote competing 
middleware products. Finally, the RPFJ takes affirmative steps to 
restore competition by creating favorable conditions under which 
competing middleware products can be developed and deployed. Among 
other things, the RPFJ requires the documentation and disclosure of 
applications interfaces and communications protocols to facilitate 
third-party development efforts and, in some instances, modifications 
of the operating system to accommodate competing middleware. Again, 
these restorative provisions go beyond the specific findings of 
unlawful behavior, with the goal of creating a forward-looking and 
comprehensive remedial scheme. Nothing in the RPFJ exempts Microsoft 
from the mandates of the antitrust laws; it continues to face antitrust 
exposure for conduct beyond that which has been litigated in this case.
    Many commentors, especially many of Microsoft's competitors, urge 
the Court to withhold Tunney Act approval, advocating their own views 
of the public interest. Although many such commentors assert that 
alternatives to the RPFJ might advance their own private strategic and 
financial interests, such proposals typically lack a foundation in the 
court's liability findings and likely would be harmful to both 
competition and consumers. The most persistent complaint is that the

[[Page 12104]]

fencing-in and restorative provisions are not absolute prohibitions on 
competitive activity by Microsoft or absolute requirements that 
Microsoft surrender its technology for the benefit of competitors. 
Characterizing the RPFJ's limitations as ``loopholes,'' these 
commentors fail to recognize that the limitations merely permit 
Microsoft to compete through actions that are not prohibited by the 
antitrust laws, were never at issue in this case, or were challenged 
under theories of liability expressly rejected by the court of appeals.
    Protecting competitors from legitimate competition from Microsoft 
is not a goal of public antitrust enforcement. The goal of the decree 
is not to secure specific advantages for particular competitors or to 
dictate for consumers which products or technologies will succeed. In 
fashioning the RPFJ, the United States has taken pains to remedy the 
violations without seeking to dictate market outcomes. We have had to 
balance certain competing interests, recognizing that provisions 
benefitting firms at one level in the chain of distribution have 
potential effects on firms at other levels. In striking such balances, 
the United States has remained faithful to the axiom that the U.S. 
antitrust laws protect competition not competitors. E.g., Andrx 
Pharms., Inc. v. Biovail Corp. Int'l, 256 F.3d 799, 812 (D.C. Cir. 
2001) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 
477, 488 (1977), petition for certiorari filed, 70 U.S.L.W. 3465 (Jan. 
11, 2002), (No. 01-1050). On that basis, the United States has 
concluded that further fencing-in or restorative relief based upon 
hypothetical concerns about Microsoft's behavior not only would be 
unnecessary and unwarranted, but also might be affirmatively harmful to 
competition.
    Moreover, the RPFJ bears none of the infirmities that would justify 
the Court's withholding of approval. See MSL, 118 F.3d at 783 (listing 
factors that would justify withholding approval); Microsoft I, 56 F.3d 
at 1462 (same). The decree is comprehensive and complex, like the 
computer industry itself, but its terms are carefully defined and not 
ambiguous.\54\ The enforcement mechanisms are creative and fully 
adequate. See pages 60-62 below.\55\ No third party has demonstrated 
positive injury that would flow from entry of the RPFJ.
---------------------------------------------------------------------------

    \54\ For a response to commentors' claims of specific 
ambiguities, see Response of the United States To Public Comments on 
the Revised Proposed Final Judgment, passim, esp. Sec. III 
(Definitions) (``Response'').
    \55\ For a response to commentors' claims of specific 
shortcomings of the enforcement mechanisms of the RPFJ, see 
Response, Sec. VIII (Enforcement); see also Declaration of David S. 
Sibley (``Sibley Decl.'') (attached as Appendix C).
---------------------------------------------------------------------------

A. The Revised Proposed Final Judgment Satisfies the Goals of an 
Antitrust Remedy and Properly Addresses All Bases of Liability Affirmed 
by the Court of Appeals

    The Revised Proposed Final Judgment provides stringent, effective, 
enforceable, and immediate relief that fully comports with the purposes 
of relief in antitrust cases and with Microsoft's degree of liability 
as affirmed by the Court of Appeals. Restoring competition is the ``key 
to the whole question of an antitrust remedy,'' United States v. E.I. 
du Pont de Nemours & Co., 366 U.S. 316, 326 (1961). Competition was 
injured in this case principally because Microsoft's illegal conduct 
contributed to the applications barrier to entry into the personal 
computer operating system market by impeding the emergence of 
middleware products that had the potential to assist 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 
competitive conditions like those that existed prior to the unlawful 
conduct. Moreover, in fashioning relief, the United States, as the 
public enforcer of the federal antitrust laws, must take care that the 
remedy not burden the economy or distort market outcomes through 
unnecessarily regulatory or otherwise inappropriate restraints. The 
RPFJ responds to these concerns; it imposes a series of requirements 
and carefully crafted prohibitions on Microsoft's conduct that are 
designed to accomplish the critical goals of an antitrust remedy 
without damaging the economy. See Sibley Decl. Paras. 86-90.
    As instructed by the Court of Appeals and this Court (see Tr. 9/28/
01 at 8), the United States fashioned its relief by focusing on the 
specific practices for which Microsoft's liability was affirmed. 
Significantly, and quite properly, the RPFJ does not seek to eliminate 
Microsoft's operating system monopoly, see Sibley Decl. para. 8, though 
many commentors suggest it should. There was never any allegation--let 
alone any finding--in this case that Microsoft acquired its position in 
operating systems unlawfully. Further, the district court and the Court 
of Appeals both determined that they could not conclude that, absent 
Microsoft's illegal actions, any middleware product or products would 
have succeeded in toppling the monopoly.
    In fashioning the decree, the United States began with the district 
court's interim conduct remedies of June 2000. See Initial Final 
Judgment, 97 F. Supp. 2d at 66-69. As this Court recognized (Tr. 9/28/
01 at 8), however, those remedies were based on a much wider range of 
liability findings than were affirmed on appeal. See Microsoft, 253 
F.3d at 105 (``[t]his court has drastically altered the District 
Court's conclusions on liability''). Accordingly, the conduct 
restrictions of the Initial Final Judgment had to be tailored to the 
findings the Court of Appeals upheld. At the same time, however, 
because the interim conduct restrictions were designed to apply only as 
a stop-gap until the district court's structural remedy was implemented 
(Initial Final Judgment, 97 F. Supp. 2d at 66), they had to be 
broadened to address more fully the remedial objectives of arresting 
the anticompetitive conduct, preventing its recurrence, and restoring 
competitive conditions in the marketplace. No longer merely a stop-gap, 
the conduct restrictions now must stand on their own as full relief.
    In addition, the remedies needed to be updated to strengthen their 
long-term effectiveness in the face of the rapid technological 
innovation that continues to characterize the computer industry. The 
Court of Appeals noted that the six years that had elapsed between 
Microsoft's initial anticompetitive conduct and the appeal was an 
``eternity'' in this market, Microsoft, 253 F.3d at 49 (quoted by Order 
at 2 (Sept. 28, 2001)), and the facts bear that out. When the complaint 
was filed in May 1998, Microsoft's then-current operating system was 
Windows 95. Shortly thereafter, Microsoft revised and updated the 
operating system with Windows 98, which fully integrated Internet 
Explorer into Windows. In October 2001, just after the case was 
remanded to this Court, Microsoft introduced the latest generation of 
its operating system, Windows XP. The remedy crafted now must be 
relevant in the new world of Windows XP, and beyond. The RPFJ 
accomplishes these objectives by fundamentally changing--for the 
ultimate benefit of consumers--the way Microsoft deals with OEMs, IAPs, 
ISVs, and others in the computer industry.

[[Page 12105]]

1. The RPFJ Stops the Unlawful Conduct, Prevents Its Recurrence and 
Restores Competitive Conditions to the Market
    The Court of Appeals affirmed the district court's ruling that 
Microsoft unlawfully maintained its operating system monopoly through 
various actions designed to protect the operating system from the 
potential threat posed by middleware. However, the court reversed the 
district court's finding that Microsoft was liable based upon its 
general ``course of conduct,'' and limited liability to twelve specific 
anticompetitive acts out of twenty found violative by the district 
court. The RPFJ provides consumers with prompt, certain, and effective 
relief by stopping each of the specific acts found unlawful by the 
Court of Appeals, preventing their recurrence, and restoring 
competitive conditions in the market.

a. Stops the Unlawful Conduct

    Each of the twelve acts found unlawful by the Court of Appeals is 
listed below with a brief description of the specific provisions of the 
RPFJ that effectively address the conduct. \56\
---------------------------------------------------------------------------

    \56\ For a fuller discussion of how the Court of Appeals 
addressed the twenty acts found by the district court to violate 
Section 2, see Appendix A (attached hereto), and Sibley Decl. para. 
16 (Table One).
---------------------------------------------------------------------------

Agreements With Computer Manufacturers (OEMs)

    1. Prohibiting removal of desktop icons, folders or Start menu 
entries (see 253 F.3d at 61)
    Section III.H.1 of the RPFJ prevents Microsoft from engaging in 
this conduct by allowing end users or computer manufacturers to enable 
or remove access to each middleware product by displaying or removing 
icons, shortcuts, or menus in the Microsoft operating system in the 
same place they are normally displayed. See Sibley Decl. para. 24.
    2. Prohibiting alteration of initial boot sequence (see 253 F.3d at 
61)
    Section III.C.3 prohibits Microsoft from restricting OEMs from 
launching middleware automatically at the end of the initial boot 
sequence or subsequent boot sequences. Section III.C.4 prohibits 
Microsoft from restricting OEMs from offering users the option of 
launching a non-Microsoft operating system before Windows starts up. 
Section III.C.5 prohibits Microsoft from preventing OEMs from 
presenting their own Internet access offer in the initial boot 
sequence. See Sibley Decl. para. 25.
    3. Prohibiting addition of icons or folders of different shape or 
size (see 253 F.3d at 62)
    Section III.C.1 prohibits Microsoft from preventing OEMs from 
installing and displaying middleware on the desktop. Section III.C.2 
prohibits Microsoft from preventing OEMs from distributing or promoting 
middleware by placing on the desktop shortcuts of any size or shape, as 
long as they do not impair the functionality of the user interface. 
Section III.H.3 ensures that Microsoft's operating system does not 
automatically override the ``default'' settings to replace competing 
middleware products without first seeking confirmation from the user. 
See Sibley Decl. Paras. 26, 27.
    4. Prohibiting use of ``Active Desktop'' to promote others'' 
products (see 253 F.3d at 62)
    This specific conduct is no longer at issue because Microsoft has 
discontinued the use of the Active Desktop. Sections III.C.1 and 
III.C.2 nevertheless broadly restrict Microsoft from preventing OEMs 
from promoting rival products. See Sibley Decl. para. 28.

Binding Internet Explorer to Windows

    5. Excluding Internet Explorer from the ``Add/Remove'' utility (see 
253 F.3d at 65)
    Section III.H.1 requires Microsoft to allow end users and OEMs to 
enable or remove access to any Microsoft middleware product. See Sibley 
Decl. para. 29.
    6. Commingling code to prevent removal of Internet Explorer (see 
253 F.3d at 64-66)
    Section III.C.1 prohibits Microsoft from preventing computer 
manufacturers from installing and displaying rival middleware products 
on the desktop.
    Section III.H.1 requires Microsoft to allow end users and computer 
manufacturers to remove access to any Microsoft middleware product. See 
Sibley Decl. para. 30.

Agreements With Internet Access Providers (IAPs)

    7. Placement of IAP's product on desktop in return for its 
agreement to exclusively promote Internet Explorer (or to limit 
shipments of Navigator) (see 253 F.3d at 68)
    Section III.G.1 prohibits Microsoft from entering into any 
agreement with an IAP, ICP, ISV, or OEM that grants consideration on 
the condition that such entity distribute, promote, use, or support any 
Microsoft middleware or operating system exclusively or in a fixed 
percentage. Section III.G.2 prohibits Microsoft from entering into any 
agreement with an IAP or ICP granting placement in Windows to the IAP 
or ICP on the condition that it refrain from distributing, promoting, 
or using any product competing with Microsoft middleware. See Sibley 
Decl. para. 31.

Agreements With Internet Content Providers, Independent Software 
Vendors, and Apple

    8. Agreement with ISVs to make Internet Explorer their default 
hypertext-based user interface (see 253 F.3d at 71-72)
    Section III.F.2 forbids Microsoft from conditioning the grant of 
consideration on an ISV's refraining from developing, using, 
distributing, or promoting software that competes with Microsoft's 
operating system or middleware. Section III.G.1 prohibits Microsoft 
from entering into any agreement with an IAP, ICP, ISV, or OEM that 
grants consideration on the condition that such entity distributes, 
promotes, uses, or supports any Microsoft middleware or operating 
system exclusively or in a fixed percentage. See Sibley Decl. para. 32.
    9. Threat to end support of Apple Computer's Office product unless 
Apple bundled Internet Explorer with the Macintosh operating system and 
made Internet Explorer the default browser (see 253 F.3d at 73)
    Sections III.F.1 and III.F.2, discussed above, prohibit Microsoft 
from retaliating against ISVs and IHVs, including Apple, for supporting 
competing products and from offering consideration to such entities for 
refraining from supporting competing products. In addition, Section 
III.G.1 prohibits such exclusive arrangements. Sibley Decl. para. 33.

Efforts To Exclude Sun's Java

    10. Contracts requiring ISVs to exclusively promote Microsoft's 
Java product (see 253 F.3d at 75)
    Section III.F.2 forbids Microsoft from conditioning the grant of 
consideration on an ISV's refraining from developing, using, 
distributing, or promoting software that competes with Microsoft's 
operating system or middleware. Section III.G.1 prohibits Microsoft 
from entering into any agreement with an IAP, ICP, ISV, or OEM that 
grants consideration on the condition that such entity distribute, 
promote, use, or support any Microsoft middleware or operating system 
exclusively or in a fixed percentage. See Sibley Decl. para. 34.
    11. Deception of Java developers about Windows-specific nature of 
tools distributed to them (see 253 F.3d at 76)
    Section III.D addresses this conduct by requiring Microsoft to 
disclose certain APIs required for competing middleware to interoperate 
with its operating system. This makes the means

[[Page 12106]]

by which middleware producers interoperate with the operating system 
more transparent, and thus hinders Microsoft's ability to disadvantage 
these competitors. See Sibley Decl. para. 35.
    12. Coercion of Intel to stop assisting Sun in improving its Java 
technology (see 253 F.3d at 77)
    Sections III.F.1 and III.F.2, discussed above, prohibit Microsoft 
from retaliating against ISVs and IHVs, including Intel, for supporting 
competing products and from offering consideration to such entities for 
refraining from supporting competing products. See Sibley Decl., para. 
36.
    Thus, the RPFJ effectively stops each of the specific acts found 
unlawful by the Court of Appeals. See Sibley Decl. para. 40.

b. Prevents Recurrence of Unlawful Conduct

    In addition to stopping and preventing the recurrence of the 
specific acts found unlawful by the Court of Appeals, the RPFJ guards 
against the broad range of potential strategies Microsoft might develop 
to impede the emergence of competing middleware products. See Sibley 
Decl. Paras. 41-51.
    Middleware Definition. The various definitions of middleware within 
the RPFJ (see ``Microsoft Middleware'' (Section VI.J), ``Microsoft 
Middleware Product'' (Section VI.K) ``Non-Microsoft Middleware'' 
(Section VI.M), and ``Non-Microsoft Middleware Product'' (Section 
IV.N)) are broad. They cover not only the middleware products addressed 
by the Court of Appeals--Internet browsers and Java--but also 
additional current middleware products, such as email client software, 
networked audio/video client software, and instant messaging software, 
as well as future middleware products not yet in existence. See Sibley 
Decl. Paras. 41-42. To ensure inclusion of future products, the 
definitions set forth an objective test for products not yet existing; 
the definitions are qualified, however, in recognition that not all 
software that exposes APIs qualifies as competitively significant 
``middleware.'' Consequently, third-party software that, like Web 
browsers or Java, has the potential to create a competitive threat to 
Microsoft's operating system monopoly, will be covered in the future.
    Non-Discrimination and Non-Retaliation. Sections III.A, III.B, and 
III.F impose broad prohibitions and obligations on Microsoft to ensure 
that it cannot implement new forms of exclusionary behavior against 
middleware. See Sibley Decl. Paras. 41-42, 51. Section III.A of the 
RPFJ ensures that OEMs 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. 
Because the Court of Appeals agreed with the district court's 
conclusion that OEMs are a crucial channel of distribution for 
competing products (see 253 F.3d at 60-61), it is critical that OEMs 
are free to choose to distribute and promote competing middleware 
products without interference from Microsoft. Section III.B strengthens 
Section III.A further by requiring Microsoft to provide uniform 
licensing terms to the twenty largest and most competitively 
significant OEMs. Windows license royalties and terms are inherently 
complex, making it easy for Microsoft to use them to coerce OEM 
conduct. By eliminating the opportunity for Microsoft to use license 
terms as a club, the provision ensures that OEMs can make their own 
choices. Section III.F prohibits Microsoft from retaliating against 
ISVs and IHVs or conditioning consideration on a developer's refraining 
from developing, distributing, or writing to software that competes 
with Microsoft platform software. At the same time, it allows Microsoft 
to enter into lawful agreements with software developers that include 
provisions relating to Microsoft software, as long as the provisions 
are limited and reasonably necessary to effectuate the bona fide 
contractual relationship.

c. Restores Competitive Conditions to the Market

    The RPFJ restores competitive conditions to the market by requiring 
Microsoft to, among other things: (1) Disclose APIs and license 
communications protocols that will give ISVs the opportunity to match 
Microsoft's middleware and server software functionality; and (2) allow 
OEMs and end users to replace Microsoft middleware and preserve 
``default'' settings that will ensure that Microsoft's middleware does 
not override the selection of competing middleware products. See Sibley 
Decl. para. 52 & Table Two.
    APIs and Communications Protocols. Section III.D of the RPFJ 
requires Microsoft to disclose all of the interfaces and related 
technical information, including APIs, that Microsoft's middleware uses 
to interoperate with the Windows operating system. This includes APIs 
and other information that Microsoft has not previously disclosed. This 
Section creates the opportunity for ISVs, IAPs, ICPs, and OEMs to 
develop new middleware products that compete directly with Microsoft on 
a function-by-function basis, assured that their products will 
interoperate with the Windows operating system.
    Section III.E requires Microsoft to license the communications 
protocols that are necessary for software located on a computer server 
to interoperate with the Windows operating system. This means 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 the 
Windows operating system. The competitive significance of most non-
Microsoft middleware, including the browser and Java technologies--
against which much of Microsoft's illegal conduct was directed--was and 
will continue to be highly dependant 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 prevents Microsoft from incorporating into Windows 
features or functionality with which only its own servers 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. 
Although plaintiffs presented limited evidence about servers at trial, 
and no server-related violations were alleged or found, the United 
States believed that the RPFJ's effectiveness would be undercut unless 
it addressed the rapidly growing server segment of the market.
    Section III.I requires Microsoft to offer the necessary related 
licenses of the intellectual property that are required to disclose and 
license under the RPFJ. Section III.I ensures that Microsoft's 
obligations to disclose the technical information in Sections III.D and 
III.E are meaningful. This Section ensures 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.
    Section III.J permits Microsoft to take certain limited acts to 
address security-related issues that may arise from the broad 
disclosures required in Sections III.D and III.E. Section III.J 
provides a narrow exception for disclosure of APIs and other 
information for disclosures

[[Page 12107]]

that would compromise system security. See Sibley Decl. para. 65.
    Power to Replace Microsoft Middleware and Preserve Defaults. 
Section III.H further ensures that OEMs will be able to offer and 
promote, and consumers will be able to use, competing middleware 
products. Section III.H.1 requires Microsoft to allow end users and 
OEMs to enable or remove access to each Microsoft middleware product. 
Thus, all middleware products will have equal opportunity for desktop 
placement. Section III.H.2 requires Microsoft to allow end users, OEMs, 
and Non-Microsoft Middleware Products to designate non-Microsoft 
middleware to be invoked in place of the Microsoft middleware. This 
will allow competing programs to be launched automatically, as 
defaults, in numerous competitively significant instances.
2. The RPFJ Contains Stringent Enforcement Mechanisms
    Sections IV, V, and VII of the RPFJ contain some of the most 
stringent enforcement provisions ever contained in any modern consent 
decree. Sections IV and VII provide that the United States' full 
enforcement powers are available to enforce the judgment. As with any 
other decree, the United States will have prosecutorial access powers 
to monitor compliance, and authority to bring: (1) Both civil and 
criminal contempt petitions; (2) petitions for injunctive relief to 
halt or prevent violations; (3) motions for declaratory judgment to 
clarify or interpret particular provisions; and (4) motions to modify 
the Final Judgment, as appropriate. \57\ Though not required by the 
RPFJ, the United States has charged a core team of lawyers and 
economists experienced in the software industry with enforcing the 
RPFJ. Section IV also provides, as the United States typically 
requires, that Microsoft maintain an antitrust compliance program to 
help ensure compliance with the RPFJ. Microsoft is required to appoint 
an internal compliance officer responsible for supervising the review 
of Microsoft's activities to determine whether they comply with the 
RPFJ and for ensuring that Microsoft undertakes internal notification 
and education responsibilities as required.
---------------------------------------------------------------------------

    \57\ Of course, each Settling State also has authority to 
enforce the RPFJ.
---------------------------------------------------------------------------

    But the enforcement provisions do not stop there; rather, they 
contain two other, aggressive features. First, the RPFJ establishes the 
Technical Committee, a full-time, on-site compliance team of software 
design and programming experts, with the means to hire its own staff 
and consultants, as needed. The Technical Committee will facilitate 
enforcement by monitoring compliance with the RPFJ and reporting 
violations to the United States. Additionally, the Technical Committee 
is available to mediate compliance issues in a manner that will not 
supplant legal enforcement by the United States. This dispute 
resolution function reflects the recognition that the market will 
benefit from rapid, consensual resolution of issues, whenever possible, 
more so than litigation under the United States' contempt powers. 
Dispute resolution complements, but does not supplant, the other 
methods of enforcement. Furthermore, should the United States bring an 
enforcement action against Microsoft, it will not have to start from 
scratch. Rather, it will have the Technical Committee's work product, 
findings, and recommendations to help start any investigation.
    In order to fulfill these important responsibilities, the Technical 
Committee will have complete access to Microsoft's records, facilities, 
systems, equipment, and personnel. Significantly, this includes access 
to Microsoft's source code and related materials, which will assist in 
resolving or identifying any disputes relating to Microsoft's 
disclosure obligations. The Technical Committee will also have the 
benefit of written reports and data, which Microsoft must prepare.
    Second, under Section V, the RPFJ is scheduled to terminate in five 
years, but may be extended by two years if the Court finds that 
Microsoft has engaged in a pattern of wilful and systemic violations. 
The five-year duration provides sufficient time for the remedies to 
take effect in this evolving market and to restore competitive 
conditions to the greatest extent possible. And, because Microsoft will 
have an incentive to get out from under the RPFJ's restrictions and 
affirmative obligations as soon as possible, the prospect that it might 
face a two-year extension will provide an extra incentive to comply.
3. The RPFJ Fully Addresses the Unlawful Conduct While Avoiding an 
Unnecessarily Regulatory Decree That Would Distort Market Outcomes
    As discussed above, the United States carefully crafted the RPFJ to 
fully address the conduct found unlawful by the Court of Appeals. In 
doing so, the United States was mindful not to implement an overly 
broad, unnecessarily regulatory decree that would interfere with 
competitive conditions in the market. As discussed more fully in the 
Response to Comments, many commentors seek remedies that preordain 
market outcomes, require extensive on-going regulation, are vulnerable 
to manipulation by Microsoft's rivals, or are simply crafted to weaken 
Microsoft as a competitor.\58\ Such remedies would create 
inefficiencies in the market and likely result in harm to consumer 
welfare. See Sibley Decl. Paras.  19-21, 86-88.
---------------------------------------------------------------------------

    \58\ For example, several commentors have urged that the RPFJ 
require Microsoft to distribute Sun-compatible Java products with 
each copy of the Windows operating system shipped by Microsoft. 
E.g., SILA Comments, at 49-51; Comments of SBC Communications, Inc. 
on the Proposed Final Judgment at 145 (MTC #00029411) (``SBC 
Comment''); ProComp Comment, Att. A, at 18-19 (Declaration of 
Kenneth J. Arrow) (``Arrow Decl.''). This remedy would go beyond 
restoring the competitive conditions existing prior to Microsoft's 
unlawful conduct--where Sun's Java product competed for space on 
Windows--and instead preordain the market outcome by ensuring Java 
placement on the operating system. See Sibley Decl. para. 80. As 
another example, a commentor proposes that Microsoft be required to 
offer, at a lower price, a separate, ``stripped down'' version of 
Windows that does not include Microsoft middleware products. SBC 
Comment, at 48-49. However, determining the appropriate discount for 
each of the middleware products stripped out of Windows, including 
an accounting for the shared costs between multiple projects, would 
result in a highly regulatory pricing apparatus susceptible to 
further litigation. See Sibley Decl. Paras.  71-74.
---------------------------------------------------------------------------

B. The Revised Proposed Final Judgment Compares Favorably to the 
Initial Final Judgment

    In the Joint Status Report filed September 20, 2001, plaintiffs 
informed the Court that their proposal for relief would be modeled on 
the conduct restrictions in the Initial Final Judgment. Joint Status 
Report at 2 (Sept. 20, 2001). A week later, the Court admonished 
plaintiffs to determine which relief was no longer appropriate given 
the Court of Appeals' narrowing of the underlying liability. See Tr. 9/
28/01 at 8. Although some commentors have argued that any relief short 
of the Initial Final Judgment is inadequate, that is contrary to the 
Court's statements, as well as the Court of Appeals' ruling.
    The RPFJ parallels the Initial Final Judgment in many ways, 
provides for greater relief in some respects, and, in light of the 
Court of Appeals' decision, omits some provisions. A comparison of the 
two decrees highlights why the RPFJ is in the public interest.
1. The Revised Proposed Final Judgment Relies on Conduct Restrictions, 
Rather Than Structural Relief
    The most significant difference between the Initial and Revised 
Proposed Final Judgment is that the

[[Page 12108]]

former required a break-up of Microsoft while the latter does not. See 
IFJ Secs. 1-2. Shortly after remand, plaintiffs informed Microsoft and 
this Court that, in light of the Court of Appeals' decision, we would 
no longer seek to break up the company. Joint Status Report 2 (Sept. 
20, 2001). Thus, even if the United States had not entered into a 
negotiated settlement and instead litigated a remedy, we would not have 
sought structural relief. Plaintiffs abandoned the effort to break up 
Microsoft for both legal and practical reasons.
    First, although the Court of Appeals merely vacated--but did not 
reverse--the Initial Final Judgment, it also made clear that it viewed 
structural relief in this case skeptically, at best. The court 
questioned whether plaintiffs had ``established a sufficient causal 
connection between Microsoft's anticompetitive conduct and its dominant 
position in the [operating system] market'' to justify divestiture. 
Microsoft, 253 F.3d at 106. The court continued that ``[a]bsent such 
causation, the antitrust defendant's unlawful behavior should be 
remedied by ``an injunction against continuation of that conduct.'' Id. 
(quoting 3 Antitrust Law para. 650a, at 67). The court also suggested 
that the necessary causation might be lacking, noting that even the 
district court ``expressly did not adopt the position that Microsoft 
would have lost its position in the [operating system] market but for 
its anticompetitive behavior.'' Id. at 107 (quoting Findings of Fact, 
para. 411) (emphasis added). Moreover, the Court of Appeals accepted 
Microsoft's argument that divestiture is usually reserved for 
``dissolution of entities formed by mergers and acquisitions,'' and 
directed this Court to ``reconsider'' whether ``divestiture is 
appropriate with respect to Microsoft, which argues that it is a 
unitary company.'' Id. at 105. And the court emphasized that, when 
fashioning a new remedy, the district court should bear in mind that 
the Court of Appeals had ``drastically'' altered the basis of liability 
(id. at 105, 107) and that the new remedy should reflect the ``limited 
ground of liability'' upheld on appeal. Id. at 107.
    Second, if plaintiffs had pursued structural relief on remand, 
Microsoft would have been entitled to present evidence challenging a 
``wide range of plaintiffs' factual representations, including the 
feasibility of dividing Microsoft, the likely impact on consumers, and 
the effect of divestiture on shareholders.'' Id. at 101. This not only 
would have been time consuming--both in the district court and then, 
assuming this Court actually ordered structural relief anew, again in 
the Court of Appeals--but also would have permitted Microsoft to 
introduce a plethora of new evidence. Foregoing a structural remedy 
permitted plaintiffs to speed along the remand proceedings and obtain 
quicker relief and relief that was more likely to be affirmed on 
appeal.
2. Remedying Tying Is No Longer an Objective
    The Revised Proposed Final Judgment also departs significantly from 
the Initial Final Judgment by omitting a prohibition on tying. See IFJ 
Sec. 3.f (``Ban on Contractual Tying''). The Court of Appeals vacated 
Microsoft's liability on the tying claim (Microsoft, 253 F.3d at 84-
97), and soon thereafter plaintiffs informed Microsoft and this Court 
that, in light of the appellate court's decision, we would no longer 
pursue allegations of tying. Joint Status Report 2 (Sept. 20, 2001). 
Thus, even if the United States had not entered into a negotiated 
settlement and instead continued its litigation, we would not have 
pursued the tying claim. As with structural relief, plaintiffs 
abandoned the tying claim for both legal and practical reasons.
    The Court of Appeals vacated and remanded, rather than reversed, 
the tying claim, but left clear instructions on what it expected on 
remand. See Microsoft, 253 F.3d at 95-97. First, plaintiffs would have 
to pursue the claim under the rule of reason--with its rigorous proof 
requirements--rather than the per se rule, which obviates many 
difficult problems of proof. Id. at 89-95. Second, plaintiffs would be 
required to show that Microsoft's conduct ``unreasonably restrained 
competition . . . in the tied good market,'' but would be ``precluded 
from arguing any theory of harm that depends on a precise definition of 
browsers or barriers to entry . . . other than what may be implicit in 
Microsoft's tying arrangement.'' Id. at 95. Plaintiffs considered these 
to be significant legal hurdles.
    Of course, pursuing the tying claim on remand also would have 
raised many of the same practical difficulties as discussed with 
respect to pursuing structural relief on remand. For example, continued 
pursuit of tying would have delayed the remand proceedings 
significantly, thereby further delaying any relief for consumers. Also, 
Microsoft would have been entitled to introduce a whole host of new 
evidence relating to its claimed procompetitive justifications for its 
actions. Thus, the decision to abandon the tying claim was a sound 
exercise of prosecutorial discretion.
    The United States' decision to abandon the tying claim, coupled 
with the Court of Appeals' decision to reject the attempted 
monopolization count, had a significant impact on the scope of relief 
the United States could obtain. The tying and attempted monopolization 
claims were the only two considered by the Court of Appeals that 
asserted a direct anticompetitive impact in the market for Web 
browsers. The remaining count, monopoly maintenance, asserted an 
anticompetitive impact in the operating system market. The only 
connection that Web browsers had to this claim was that they were one 
of the nascent middleware threats that Microsoft had impeded. 
Therefore, without a claim asserting a direct impact in the Web browser 
market, the United States' was entitled to relief that restored nascent 
threats like those that Web browsers had presented, not relief that 
addressed some broader injury in the browser market.
3. The New Conduct Restrictions Compare Favorably to Those in the 
Initial Final Judgment
    The Revised Proposed Final Judgment is based on the interim conduct 
restrictions of the Initial Final Judgment of June 7, 2000.

a. Substantive Provisions Included in Both the Initial Final 
Judgment and the Revised Proposed Final Judgment

    Both decrees prohibit Microsoft from retaliating against OEMs that 
support non-Microsoft products. Compare IFJ Sec. 3.a.i with RPFJ 
Sec. III.A. Both decrees also require Microsoft to license its Windows 
operating system products to the 20 largest OEMs on uniform terms. 
Compare IFJ Sec. 3.a.ii, with RPFJ Sec. III.B. The Initial Final 
Judgment also afforded OEMs flexibility in product configuration, as 
does the Revised Proposed Final Judgment. Compare IFJ Sec. 3.a.iii, 
with RPFJ Sec. III.C. The Initial Final Judgment also barred Microsoft 
from prohibiting OEMs from automatically launching a substitute user 
interface upon completion of the boot process (IFJ Sec. 3.a.iii(3)), 
but the Court of Appeals expressly rejected this basis for liability 
(Microsoft, 253 F.3d at 63), so the Revised Proposed Final Judgment has 
no equivalent provision. And both decrees require Microsoft to provide 
OEMs and consumers the means to remove access to any Microsoft 
middleware that comes with Windows so that rival middleware may be 
substituted. Compare IFJSec. 3.g.i, with RPFJ Sec. III.H.

[[Page 12109]]

    Section 3.b of the Initial Final Judgment required Microsoft to 
disclose to ISVs and OEMs all Windows APIs necessary for 
interoperation, including interoperation with servers; Sections III.D 
and III.E of the RPFJ accomplish the same result. The Initial Final 
Judgment also required Microsoft to establish a ``secure facility'' 
where ISVs, OEMs, and others could ``study, interrogate and interact'' 
with the Windows source code to help ensure interoperability. See IFJ 
Sec. 3.b. The RPFJ omits this provision, but provides for affirmative 
disclosure of interfaces and protocols, and empowers the Technical 
Committee to ensure that those disclosures are being made. See RPFJ 
Sec. IV.B. This approach strikes the appropriate balance by ensuring 
that developers will have the access they need, while protecting 
Microsoft's intellectual property from misappropriation.
    Both decrees also comprehensively address Microsoft's relations 
with ISVs and IHVs to ensure that developers can create or use rival 
software. Both decrees accomplish this objective by broadly prohibiting 
Microsoft from threatening or retaliating against ISVs or IHVs' actual 
or contemplated action to develop, use, distribute, promote, or support 
software that competes with Microsoft middleware or operating system 
software. Compare IFJ Secs. 3.d, 3.h, with RPFJ Sec. III.F. Similarly, 
both decrees prohibit Microsoft from entering into exclusive agreements 
with third parties that would require them to refrain from 
distributing, promoting, using, or supporting rival software. Compare 
IFJ Sec. 3.e, with RPFJ Sec. III.G.
    There are also similarities with respect to enforcement of the two 
decrees. For example, both decrees require Microsoft to maintain an 
internal antitrust compliance program (compare IFJ Sec. 4, with RPFJ 
Sec. IV.C), and both give plaintiffs access to Microsoft's source code, 
books, correspondence, personnel, etc. and the right to require 
Microsoft to submit written reports under oath. Compare IFJ Sec. 5, 
with RPFJ Sec. IV.A.2.

b. The RPFJ Contains Provisions Not Included in the Initial Final 
Judgment

    Although the Initial Final Judgment required Microsoft to disclose 
its APIs to facilitate interoperation (IFJ Sec. 3.b), the RPFJ goes 
further by requiring Microsoft to offer the necessary related licenses 
for the intellectual property that Microsoft must disclose. See RPFJ 
Secs. III.I.1, III.I.4. This ensures that Microsoft cannot use its 
intellectual property rights to undermine the competitive value of its 
disclosure obligations.
    The RPFJ also significantly enhances enforcement of the decree as 
compared to the Initial Final Judgment. As previously discussed (see 
page 60 above), the RPFJ establishes a Technical Committee--a full-
time, on-site compliance team of computer experts, complete with its 
own staff and the power to hire consultants--to monitor compliance with 
the decree, report violations to the Department, and attempt to resolve 
technical disputes under the disclosure provisions. RPFJ Secs. IV.B.8, 
IV.D.4. The Technical Committee will have complete access to 
Microsoft's source code (RPFJ Sec. IV.B.8.c), records, facilities, and 
personnel. Its dispute resolution responsibilities (RPFJ Sec. IV.D) 
reflect the recognition that the market will benefit from rapid, 
consensual resolution of issues whenever possible, more so than 
litigation under the Department's contempt powers. The dispute 
resolution process complements, but does not supplant, ordinary methods 
of enforcement. Complainants may still bring their inquiries directly 
to the Department, and need not go first to the Technical Committee 
(RPFJ Sec. IV.D.1). The Technical Committee represents an innovation in 
consent decrees that the United States believes will improve the speed 
and quality of enforcing a decree in a field as technical and fast-
paced as the computer industry.
    The Revised Proposed Final Judgment provides for extending the 
decree's duration in the event Microsoft is found to have engaged in a 
``pattern of willful and systematic violations'' of its terms. RPFJ 
Sec. V.B. This potential threat is yet another means to ensure that 
Microsoft will comply with all of the decree's provisions, to the 
ultimate benefit of consumers.
    Finally, the United States updated the RPFJ in several key ways to 
improve the clarity of the decree and account for changes in the 
industry since the IFJ was proposed. First, the RPFJ contains a new 
provision in Section III.H.3 that prohibits Microsoft from designing 
Windows to automatically alter an OEMs middleware configurations on the 
desktop without first seeking confirmation from the user no sooner than 
14 days after the consumer has first booted the computer. This 
provision was included in response to Microsoft's inclusion of the 
Clean Desktop Wizard product in Windows XP that ``sweeps'' the unused 
icons that the OEM has chosen to place on the desktop. Second, the 
definition of middleware products in the RPFJ was updated by including 
the actual names of the current Microsoft middleware products--Internet 
Explorer, Microsoft's Java Virtual Machine, Windows Media Player, 
Windows Messenger and Outlook Express. (RPFJ Sec. VI.K). This 
significantly improves the clarity of the decree because the IFJ had 
not explicitly indicated which current Microsoft products constituted 
middleware. The RPFJ's middleware definitions were also updated to 
account for the increased emphasis on downloading as a distribution 
mechanism in the market.

C. The Revised Proposed Final Judgment Creates Competitive Conditions

    There can be no guarantee that consumers and industry participants 
will prefer rival middleware over Microsoft's software, or that rival 
middleware will ever displace--or facilitate the displacement of--
Microsoft's monopoly position, but the RPFJ restores competitive 
conditions that foster such threats. Indeed, even the district court, 
in its extensive findings of fact and conclusions of law, expressly 
disclaimed the conclusion that but for Microsoft's anticompetitive 
acts, Netscape's browser and/or Sun's Java technologies necessarily 
would have eroded Microsoft's monopoly position. See Findings of Fact, 
para.411; Microsoft, 253 F.3d at 107. Thus, consistent with the 
antitrust laws, the RPFJ refrains from picking winners and losers, and 
sticks to restoring the competitive conditions. Consumers benefit from 
competition, and the goal of the antitrust laws is to protect it, not 
weight it to a particular result.

V. The Court Should Make Its Public Interest Determination and 
Enter the Decree as Expeditiously as Possible

    Time is of the essence. When the Court five months ago ordered the 
parties to ``expend and concentrate all of their resources upon 
resolving these cases through a fair settlement for all parties,'' 
Order at 2 (Sept. 28, 2001), the Court recognized:

    The claims by Plaintiffs of anticompetitive conduct by Microsoft 
arose over six years ago, and these cases have been litigated in the 
trial and appellate court for over four years. As the Court of 
Appeals has noted, the relevant time frame for this dispute spans 
``an eternity in the computer industry.''

Order at 2 (Sept. 28, 2001). The public has waited long enough. The 
Court should make a determination that entry of the proposed final 
judgment is in the public interest, and then enter it as expeditiously 
as possible.

A. The Court Should Not Hold an Evidentiary Hearing

    As the Court has recognized, the Tunney Act does not require an

[[Page 12110]]

evidentiary hearing as part of this proceeding,\59\ Tr. at 20 (Feb. 8, 
2002), although the Court left open the possibility that it will decide 
to hold one. Id. at 20-21. The question lies within the Court's sound 
discretion, guided by the principle that ``the trial judge will adduce 
the necessary information through the least complicated and least time-
consuming means possible.'' Senate Report at 6; accord House Report at 
8.
---------------------------------------------------------------------------

    \59\ The various materials the Tunney Act does require, see 15 
U.S.C. 16(b), together with any record created prior to settlement, 
will usually suffice. See United States v. Enova Corp., 107 F. Supp. 
2d 10, 17 (D.D.C. 2000) (``Tunney Act expressly allows the court to 
make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
Senate Hearings at 152-53 (testimony of Hon. J. Skelly Wright) (``an 
experienced judge, who does have the facility of getting to the 
point and getting others to get to the point, can arrive at a public 
interest determination in most cases without using'' additional 
tools); Senate Report at 6 (``[w]here the public interest can be 
meaningfully evaluated simply on the basis of briefs and oral 
arguments, that is the approach that should be utilized''). Even 
absent a settlement, no evidentiary hearing on relief is required 
where there are ``no disputed factual issues regarding the matter of 
relief.'' Microsoft, 253 F.3d at 101.
---------------------------------------------------------------------------

    In our view, at the conclusion of the one- or two-day hearing the 
Court has ordered, Order (Feb. 15, 2002); see Tr. 2/15/02 at 5, at 
which the Court is considering allowing oral argument by third parties, 
id. at 9, the Court will have more than ample information on which to 
base its public interest determination. The Court should not hold an 
evidentiary hearing.
    First, the very length and size of this case, to which some 
commentors point as justification for an evidentiary hearing, actually 
show that there is no need for one. The Court already has available to 
it a massive trial record--including testimony and thousands of 
exhibits--plus tens of thousands of comments (some including 
affidavits, technical reports, and other evidentiary presentations) 
submitted as part of the Tunney Act process. This record contains 
extensive information about the competitive structure of the industry 
and myriad other matters relevant to the public interest determination. 
Little if anything more would be learned from live witnesses and cross-
examination than is already known from the record, comments, and the 
United States' responses to the comments.\60\
---------------------------------------------------------------------------

    \60\ For example, commentor ProComp submitted a lengthy 
declaration from Professor Arrow, Arrow Decl., in opposition to the 
RPFJ, but fails to identify, in either its comments, ProComp 
Comment, or its filed memorandum, ProComp's Memorandum in Support of 
Its Motion for Limited Intervention or Tunney Act Participation 
(Feb. 7, 2002), anything specific that Professor Arrow would say at 
an evidentiary hearing beyond what already appears in his 
declaration. Cf. American Can Co. v. Mansukhani 814 F.2d 421, 425 
(7th Cir. 1987) (defendants not entitled to a hearing on remedies 
because they failed ``to explain to the district court what new 
proof they would present to show'' that the proposed remedy was 
unwarranted).
---------------------------------------------------------------------------

    Second, the most analogous precedent, AT&T, does not support an 
evidentiary hearing. In that case, considering the entry of a decree 
that would massively restructure the entire telecommunications 
industry, Judge Greene held two days of hearings, permitting some 
organizations to ``present[] oral argument'' AT&T, 552 F. Supp. at 147 
n.65. But the court ``concluded that none of the issues before it 
require[d] an evidentiary hearing. That being so, there [was] obviously 
no need, nor indeed any occasion, for the presentation by a third party 
of its own witnesses or for the cross-examination of adverse 
witnesses.'' Id. at 219. See also id. at 188 n.233 (rejecting 
contention that ``the Court should not assess the propriety of the 
restrictions without holding evidentiary hearings with regard to the 
need therefor'').\61\
---------------------------------------------------------------------------

    \61\ Judge Greene also denied all motions to intervene prior to 
the court's public interest determination. AT&T, 552 F. Supp. at 146 
& n.61.
---------------------------------------------------------------------------

    Third, it is clear that much of the impetus behind the call for an 
evidentiary hearing comes from commentors who want that hearing to 
inquire into the Department of Justice's decision to enter into a 
settlement. The drive to challenge the propriety of prosecutorial 
decisions provides no warrant for an evidentiary hearing, because ``the 
district court is not empowered to review the actions or behavior of 
the Department of Justice; the court is only authorized to review the 
decree itself.'' Microsoft I, 56 F.3d at 1459. See also Maryland v. 
United States, 460 U.S. 1001, 1005-06 (1983) (Rehnquist, J., 
dissenting) (considerations that led the Department of Justice to 
settle are not amenable to judicial review).
    Fourth, an evidentiary hearing would further complicate the Tunney 
Act process and invite unwarranted delay in entering the RPFJ. Given 
the number of commentors and persons interested in participating in the 
Tunney Act process, it could prove difficult to manage an evidentiary 
hearing equitably without causing substantial delay. The public 
interest in achieving a prompt resolution of this case and rapid 
implementation of remedies \62\ should not be frustrated absent a 
showing of very good cause.
---------------------------------------------------------------------------

    \62\ Although Microsoft has agreed to be bound by much of the 
RPFJ pending its entry (Stipulation para. 2 (Nov. 6, 2001)), some 
important provisions become effective only after entry. See, e.g., 
RPFJ Sec. IV.B (Technical Committee must be created ``[w]ithin 30 
days of entry of this Final Judgment''); id, Sec. IV.C (Microsoft's 
internal compliance program begins ``within 30 days of entry'').
---------------------------------------------------------------------------

B. The Court Should Not Delay Entry of the Decree Pending the Remedies 
Hearing in New York v. Microsoft

    The remedies hearing in New York v. Microsoft Corp., No. 98-CV-
1233, is currently scheduled to begin on March 11, 2002. Some 
commentors have suggested that the Court delay its public interest 
determination in this case pending the results of that hearing, 
evidently so that the record, and perhaps the Court's adjudicated 
judgment, in New York can be imported into this Tunney Act proceeding. 
The suggestion that the Court link the two proceedings in this manner 
is legally flawed and ill-advised. Were the Court to follow the 
suggestion, it would undermine the foundations of the Tunney Act, bring 
into question the authority of the Department of Justice to settle 
lawsuits, threaten the viability of the consent decree as a tool of 
antitrust enforcement, and risk serious damage to federal/state 
cooperation in the prosecution of antitrust cases. It would be an 
unfortunate precedent for this Court to set.
1. Linking This Case to the Remedies Hearing in New York Would Be Bad 
Law and Bad Policy
    Linking this case to the remedies hearing, and outcome, in New York 
would transform the nature of this proceeding in ways Congress did not 
intend and the law does not countenance. The Tunney Act establishes a 
complete framework for review and entry of a consent decree in a civil 
antitrust suit brought by the United States, a framework that does not 
encompass separate litigation brought by other plaintiffs. The Court's 
role in this case is to determine whether the judicial act of entering 
a proposed decree arrived at by agreement of the parties is ``within 
the reaches of the public interest.'' Microsoft I, 56 F.3d at 1458 
(quotation marks and emphasis omitted). In contrast, the role of the 
Court in New York is that of judicially resolving disputes between the 
parties--according to the applicable evidentiary standard--and 
ultimately imposing an adjudicated judgment. The Court's ability to 
play different roles in the two cases is not in doubt. But the Tunney 
Act does not provide for mixing those roles.
    To the extent the Court delays this proceeding so as to rely on the 
New York record or result, the Court brings

[[Page 12111]]

adversary litigation, with all that entails, into the Tunney Act 
process, which is intended to be something quite different. The Tunney 
Act, intended ``to encourage[] settlement by consent decrees as part of 
the legal policies expressed in the antitrust laws,'' United States v. 
Alex. Brown & Sons, 963 F. Supp. 235, 238-39 (S.D.N.Y. 1997) (quoting 
House Report at 6, 1974 U.S.C.C.A.N. at 6537), aff'd sub nom. United 
States v. Bleznak, 153 F.3d 16 (2d Cir. 1998), would become the 
continuation of litigation by other means.
    Linking the two proceedings would also leave the United States with 
two equally improper alternatives. Either the United States would have 
to participate, through intervention or other means, in litigation in 
New York (where it is too late to participate in remedy-phase 
discovery), or if not, it would have to let the outcome of its own case 
turn on a litigation record to which it is a stranger. Each alternative 
effectively deprives the United States of its ability to resolve a case 
by consent decree. Each deprives the Department of Justice of its 
authority to settle cases, Supreme Court precedent to the contrary 
notwithstanding, see Cascade Natural Gas Corp. v. El Paso Natural Gas 
Co., 386 U.S. 129, 136 (1967) (Court does ``not question the authority 
of the Attorney General to settle suits after, as well as before, they 
reach here''), because the case effectively continues in full 
litigation despite the settlement agreed to by the parties. The only 
difference between the alternatives left to the government is that the 
first continues to draw upon the resources a settlement should have 
freed up for use in other antitrust enforcement as the price of 
continued influence over the outcome of the government's own case, 
while the second provides a resource savings, but at the cost of that 
very influence.
    Both the United States and antitrust defendants would have a 
substantially reduced incentive to settle cases at all if Tunney Act 
proceedings could be linked to other litigation. Why settle, if the 
entry of judgment in the ``settled'' case could be delayed pending the 
outcome of parallel litigation that remains unsettled, and if the 
result in the ``settled'' litigation could depend on what happens in 
the remaining litigation? That result may satisfy those who think 
government antitrust cases in general, or at least this government 
antitrust case in particular, should not be settled, but it is 
inconsistent with the Tunney Act policy favoring settlement as a viable 
tool in the antitrust enforcement arsenal.
    The possibility of this linking comes about here only because the 
United States, 20 States, and the District of Columbia joined forces in 
a cooperative effort to challenge anticompetitive conduct by a 
monopolist. This case and New York were consolidated for all purposes, 
and the plaintiffs worked closely to bring the matter to a successful 
resolution.\63\ Last November, the remaining plaintiffs reached a point 
where they could not all agree on the next step; the United States and 
nine States settled with Microsoft, while the other nine plaintiff 
States (including the District of Columbia) chose to continue 
litigating. If that fact means, as a result of linkage between the 
remedy phase of New York and this Tunney Act proceeding, that the 
United States effectively has been prevented from settling its own 
lawsuit, the United States surely will view the prospect of future such 
collaborative enforcement efforts in a less favorable light. Such a 
result would be exceedingly unfortunate for the future of antitrust 
enforcement.
---------------------------------------------------------------------------

    \63\ Had the plaintiffs not embarked on this creative 
collaboration, it is highly unlikely that two cases against 
Microsoft would have gone forward, parallel but separate, with each 
reaching more or less the same result at more or less the same time.
---------------------------------------------------------------------------

    Finally, of course, linkage inevitably would delay entry of a final 
judgment, thereby further thwarting the public interest in prompt 
resolution of this case. Cf. AT&T, 552 F. Supp. at 213 (deferring 
approval of the proposed decree ``would be unfair to the parties and to 
the public;'' delay ``can only multiply the costs of uncertainty that 
have plagued the industry far too long'').
2. The Claimed Benefits of Linkage Are Illusory
    Perhaps these costs of linkage would be acceptable if the gains to 
be had were substantial. They are not.
    Some argue that delaying this proceeding until after the remedies 
phase of New York will avoid the risk that the Court will prejudge that 
remedies phase by its determination here. But that risk is trivial. 
What the two cases share is one defendant (Microsoft), and a common 
record as of November 6, 2001. Two things principally set them apart. 
One is their different records from November 6 forward. The other, more 
important, distinction is that the Court faces two radically different 
tasks and addresses two radically different questions in the two 
proceedings. See pages 42-46, above. The Court's task here is to 
determine whether entry of a negotiated settlement is in the public 
interest according to a deferential standard of review; its task in New 
York is to enter an adjudicated judgment, perhaps devised by the Court 
itself, that the Court, in the exercise of its ``broad discretion . . . 
[,] calculates will best remedy the conduct it has found to be 
unlawful,'' Microsoft, 253 F.3d at 105, in light of the facts proven 
before it. The risk that its determination here would lead the Court to 
prejudge the result in New York is therefore minuscule.
    Some also suggest that delay here until a remedy is determined by 
adjudication in New York will avoid the risk of inconsistent remedies 
in the two cases. This risk, too, is small. Although it is quite 
possible that the remedy in New York might impose on Microsoft 
requirements not imposed here, or not impose on Microsoft requirements 
that are imposed here, that possibility need not give rise to 
inconsistency. Only if the two remedies actually conflict--for example, 
one remedy requires Microsoft to do something the other prohibits, or 
one remedy requires Microsoft to provide access to a facility the other 
takes away from Microsoft--is there a troubling inconsistency. There is 
no reason to expect such an inconsistency to arise, especially given 
that the Court will be well aware of the specific terms of the RPFJ 
when it eventually enters judgment in New York. If an inconsistency 
does arise, however, there are ample means to deal with it. See, e.g., 
RPFJ Sec. VII (Court retains jurisdiction to modify decree).
    Finally, some have suggested that delaying the proceedings here 
would conserve judicial resources. But apart from study of the existing 
record, which is necessary for both cases, judicial resources in the 
two proceedings will be devoted primarily to the remedies trial in New 
York and to the review of the public comments and the United States' 
response in this matter. The Court could not properly reduce the 
resources it devotes to these two tasks whatever the sequence of the 
two proceedings. Moreover, the Tunney Act provides the Court broad 
latitude to streamline its review process, 15 U.S.C. Sec. 16(f). 
Linking that review to separate litigation makes the Tunney Act review 
dependent on trials or hearings that are far less flexible, which can 
only complicate and delay the Tunney Act review.
      

Conclusion

    The proposed final judgment satisfies all of the requirements of an 
antitrust remedy, complies with the decision of the court of appeals, 
and, most importantly, is in the public interest. Accordingly, the 
Court should enter the decree as soon as possible.

[[Page 12112]]

Dated: February 27, 2002.
    Respectfully submitted,

Charles A. James,
Assistant Attorney General.
Deborah P. Majoras,
Deputy Assistant Attorney General.
Phillip R. Malone,
Renata B. Hesse,
David Blake-Thomas,
Paula L. Blizzard,
Kenneth W. Gaul,
Adam D. Hirsh,
Jacqueline S. Kelley,
Steven J. Mintz,
Barbara Nelson,
David Seidman,
David P. Wales,
Attorneys.
Philip S. Beck,
Special Trial Counsel.
U.S. Department of Justice, Antitrust Division, 601 D Street, NW., 
Suite 1200, Washington, DC 20530, (202) 514-8276.

Appendix A to Memorandum in Support of Entry of Proposed Judgment

Comparison of Court of Appeals' Findings on Liability toProvisions 
of the Revised Proposed Final Judgment

I. Liability Findings Affirmed by the Court of Appeals

Agreements with Computer Manufacturers (``OEMs'')

    1. Microsoft prohibited OEMs from removing any desktop icons, 
folders, or ``Start'' menu entries, thereby ``thwart[ing] the 
distribution of a rival browser by preventing OEMs from removing 
visible means of user access to IE.'' United States v. Microsoft Corp., 
253 F.3d 34, 61, 64 (D.C. Cir. 2001).
    RPFJ Provisions:
     Section III.H.1 requires Microsoft to ``[a]llow 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 . . . The 
mechanism shall offer the end user a separate and unbiased choice with 
respect to enabling or removing access . . . and altering default 
invocations . . . with regard to each such Microsoft Middleware Product 
. . . .''
    2. Microsoft prohibited OEMs from ``modifying the initial boot 
sequence . . ., thus prevent[ing] OEMs from using that process to 
promote the services of IAPs. . . .'' 253 F.3d at 61-62, 64.
    RPFJ Provisions:
     Section III.C.3 prohibits Microsoft from restricting OEMs 
from ``[l]aunching 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 . . . 
.''
     Section III.C.4 prohibits Microsoft from restricting OEMs 
from ``[o]ffering users the option of launching other Operating Systems 
. . . or a non-Microsoft boot-loader or similar program. . . .''
     Section III.C.5 prohibits Microsoft from restricting OEMs 
from ``[p]resenting in the initial boot sequence its own IAP offer  . . 
.''
    3. Microsoft prohibited OEMs from ``adding icons or folders 
different in size or shape from those supplied by Microsoft,'' thereby 
preventing OEMs from ``promot[ing] rival browsers, which keeps 
developers focused upon the APIs in Windows.'' 253 F.3d at 62, 64.
    RPFJ Provisions:
     Section III.C.1 prohibits Microsoft from restricting OEMs 
from ``[i]nstalling, and displaying icons, shortcuts, or menu entries 
for, 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 . . . .''
     Section III.C.2 prohibits Microsoft from restricting OEMs 
from ``[d]istributing or promoting Non-Microsoft Middleware by 
installing and displaying on the desktop shortcuts of any size or shape 
. . . .''
     Section III.H.3 requires Microsoft to ``[e]nsure that a 
Windows Operating System Product does not (a) automatically alter an 
OEM's configuration of icons, shortcuts or menu entries . . . pursuant 
to Section III.C of this Final Judgment without first seeking 
confirmation from the user and (b) seek such confirmation . . . until 
14 days after the initial boot up of a new Personal Computer . . . .''
    4. Microsoft prohibited OEMs from ``using the `Active Desktop' 
feature to promote third-party brands,'' thereby preventing OEMs from 
``promot[ing] rival browsers, which keeps developers focused upon the 
APIs in Windows.'' 253 F.3d at 62, 64.
    RPFJ Provisions:
     Section III.C.1 prohibits Microsoft from restricting OEMs 
from ``[i]nstalling, and displaying icons, shortcuts, or menu entries 
for, 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 . . . .''
     Section III.C.2 prohibits Microsoft from restricting OEMs 
from ``[d]istributing or promoting Non-Microsoft Middleware by 
installing and displaying on the desktop shortcuts of any size or shape 
. . . .''

Binding of Internet Explorer to Windows

    5. Microsoft excluded IE from the ``Add/Remove Programs'' utility, 
thereby ``reduc[ing] the usage share of rival browsers not by making 
Microsoft's own browser more attractive to consumers but, rather, by 
discouraging OEMs from distributing rival products.'' 253 F.3d at 65, 
67.
    RPFJ Provisions:
     Section III.H.1 requires Microsoft to ``[a]llow 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 . .  .. 
The mechanism shall offer the end user a separate and unbiased choice 
with respect to enabling or removing access . . . and altering default 
invocations . . . with regard to each such Microsoft Middleware 
Product. . . .''
    6. Microsoft ``'plac[ed] code specific to Web browsing in the same 
files as code that provided operating system functions''' (253 F.3d at 
65 (quoting Findings of Fact para. 161)), thus ``deter[ring] OEMs from 
pre-installing rival browsers, thereby reducing the rivals' usage share 
and, hence, developers' interest in rivals' APIs as an alternative to 
the API set exposed by Microsoft's operating system.'' 253 F.3d at 66.
    RPFJ Provisions:
     Section III.C.1 prohibits Microsoft from restricting OEMs 
from ``[i]nstalling, and displaying icons, shortcuts, or menu entries 
for, 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 . . . .''
     Section III.H.1 requires Microsoft to ``[a]llow 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 . .  .. 
The mechanism shall offer the end user a separate and unbiased choice 
with respect to enabling or removing access . . . and altering default 
invocations . . . with regard to each such Microsoft Middleware Product 
. . . .''

Agreements With Internet Access Providers (``IAPs'')

    7. Microsoft ``agreed to provide easy access to IAPs'' services 
from the Windows desktop in return for the IAPs' agreement to promote 
IE exclusively

[[Page 12113]]

and to keep shipments of internet access software using Navigator under 
a specific percentage, typically 25%.'' 253 F.3d at 68. Such agreements 
ensure ``that the ``majority'' of all IAP subscribers are offered IE 
either as the default browser or as the only browser. . . . .'' Id. at 
71.
    RPFJ Provisions:
     Section III.G.1 prohibits Microsoft from entering into any 
agreement with ``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 . . . .''
     Section III.G.2 prohibits Microsoft from entering into any 
agreement with ``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.''

Agreements With Internet Content Providers (``ICPs''), Independent 
Software Vendors (``ISVs'') and Apple

    8. In dozens of ``First Wave'' agreements, Microsoft `` `promised 
to give preferential support, in the form of early Windows 98 and 
Windows NT betas, other technical information, and the right to use 
certain Microsoft seals of approval, to important ISVs that agree to 
certain conditions. One of these conditions is that the ISVs use 
Internet Explorer as the default browsing software for any software 
they develop with a hypertext-based user interface.`` '' 253 F.3d at 
71-72 (quoting Findings of Fact para.339). In so doing, Microsoft kept 
``rival browsers from gaining widespread distribution (and potentially 
attracting the attention of developers away from the APIs in Windows) . 
. . .'' Id. at 72.
    RPFJ Provisions:
     Section III.F.2 prohibits Microsoft from ``condition[ing] 
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 . . . .''
     Section III.G.1 prohibits Microsoft from entering into any 
agreement with ``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 . . . .''
    9. Microsoft agreed to continue development of Mac Office, a suite 
of business productivity applications needed by Apple, only when Apple 
agreed to make Internet Explorer the default browser on Apple's 
operating system and to refrain from positioning icons for non-
Microsoft browsing software on the desktop of new Apple Macintosh 
computers or Mac OS upgrades. 253 F.3d at 73. ``Microsoft's exclusive 
contract with Apple has a substantial effect in restricting 
distribution of rival browsers . . . .'' Id. at 73-74.
    RPFJ Provisions:
     Section III.F.1 prohibits Microsoft from retaliating 
against any ISV or IHV because of that ISV's or IHV's ``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.''
     Section III.F.2 prohibits Microsoft from ``condition[ing] 
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 . . . .''
     Section III.G. 1. prohibits Microsoft from entering into 
any agreement with ``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 . . . .''

Efforts to Exclude Sun's Java

    10. In dozens of ``First Wave'' agreements with ISVs, Microsoft 
``conditioned receipt of Windows technical information upon the ISVs'' 
agreement to promote Microsoft's JVM [Java Virtual Machine] 
exclusively. . . .'' 253 F.3d at 75. Such agreements ``foreclosed a 
substantial portion of the field for JVM distribution and . . ., in so 
doing, they protected Microsoft's monopoly from a middleware threat . . 
. .'' Id. at 76.
    RPFJ Provisions:
     Section III.F.2 prohibits Microsoft from ``condition[ing] 
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. . . .''
     Section III.G.1 prohibits Microsoft from entering into any 
agreement with ``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 . . . .''
    11. Microsoft ``deceived Java developers regarding the Windows-
specific nature'' of Microsoft's Java software development tools. Thus, 
``developers who relied upon Microsoft's public commitment to cooperate 
with Sun and who used Microsoft's tools to develop what Microsoft led 
them to believe were cross-platform applications ended up producing 
applications that would run only on the Windows operating system.'' 253 
F.3d at 76.
    RPFJ Provisions:
     Section III.D requires Microsoft to disclose to all ISVs 
``the APIs and related Documentation that are used by Microsoft 
Middleware to interoperate with a Windows Operating System Product.''
    12. Microsoft threatened Intel, which was developing a high-
performance cross-platform Windows-compatible JVM, that if Intel ``did 
not stop aiding Sun on the multimedia front, then Microsoft would 
refuse to distribute Intel technologies bundled with Windows.'' 253 
F.3d at 77.
    RPFJ Provisions:
     Section III.F.1 prohibits Microsoft from retaliating 
against any ISV because of that ISV's ``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.''
     Section III.F.2 prohibits Microsoft from ``condition[ing] 
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 . . . .''

II. Liability Findings Rejected by the Court of Appeals

    1. Microsoft prohibited OEMs from ``causing any user interface 
other than the Windows desktop to launch automatically.'' 253 F.3d at 
62. The court of appeals found that this restriction had an 
anticompetitive effect (id.), but does not violate Section 2 because 
``a shell that automatically prevents the Windows desktop from ever 
being seen by the user is a drastic alteration of Microsoft's 
copyrighted work, and outweighs the marginal anticompetitive effect of 
prohibiting the OEMs from substituting a different interface 
automatically upon

[[Page 12114]]

completion of the initial boot process.'' Id. at 63.
    2. Microsoft designed Windows 98 to ``override the user's choice of 
a default browser in certain circumstances.'' 253 F.3d at 67. The court 
of appeals found that plaintiffs had failed to rebut Microsoft's 
proffered technical justification that such overriding was necessary in 
a ``few'' circumstances, e.g., invoking the Windows 98 Help system, 
Windows Update feature, or accessing the Internet through ``My 
Computer'' or ``Windows Explorer.'' Id.
    3. Microsoft offered Internet Explorer free of charge to IAPs and 
ISVs. The court of appeals held that ``the antitrust laws do not 
condemn even a monopolist for offering its product at an attractive 
price, and we therefore have no warrant to condemn Microsoft for 
offering . . . IE . . . free of charge or even at a negative price.'' 
253 F.3d at 68 (giving IE to IAPs); see also id. at 75 (giving IE to 
ISVs).
    4. Microsoft offered ``IAPs a bounty for each customer the IAP 
signs up for service using the IE browser.'' 253 F.3d at 67. The court 
of appeals held that ``the antitrust laws do not condemn even a 
monopolist for offering its product at an attractive price, and we 
therefore have no warrant to condemn Microsoft for offering . . . IE . 
. . free of charge or even at a negative price.'' Id. at 68.
    5. Microsoft developed the IE Access Kit (IEAK), a ``software 
package that allows an IAP to `create a distinctive identity for its 
service in as little as a few hours by customizing the [IE] title bar, 
icon, start and search pages,' '' and offered the IEAK to IAPs for 
free. 253 F.3d at 68 (quoting Findings of Fact para. 249). The court of 
appeals held that ``the antitrust laws do not condemn even a monopolist 
for offering its product at an attractive price, and we therefore have 
no warrant to condemn Microsoft for offering . . . the IEAK . . . free 
of charge or even at a negative price.'' Id.
    6. Microsoft entered into exclusive dealings with ICPs, which 
develop websites, in exchange for the ICPs' agreement to distribute, 
promote, and rely on IE rather than Netscape's Navigator browser. 253 
F.3d at 71. The court of appeals found that ``plaintiffs failed to 
demonstrate that Microsoft's deals with the ICPs have a substantial 
effect upon competition. . . .'' Id.
    7. Microsoft developed a JVM that ``allows Java applications to run 
faster on Windows than does Sun's JVM, . . . but a Java application 
designed to work with Microsoft's JVM does not work with Sun's JVM and 
vice versa.'' 253 F.3d at 74. The court of appeals held that ``a 
monopolist does not violate the antitrust laws simply by developing a 
product that is incompatible with those of its rivals.'' Id. at 75.
    8. The court of appeals reversed the district court's finding that 
Microsoft was liable based on its ``general `course of conduct' '' 
apart from specific acts that violated Section 2. 253 F.3d at 78.

Appendix B to Memorandum in Support of Entry of Proposed Judgment

United States v. Microsoft Corp. -- NEWSPAPER NOTICE; Department of 
Justice, Antitrust Division

    Take notice that a revised proposed Final Judgment as to Microsoft 
Corporation has been filed in a civil antitrust case, United States of 
America v. Microsoft Corporation, Civil No. 98-1232. On May 18, 1998, 
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 78-day trial in late 1998 and early 
1999, the United States District Court for the District of Columbia 
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 middleware 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 
middleware 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. A Competitive Impact Statement has been filed by the United 
States describing the Complaint, the revised proposed Final Judgment, 
the industry, and the remedies available to private litigants who may 
have been injured by the alleged violation. 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 
20001.
    Interested persons may address comments 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-
1454; or (e-mail) [email protected] within 60 days of the date of 
publication of the revised proposed Final Judgment and Competitive 
Impact Statement in the Federal Register. 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 e-mail or facsimile.

[[Page 12115]]

Appendix C to Memorandum in Support of Entry of Proposed Judgment

In the United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Microsoft Corporation, 
Defendant; Declaration of David S. Sibley.

[Civil Action No. 98-1232 (CKK)]


    Next Court Deadline: March 6, 2002; Tunney Act Hearing.

I. Qualifications and Introduction

    1. My name is David S. Sibley. I am the John Michael Stuart 
Centennial Professor of Economics at the University of Texas at Austin. 
I received the degree of B.A. in Economics from Stanford University in 
1969 and a Ph.D. in Economics from Yale University in 1973. In addition 
to my current teaching responsibilities, I have taught graduate level 
courses in economics at the University of Pennsylvania and Princeton 
University. Prior to joining the University of Texas, I was Head of the 
Economics Research Group at Bell Communications Research. I have also 
served as a Member of the Technical Staff in economics at Bell 
Laboratories. During the last thirty years, I have carried out 
extensive research in the areas of industrial organization, 
microeconomic theory, and regulation. My publications have appeared in 
a number of leading economic journals, including the Journal of 
Economic Theory, Review of Economic Studies, Rand Journal of Economics, 
American Economic Review, Econometrica, and the International Economic 
Review, among others. I am also the co-author (with Steven J. Brown) of 
a leading textbook on monopoly pricing, The Theory of Public Utility 
Pricing, which was first published by Cambridge University Press in 
1986.
    2. I have consulted extensively for various firms and agencies, 
both in the United States and abroad, on antitrust and regulatory 
matters. In 1998, I was retained by the U.S. Department of Justice 
(``DOJ'') to examine the competitive effects of contractual 
restrictions in agreements between Microsoft Corporation 
(``Microsoft'') and personal computer original equipment manufacturers 
(``PC manufacturers'' or ``OEMs''), Internet access providers 
(``IAPs''), and Internet content providers (``ICPs''). The declaration 
that I filed in May 1998 on behalf of the Antitrust Division of the DOJ 
summarized my economic analysis.\1\ Appendix A contains a copy of my 
curriculum vitae.
---------------------------------------------------------------------------

    \1\ Declarations of David S. Sibley, United States v. Microsoft 
Corp., Civ. Action No. 98-1232 (D.D.C. May 18, 1998) (hereinafter 
``May 1998 Sibley Decl.''). See also David S. Sibley, Michael J. 
Doane, and Ashish Nayyar (2001), ``Economic Issues in U.S. v. 
Microsoft,'' UWLA Law Review, Symposium: Cyber Rights, Protection, 
and Markets, 103-136.
---------------------------------------------------------------------------

    3. I have been asked by the DOJ to review the terms of its proposed 
settlement with Microsoft and to provide an opinion as an independent 
economist as to whether the antitrust remedy embodied in the settlement 
is in the ``public interest.'' It is my understanding that key 
components of the public interest standard of the Tunney Act are 
satisfied when the antitrust remedy is sufficient to (1) stop the 
offending conduct, (2) prevent its reoccurrence, and (3) restore 
competitive conditions.\2\
---------------------------------------------------------------------------

    \2\ My declaration does not address the compliance and 
enforcement procedures contained in the proposed remedy.
---------------------------------------------------------------------------

    4. In conducting this analysis, I examined the following documents: 
(1) the Revised Proposed Final Judgment,\1\ the Second Revised Proposed 
Final Judgment, including the accompanying memorandum regarding 
modifications,\2\ and the Competitive Impact Statement of the DOJ; \3\ 
(2) the Findings of Fact and Conclusions of Law issued by Judge 
Jackson; \4\ (3) the decision issued by the U.S. Court of Appeals for 
the D.C. Circuit in June of 2001; \5\ (4) the record from the U.S. 
Senate Judiciary Committee's December 12, 2001, hearing regarding the 
proposed settlement, including the responses to follow-up questions 
posed to Assistant Attorney General Charles James; \6\ (5) the DOJ's 
written response to questions regarding the proposed settlement raised 
by Senator Orrin Hatch; \7\ (6) the Litigating States Proposed Final 
Judgment; (7) comments on the settlement filed by third parties, 
including declarations submitted by other economists; and (8) public 
documents and websites containing relevant information.
---------------------------------------------------------------------------

    \1\ Revised Proposed Final Judgment, United States v. Microsoft 
Corp., Civ. Action No. 98-1232 (CKK) (D.D.C. Nov. 6, 2001).
    \2\ Second Revised Proposed Final Judgment, United States v. 
Microsoft Corp., Civ. Action No. 98-1232 (CKK) (D.D.C. to be filed 
Feb. 27, 2002) (hereinafter ``SRPFJ''); United States' Memorandum 
Regarding Modifications Contained in Second Revised Proposed Final 
Judgment, United States v. Microsoft Corp., Civ. Action No. 98-1232 
(CKK) (D.D.C. to be filed Feb. 27, 2002).
    \3\ Competitive Impact Statement, United States v. Microsoft 
Corp., Civ. Action No. 98-1232 (CKK) (D.D.C. No. 15, 2001) 
(hereinafter ``CIS'').
    \4\ See Findings of Fact, United States v. Microsoft Corp., 84 
F. Supp.2d 9 (D.D.C. Nov. 5, 1999); Conclusions of Law, United 
States v. Microsoft Corp., 87 F. Supp.2d 30 (D.D.C. Apr. 3, 2000).
    \5\ United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 
June 28, 2001).
    \6\ See United States Senate, Senate Committee on the Judiciary 
Documents for the December 12 Hearing on ``The Microsoft Settlement: 
A Look to the Future''; Office of the Assistant Attorney General, 
United States Department of Justice, Response to written follow-up 
questions posed to Assistant Attorney General Charles James (Jan. 
24, 2002).
    \7\ See Office of the Assistant Attorney General, United States 
Department of Justice, Response to Senator Hatch's letter of 
November 29, 2001 (Dec. 11, 2001).
---------------------------------------------------------------------------

    5. My conclusions are summarized as follows:
     Any economic analysis of the SRPFJ must have as its 
starting point a clear delineation of the conduct found to be unlawful. 
The remedy presently under consideration must therefore focus attention 
on and fully resolve the appellate court finding that Microsoft engaged 
in specific anticompetitive acts to maintain its operating system 
monopoly.
     In developing this remedy, it is necessary to balance two 
broad factors: (1) the need to impose constraints on Microsoft's 
current and future behavior so that the unlawful acts stop and do not 
recur, and competitive conditions are restored; and (2) the requirement 
that these constraints not be so intrusive and complex that they 
themselves distort market outcomes.
     The SRPFJ achieves the right balance. Broadly defined 
provisions banning exclusivity, discrimination, and retaliation 
fundamentally alter the way Microsoft does business, and eliminate the 
artificial entry barriers erected by Microsoft that are the source of 
competitive concern. At the same time, the SRPFJ does not create market 
distortions, such as over-extensive regulation of Microsoft that may 
invite inefficient rent-seeking by Microsoft's competitors, and make 
Microsoft a less efficient competitor.
     Microsoft erected artificial entry barriers to slow or 
halt the natural tendency of the marketplace to provide certain 
alternative technologies (known as ``middleware'') that have the 
potential to erode Microsoft's operating system monopoly. The proposed 
decree aims to restore and enhance competitive conditions by removing 
technical barriers between Microsoft and rival middleware suppliers. 
This is the appropriate conduct to be remedied, not the existence of 
the monopoly itself, or barriers which arise naturally in software 
markets.
     The proposals of other commentators fail to strike the 
right balance. In an attempt to eliminate all theoretical ways in which 
Microsoft could harm competition, they propose a complex regulatory 
program that is likely to be slow-moving, litigious, and vulnerable to 
manipulation by

[[Page 12116]]

Microsoft's competitors, to say nothing of Microsoft itself.
     In analyzing the SRPFJ, I have had the benefit of 
reviewing a number of thoughtful and probing comments on the proposed 
decree. I found that most of the potential problems raised by the 
various commentators are, in fact, not problems at all, but are met by 
the SRPFJ upon careful analysis. My review of their criticisms reveals 
the potential loopholes that are theoretical possibilities are either 
unimportant, or rely on strategies that Microsoft would not have the 
incentive to undertake.
     In light of the above, in my opinion, the SRPFJ is in the 
public interest.
    6. I have organized my declaration as follows: In Section II, I 
discuss the specific anticompetitive acts that are the focus of this 
inquiry and provide an overview of the proposed remedy embodied in the 
SRPFJ. This section also reviews the characteristics of software 
markets that are relevant to an economic analysis of the proposed 
decree. Section III presents my analysis of the SRPFJ and discusses 
why, in my opinion, the proposed decree meets the public interest 
requirement of the Tunney Act. Section IV addresses the main 
suggestions for additional remedy provisions discussed by various 
commentators. My conclusions are presented in Section V.

II. Microsoft's Unlawful Conduct and Proposed Remedy in the SRPFJ

    7. Any economic analysis of the SRPFJ must have as its starting 
point a clear delineation of the conduct found to be unlawful. To be in 
the ``public interest,'' an antitrust remedy must stop the offending 
conduct, prevent its recurrence, and restore competitive conditions. 
The remedy presently under consideration must therefore focus attention 
on and fully resolve the appellate court finding that Microsoft engaged 
in specific anticompetitive acts to maintain its monopoly position in 
the market for operating systems designed to run on Intel-compatible 
personal computers (``PCs'').
    8. To assess the remedial effectiveness of the SRPFJ, it is useful 
for two reasons to review the characteristics of software markets that 
gave rise to the Microsoft operating system (``OS'') monopoly. First, 
as discussed below, certain economic forces can lead naturally to 
dominance by a single firm, even apart from anticompetitive conduct. It 
was alleged, and both the District Court and the Court of Appeals 
agreed, that Microsoft's conduct erected artificial entry barriers on 
top of those that occur naturally in software markets. These artificial 
entry barriers were added to slow or halt the adoption of alternative 
technologies (known as ``middleware'') that have the potential to erode 
Microsoft's OS monopoly. This is the conduct to be remedied, not the 
existence of the monopoly itself.
    9. Second, there is widespread agreement that the middleware threat 
to the Microsoft operating system posed by the Netscape Web browser 
(i.e., Navigator) and the Java programming technology was a ``nascent'' 
one. \8\ While there is no question that Microsoft's conduct was aimed 
at eliminating that threat, there is significant uncertainty regarding 
when Microsoft's OS monopoly would have been substantially eroded (if 
at all). Thus, the appropriate remedy in this case is to restore the 
potential threat that middleware provides, not to eliminate natural 
entry barriers that are not in themselves a cause for competitive 
concern. This point has been overlooked by those critical of the 
proposed decree who argue the appropriate antitrust remedy in this case 
calls for the elimination of the applications barrier to entry.
---------------------------------------------------------------------------

    \8\ United States v. Microsft Corp., 253 F.3d 34, 79 (D.C. Cir. 
June 28, 2001).
---------------------------------------------------------------------------

A. Characteristics of Software Markets

    10. In many software markets, including OS markets, there are 
fundamental forces that may lead to one firm being dominant at a given 
time and that tend to create barriers to entry. These forces have been 
widely discussed in the economics and computing literature. The first 
is the presence of scale economies. For complex software such as an OS, 
the initial or ``first-copy'' costs to writing software are often very 
large, whereas the incremental cost of producing additional copies is 
small. Hence, average cost declines as the scale of output rises. The 
second is increasing returns in consumption. The larger the market 
share of a particular OS, the more independent software vendors 
(``ISVs'') will tend to write applications for that OS. The more this 
happens, the more attractive will customers find that OS, further 
increasing its market share, which leads to the development of more new 
software applications, and so forth. Thus, increasing returns in 
consumption induce a series of feedback effects, which tend to make a 
dominant OS more dominant over time.\9\
---------------------------------------------------------------------------

    \9\ Increasing returns to consumption is often discussed as an 
important consequence of network effects. First formalized by 
Rohlfs, there is a network effect whenever the value to existing 
users of a network increases as the network expands with new users. 
See Jeffrey H. Rohlfs (1974), ``A Theory of Interdependent Demands 
for Communications Service,'' 5 Bell Journal of Economics and 
Management Science 16-37. See also Michael Katz and Carl Shapiro 
(1985), ``Network Externalities, Competition and Compatibility,'' 75 
American Economic Review 424-440; Michael Katz and Carl Shapiro 
(1986), ``Technology Adoption in the Presence of Network 
Externalities,'' 94 Journal of Political Economic 822-841.
---------------------------------------------------------------------------

    11. Economies of scale and increasing returns to consumption give 
rise to a phenomenon that lies at the heart of antitrust analysis of 
network industries: monopoly tipping. \10\ If a large set of users 
adopts a new network technology, then that technology becomes more 
attractive to everyone else as a result of increasing returns in 
consumption. As more users join, the technology becomes still more 
attractive until it becomes dominant; in economic terminology, the 
market has ``tipped'' to the new technology. Because users invest time 
and money in learning to use a given technology proficiently, for a 
newer technology to succeed, it would have to offer a substantial 
improvement in performance--i.e., enough of an improvement at least to 
overcome the switching costs associated with the change. In the normal 
course of markets and competition, such improvements do in fact occur. 
One example is the displacement of slide rules by pocket calculators.
---------------------------------------------------------------------------

    \10\ See. e.g., Joseph Farrell and Garth Saloner (1986), 
``Installed Base and Compatibility: Innovation, Product 
Differentiation, and Predation,'' 76 American Economic Review 940-
955: Joseph Farrell and Garth Saloner (1985), ``Standardization, 
Compatibility, and Innovation,'' 16 Rand Journal of Economics 70-83.
---------------------------------------------------------------------------

    12. The economic theory of network effects describes well the 
performance of the OS market. As an operating system gains popularity, 
the incentive to develop software for that operating system grows since 
the number of potential customers for the application developer is 
larger. This, in turn, increases the value of the operating system to 
end users (and likely its market share), which is determined by the 
quality and variety of software applications written for it. As the OS 
gains market share, software developers find it even more advantageous 
to produce additional applications for that system. This feedback 
effect explains why the number of complementary software applications 
and the installed base of these applications serve as natural barriers 
to entry, and also why alternative operating systems already in the 
market at a small scale are not effective competitors. This feature of 
software markets has become known as the applications barrier to 
entry.\11\
---------------------------------------------------------------------------

    \11\ In my May 1998 Declaration, I argued that the application 
barrier to entry occurs naturally in certain software markets and is 
not, by itself, a source of antitrust concern. By contrast, I stated 
``[t]he bundling and other contractual browser restrictions that 
Microsoft insists upon in its agreements with OEMs, IAPs, and ICPs 
add artificial entry barriers to those that occur naturally, and are 
therefore a source of competitive concern.'' See 1998 Sibley Decl. 
at para. 19.

---------------------------------------------------------------------------

[[Page 12117]]

    13. Microsoft's dominant market share was a predictable consequence 
of the applications barrier to entry. At trial, it was documented that 
Microsoft's market share in each period from 1991 to 1997 held 
consistently at about ninety percent. Further, it was documented that 
Microsoft's OS dominance was stable, that it had hardly fluctuated in 
the face of determined attempts at entry by rival operating systems, 
and that it was forecast to remain stable in the future.\12\
---------------------------------------------------------------------------

    \12\ Government Exhibit No. 1.
---------------------------------------------------------------------------

B. The Middleware Threat to the Microsoft OS

    14. The above discussion suggests that, to enter with a product 
consumers would want installed on their PCs, OS vendors would have to 
create or induce others to create an extensive set of software 
applications to go with it. Alternatively, the product would have to 
emulate the Windows applications programming interfaces (``APIs'') 
needed to run existing Windows applications. APIs permit software 
applications running on an OS to access the basic computing functions 
performed by that operating system, such as opening a file, executing a 
print command, drawing a box, etc. The Netscape Web browser was a new 
class of software--called middleware--that itself exposed a broad range 
of APIs to which software developers could write applications. This 
middleware product threatened Microsoft's OS dominance because the 
browser could serve as a software applications platform independent of 
the underlying OS.\13\ Thus, a new entrant in the OS market would not 
have to create an installed base of software applications for its OS 
comparable in size and use to those of Microsoft in order to succeed. 
Instead, applications written to the browser platform (perhaps using 
the Java programming technology of Sun Microsystems, Inc. (``Sun'')) 
would be accessible to a user using any OS supporting that browser. 
Application developers would have the incentive to write to these 
browser APIs because their applications would then run on Windows plus 
the operating systems that were previously unprofitable for these ISVs 
to write applications. This would ultimately make it less important for 
users to which operating systems were installed on their computers. As 
Bill Gates stated: ``[t]hey [Netscape] are pursuing a multi-platform 
strategy where they move the key [APIs] into the client [browser] to 
commoditize the underlying operating system.'' \14\
---------------------------------------------------------------------------

    \13\ See May 1998 Sibley Decl. at Paras. 18-19, 30, and 49-50.
    \14\ Government Exhibit No. 20, Email from Bill Gates to the 
Microsoft Executive Staff and Direct Reports (May 26, 1995).
---------------------------------------------------------------------------

    15. As the evidence in this case demonstrates, Microsoft engaged in 
specific anticompetitive actions intended to displace the Netscape 
browser with its own Web browser, Internet Explorer (``IE''). In 
particular, the commingling and contractual browser restrictions that 
Microsoft insisted upon in its agreements with OEMs, IAPs, ICPs, and 
Independent Software Vendors (``ISVs'') impeded the growth of the 
Netscape Web browser by adding artificial entry barriers to those that 
occur naturally. Such restrictions are therefore a source of 
competitive concern.
    16. In challenging Microsoft's commingling and contractual 
practices, the plaintiffs' antitrust complaint alleged the following: 
(1) Microsoft engaged in a series of anticompetitive acts to maintain 
its OS monopoly; (2) Microsoft attempted to monopolize the Web browser 
market; (3) Microsoft illegally tied IE to its operating system; and 
(4) Microsoft entered into unlawful exclusive dealing arrangements. The 
District Court sustained claims (1) through (3). The appellate court, 
however, sustained only the monopoly maintenance claim, and with fewer 
anticompetitive actions than the District Court had found. \15\ Thus, 
the focus of the SRPFJ is on remedying the twelve specific 
anticompetitive actions the appellate court found Microsoft to have 
taken to maintain its OS monopoly. (See Table One.) In addition, the 
SRPFJ includes measures designed to enhance the ability of rival 
middleware vendors to interoperate with the Microsoft OS. As addressed 
in Sections III and IV below, many critics of the proposed decree 
appear to have ignored the fact that the government's case had been 
significantly narrowed.
---------------------------------------------------------------------------

    \15\ The appellate court reversed both the attempted 
monopolization and tying claims (remanding the tying claim for 
further hearing under the rule of reason standard) and vacated the 
Final Judgment that called for a structural remedy and interim 
conduct remedies.

         Table One--Summary of Findings of Anticompetitive Acts
------------------------------------------------------------------------
  Anticompetitive findings of district
                  court                           Appellate court
------------------------------------------------------------------------
                          Agreements With OEMs
------------------------------------------------------------------------
1. Prohibition on OEM removing desktop    Yes.
 icons, folders, or Start Menu entries.
2. Prohibition on OEM altering initial    Yes.
 boot sequence.
3. Prohibition on OEM allowing            No.
 alternative user interface to launch
 automatically.
4. Prohibition on OEM adding icons or     Yes.
 folders in different size or shape.
5. Prohibition on OEM using Active        Yes.
 Desktop to promote others' products.
------------------------------------------------------------------------
                        Binding of IE to Windows
------------------------------------------------------------------------
6. Excluding IE from the ``Add/Remove''   Yes.
 utility.
7. Designing Windows to override users'   No.
 choice of default browser other than IE.
8. Commingling code to eliminate OEM      Yes.
 choice of removal of IE from Windows.
------------------------------------------------------------------------
                          Agreements With IAPs
------------------------------------------------------------------------
9. Licensing IE for free................  No.
10. Payment for use of IE with IAP        No.
 service signup.
11. Developing IE Access Kits and         No.
 offering them for free.
12. Placement of IAP's product on         Yes.
 desktop in return for IE exclusivity
 (or limit to Navigator shipments).
------------------------------------------------------------------------

[[Page 12118]]

 
                  Agreements With ICPs, ISVs, and Apple
------------------------------------------------------------------------
13. Exclusive agreements with ICPs......  No.
14. Agreements With ISVs to make IE the   Yes.
 default hypertext interface.
15. Threat to end support of Office on    Yes.
 MAC platform as ``a club'' to coerce
 Apple to use IE as default browser with
 MAC OS.
------------------------------------------------------------------------
                   Efforts To Contain and Subvert Java
------------------------------------------------------------------------
16. Design of Java Virtual Machine        No.
 (``JVM'') that was incompatible with
 Sun's product.
17. Exclusive agreements to promote       Yes.
 Microsoft's JVM.
18. Deceived Java developers about        Yes.
 Windows-specific nature in Microsoft
 Java.
19. Coerced Intel to stop aiding Sun by   Yes.
 threats to support Advanced Micro
 Devices, Inc. (``AMD'').
------------------------------------------------------------------------
                            Course of Conduct
------------------------------------------------------------------------
20. Apart from specific acts,             No.
 Microsoft's general course of conduct
 violated Section 2 of the Sherman Act.
------------------------------------------------------------------------

C. Summary of SRPFJ Provisions

    17. Given the appellate court findings, the SRPFJ focus is 
appropriately on middleware. Each of the twelve anticompetitive acts 
were directed toward eliminating the middleware threat to the Microsoft 
OS. However, by its nature, the proposed decree must be forward 
looking, and this requirement imposes challenges as to how middleware 
should be defined. As the appellate court noted, ``[s]ix years has 
passed since Microsoft engaged in the first conduct plaintiffs alleged 
to be anticompetitive. And as the record in this case indicates, six 
years seems like an eternity in the computer industry.'' \16\ The 
anticompetitive actions taken by Microsoft targeted the middleware 
threat posed by the Netscape Web browser and Java.\17\ However, there 
is general agreement that Microsoft has won the ``browser war.'' Relief 
focusing only on this threat is thus likely to be ineffective. 
Moreover, the characteristics of middleware products today focus not on 
access to the Internet but on the range of offerings that access to the 
Internet can provide. Thus, middleware is properly defined in the 
proposed decree to encompass present and future middleware threats. In 
particular, middleware is broadly defined in the SRPFJ to capture 
almost any software that exposes a range of APIs. For example, as 
defined, middleware captures Internet browsers, email client software, 
networked audio/video client software, and instant messaging software.
---------------------------------------------------------------------------

    \16\ United States v. Microsoft Corp., 253 F.3d 34, 6 (D.C. Cir. 
June 28, 2001).
    \17\ See, e.g., May 1998 Sibley Decl. at Paras. 18-19.
---------------------------------------------------------------------------

    18. As shown in Table Two, to stop the unlawful conduct found by 
the appellate court, the SRPFJ targets Microsoft's business practices 
by broadly banning exclusive dealing, providing OEMs more control of 
the desktop and initial boot sequences, and prohibiting retaliatory 
conduct by Microsoft. The remedy for preventing recurrence of that 
conduct consists of provisions for non-discrimination and non-
retaliation. With regard to lost competition, the SRPFJ seeks to 
restore the potential middleware threat. This is to be accomplished 
primarily through provisions requiring API disclosure and the licensing 
of communication protocols embedded in the OS. This will enable 
independent software developers to more effectively interoperate with 
Windows and thus compete with the middleware functionality offered by 
Microsoft. Middleware developers are also aided by (1) the requirement 
that Microsoft create and preserve default settings when Windows 
launches or invokes rival middleware in certain cases, and (2) the 
requirement that Microsoft create ``add/delete'' functionality that 
makes it easier for OEMs and users to replace end-user access to 
Microsoft Middleware functionality with rival middleware.

                 Table Two--Summary of SRPFJ Provisions
------------------------------------------------------------------------
                Provision                        Section in SRPFJ
------------------------------------------------------------------------
                    Remedy To Stop Offending Conduct
------------------------------------------------------------------------
Prohibits retaliatory conduct...........  III.A.1-3, III.F.1
Broadly bans exclusive dealing..........  II.F.2, III.G.1-2
Provides OEMs more control of desktop     III.C.1-6
 and initial boot sequence.
------------------------------------------------------------------------
                      Remedy To Prevent Recurrence
------------------------------------------------------------------------
Non-discrimination and non-retaliation    III.A.1-3,
 provisions.
------------------------------------------------------------------------
                Remedy To Restore Competitive Conditions
------------------------------------------------------------------------
If Microsoft middleware products rely on  III.D, III.I
 an API, then that API must be disclosed.
Microsoft required to create and          III.H.2
 preserve default settings, such that
 certain of.
Microsoft required to create add/delete   III.H.1
 functionality that makes it easier for
 OEMs.
Microsoft required to license             III.E, III.I
 communications protocols embedded in
 the OS, but.
------------------------------------------------------------------------


[[Page 12119]]

    19. The difficult task is to create a balanced remedy that 
constrains anticompetitive behavior by Microsoft without limiting 
competition on the merits. Thus, in developing an antitrust remedy in 
this case, it is necessary to balance two broad factors: (1) the need 
to impose constraints on Microsoft's current and future behavior so 
that the unlawful business practices stop and do not recur, and 
competitive conditions are restored and (2) the requirement that these 
constraints not be so intrusive and complex that they themselves 
distort market outcomes.
    20. By focusing on Microsoft's anticompetitive business practices, 
the provisions in the SRPFJ eliminate the artificial barriers to entry 
erected by Microsoft that are the source of competitive concern. The 
provisions in the proposed decree aim to deter conduct that (1) seeks 
exclusivity or (2) is backed by retaliatory threats. The SRPFJ also 
aims to restore and enhance competitive conditions by removing 
technical barriers to competition between Microsoft and rival 
middleware suppliers. As discussed above, from an economic standpoint, 
middleware is important because it can expose APIs and has the 
potential to become an applications platform distinct from the Windows 
OS.
    21. At the same time, the SRPFJ does not attempt to preordain 
market outcomes or to weaken Microsoft as a legitimate competitor. 
Overly broad remedies can create socially wasteful costs by eliminating 
efficiencies, and remedies designed to ``manage'' the competitive 
process can indirectly reduce consumer welfare. In particular, over-
extensive government regulation of Microsoft may result in inefficient 
rent-seeking by Microsoft's competitors,\18\ and make Microsoft a less 
efficient competitor. As discussed below, in my opinion, the SRPFJ 
achieves the right balance.
---------------------------------------------------------------------------

    \18\ Rent seeking involves the use of real resources to obtain 
favorable treatment or rules.
---------------------------------------------------------------------------

III. Economic Analysis of the SRPFJ in Light of the Tunney Act 
Requirements

    22. It is my understanding that key components of the public 
interest standard of the Tunney Act are satisfied when the antitrust 
remedy is sufficient to (1) stop the offending conduct, (2) prevent its 
recurrence, and (3) restore competitive conditions. In this section, I 
examine the extent to which the SRPFJ satisfies this three-part test. 
In so doing, I respond to many of the thoughtful comments on the 
proposed decree that were submitted during the public comment period 
recently concluded.

A. Does the SRPFJ Stop the Offending Conduct?

    23. To answer this question it is first necessary to review both 
the specific acts of Microsoft that were held to be anticompetitive and 
the linkage between those acts and the provisions in the SRPFJ. Table 
Three identifies the twenty specific acts related to the monopoly 
maintenance claim that were found to be anticompetitive by the District 
Court and the twelve claims upheld by the appellate court. The right-
hand column of Table Three presents the provisions in the SRPFJ that I 
believe likely would effectively prevent those acts from occurring. I 
begin my analysis by examining the acts of Microsoft found to be 
unlawful by the appellate court.
    24. Prohibition on OEM removing desktop icons, shortcuts, or Start 
Menu entries. If the SRPFJ had been in effect when Microsoft imposed 
this requirement on OEMs, Microsoft would have been in violation of 
Section III.H.1.a of the proposed decree. This section of the SRPFJ 
specifically allows either end users or OEMs to enable or remove access 
to each Middleware Product by displaying or removing icons, shortcuts, 
or menu entries anywhere in a Windows Operating System Product that a 
list of icons, shortcuts, or menu entries is normally displayed. 
According to the SRPFJ, the mechanism that accomplishes this task must 
be readily accessible from the desktop or the Start Menu entries, and 
it must be available to OEMs using standard pre-installation kits.

                       Table Three--Provisions in SRPFJ That Address Anticompetitive Acts
----------------------------------------------------------------------------------------------------------------
      Anticompetitive findings of District Court                 Appellate                   Addressed in
----------------------------------------------------------------------------------------------------------------
                                              Agreements With OEMs
----------------------------------------------------------------------------------------------------------------
1. Prohibition on OEM removing desktop icons,          Yes.........................  III.H.1
 folders, or Start.
2. Prohibition on OEM altering initial boot sequence.  Yes.........................  III.C.3-5
3. Prohibition on OEM allowing alternative user        No                            ...........................
 interface to.
4. Prohibition on OEM adding icons or folders in       Yes.........................  III.C.1-2
 different size or.
5. Prohibition on OEM using Active Desktop to promote  Yes.........................  III.C.1-2
 others'.
----------------------------------------------------------------------------------------------------------------
                                            Binding of IE to Windows
----------------------------------------------------------------------------------------------------------------
6. Excluding IE from the ``Add/Remove'' utility......  Yes.........................  III.H.1
7. Designing Windows to override users' choice of      No..........................  III.H.2
 default.
8. Commingling code to eliminate OEM choice of         Yes.........................  III.C.1
 removal of IE.
----------------------------------------------------------------------------------------------------------------
                                              Agreements with IAPs
----------------------------------------------------------------------------------------------------------------
9. Licensing IE for free.............................  No                            ...........................
10. Payment for use of IE with IAP service signup....  No                            ...........................
11. Developing IE Access Kits and offering them for    No                            ...........................
 free.
12. Placement of IAP's product on desktop in return    Yes.........................  III.G.1-2
 for IE Exclusivity (or limit to Navigator shipments).
----------------------------------------------------------------------------------------------------------------
                                      Agreements With ICPs, ISVs, and Apple
----------------------------------------------------------------------------------------------------------------
13. Exclusive agreements with ICPs...................  No..........................  III.G.1-2
14. Agreements with ISVs to make IE the default        Yes.........................  III.F.2
 hypertext user.
15. Threat to end support of Office on MAC platform    Yes.........................  III.F.1-2 III.G.1
 as ``a club'' to coerce Apple to use IE as default
 browser with MAC OS.
----------------------------------------------------------------------------------------------------------------

[[Page 12120]]

 
                                       Efforts To Contain and Subvert Java
----------------------------------------------------------------------------------------------------------------
16. Design of Java Virtual Machine (``JVM'') that was  No                            ...........................
17. Exclusive agreements to promote Microsoft's JVM..  Yes.........................  III.F.2
18. Deceived Java developers about Windows-specific    Yes.........................  III.D
 nature in.
19. Coerced Intel to stop aiding Sun by threats to     Yes                           ...........................
 support AMD.
----------------------------------------------------------------------------------------------------------------
                                                Course of Conduct
----------------------------------------------------------------------------------------------------------------
20. Apart from specific acts, Microsoft's general      No                            ...........................
 course of conduct violated Section 2 of the Sherman
 Act.
----------------------------------------------------------------------------------------------------------------

    25. Prohibition on OEM altering the initial boot sequence. This 
Microsoft prohibition would have violated Sections III.C.3-5 of the 
proposed decree. These sections require that OEMs be allowed to alter 
the initial boot sequence in certain ways to promote rival middleware. 
Section III.C.3 allows OEMs to launch rival middleware in place of a 
Microsoft Middleware Product at the end of the initial boot sequence. 
Section III.C.4 allows OEMs to offer machines that dual boot to two 
different operating systems. Section III.C.5 allows OEMs to present 
Internet access offers which may promote rival software.
    26. Prohibition on OEM adding icons or folders in different size or 
shape. Microsoft began to impose this restriction, which was intended 
to prevent OEMs from pre-installing Netscape Navigator, in its first 
Windows 95 contracts. Under the proposed decree, the only restrictions 
that Microsoft would now be able to place on the icons, shortcuts, and 
menu entries placed by an OEM are those described in Section III.C.1-2. 
These sections state that Microsoft can restrict the OEM from placing 
such icons, shortcuts, and menu entries in any list in Windows that is 
described in the Windows documentation as being for particular types of 
functions. These provisions would, however, apply also to Microsoft's 
own placement of icons, menu entries, and shortcuts and do not restrict 
the OEM from choosing the size and shape of its shortcuts.\19\
---------------------------------------------------------------------------

    \19\ The size and shape of an icon is fixed and cannot be 
changed by the OEM or Microsoft Section III.C.2 prohibits Microsoft 
from restricting the OEM's selection of the size and shape of 
shortcuts, including shortcuts placed on the desktop.
---------------------------------------------------------------------------

    27. I note that Section III.H.3 of the SRPFJ is also relevant with 
regard to Microsoft's prohibition against the addition of OEM-specified 
icons, shortcuts, and menu entries. This section states that Microsoft 
cannot alter an OEM's desktop configuration of icons, etc. without end-
user actions, and, in any case, it cannot even ask the user to 
undertake such action for fourteen days after the initial boot. Based 
on my reading of the Competitive Impact Statement (which serves as an 
explanation of SRPFJ provisions) and on conversations with personnel 
from the DOJ, the only existing Microsoft technology to which this 
section refers is the Desktop Cleanup Wizard, which currently exists 
only on Windows XP. The Desktop Cleanup Wizard simply asks the end user 
if he or she wants to retain infrequently-used icons on the desktop, 
whether or not these icons refer to rival software. The SRPFJ requires 
that it treat Microsoft and Non-Microsoft icons in an unbiased manner.
    28. Prohibition on OEMs using Active Desktop to promote others' 
products. It is my understanding that this prohibition is no longer a 
relevant concern because the Active Desktop is no longer significantly 
in use. Indeed, I note that the Microsoft pre-installation kit for 
Windows XP instructs the OEM not to activate the Active Desktop. 
However, should features similar to the Active Desktop exist in the 
future, Sections III.C.1-2 would prevent similar types of restrictions 
by providing OEMs more control and flexibility over the desktop.
    29. Exclusion of Internet Explorer from the ``Add/Remove'' utility. 
This violation would clearly have been prevented by Section III.H.1 of 
the proposed decree. Section III.H.1 requires Microsoft to allow the 
removal of the means of access to Microsoft Middleware Products.
    30. Commingling of code to eliminate OEM choice of removal of IE 
from Windows. This offense is addressed by Sections III.H.1 and III.C.1 
of the proposed decree. Section III.H.1 requires Microsoft to allow the 
removal of the means of end-user access to Microsoft Middleware 
Products, which would include IE. Section III.C.1 allows the OEM to 
install and display icons, shortcuts, and menu entries that facilitate 
easy end-user access to middleware offered by Microsoft rivals. From 
the standpoint of most end-users, a software product, such as a 
browser, has been removed and is not present if there are no visible 
means to access it. Accordingly, Section III.C.1 and III.H.1 together 
enable the OEM or end user to select another browser as the default 
browser, without IE being visible to the end user. I do not interpret 
the appellate court decision as requiring that code internal to Windows 
be removed without regard to the competitive significance of its 
removal merely because it is also used in Web browsing. The appellate 
court stated that such removal of code would be needed if such removal 
was required to permit OEMs to remove the means of access to Microsoft 
products, since their inability to do so resulted in the exclusion of 
rival products. Thus, because the SRPFJ requires Microsoft to make it 
possible for OEMs effectively to remove Microsoft Middleware Products 
by removing access to them and to install rival products, the actual 
removal of code is not necessary.
    31. Placement of an IAP's product on the desktop in return for IE 
exclusivity (or limit to Navigator shipments). This offense would have 
been prevented by Sections III.G.1 and III.G.2 of the proposed decree. 
With one exception, these sections prevent Microsoft from entering into 
an agreement with any IAP, ICP, ISV, independent hardware vendor 
(``IHV''), or OEM requiring either exclusivity for a Microsoft 
Middleware product or that such software be distributed in a fixed 
percentage, irrespective of consumer choice. The exception is that 
fixed percentage agreements that provide Microsoft preferential status 
are permitted under the SRPFJ as long as it is commercially feasible 
for the OEM, IAP, etc. to give equivalent treatment to rival 
middleware. When preferential status for Microsoft necessarily excludes 
rival middleware, Section III.G.1 implies that

[[Page 12121]]

preferential status from Microsoft cannot extend to more than fifty 
percent of the shipments of the OEM, IAP, etc. Also, Microsoft cannot 
grant an IAP or ICP placement on the desktop or any other favored place 
in Windows in return for the IAP or ICP refraining from distributing, 
promoting, or using any software that competes with Microsoft 
Middleware.
    32. Agreements with ISVs to make IE the default hypertext user 
interface. Such exclusive agreements are ruled out by Sections III.F.2, 
and III.G.1. Section III.F.2 prevents Microsoft from rewarding ISVs for 
refraining from developing, promoting, or using software that competes 
with Microsoft middleware and operating systems. Provision III.G.1 
prohibits Microsoft from entering into agreements which give Microsoft 
preferential status (e.g., fixed percentage agreements) when an ISV or 
IHV is unable to offer an equivalent status to a rival product. Fixed 
percentage agreements are permissible, however, when it is commercially 
feasible for the other party to the agreement to provide at least the 
same level of promotion to the rival middleware.
    33. Threat to end support of Office on MAC platform as ``a club'' 
to coerce Apple to use IE as default browser with MAC OS. For the 
purpose of the SRPFJ, Apple is considered an ISV. One of the historical 
incidents involving Microsoft and Apple was that Microsoft threatened 
to end the support of Office on the MAC platform if Apple continued to 
promote Netscape's Web browser. Section III.F.1 forbids retaliation of 
the kind Microsoft threatened. This restriction would have rendered the 
threat itself ineffective. Microsoft also signed an agreement with 
Apple which ported Office to the MAC and made IE the default browser 
and relegated Netscape's browser to a folder. This agreement would have 
violated Section III.F.2 because it represented consideration in return 
for Apple's refraining from promoting the Netscape browser. Finally, 
because Apple could not have made both IE and Navigator the default 
browser on the MAC, the agreement would have violated Section III.G.1.
    34. Exclusive agreements to promote Microsoft's JVM. These 
agreements between Microsoft and ISVs gave those ISVs advance 
information on new Microsoft APIs in return for writing to the 
Microsoft version of the Java Virtual Machine (``JVM''). Section 
III.F.2 would have prevented Microsoft from offering the ISV 
consideration, in the form of advance information, in return for 
promoting the Microsoft JVM over the Sun JVM. Section III.G.1 would 
also block such a transaction since the ISVs were being asked to 
promote the Microsoft JVM exclusively.
    35. Deception of Java developers regarding the Windows-specific 
nature of Microsoft Java. To the extent that such deceit on the part of 
Microsoft involved the disclosure of additional APIs developed by 
Microsoft for its JVM that worked only on Windows, this behavior would 
have been blocked by the API disclosure requirement of Section III.D. 
However, I see nothing in the SRPFJ that speaks directly to the issue 
of deceit.
    36. Coerced Intel to stop aiding Sun by threats of support to AMD. 
Microsoft's interaction with Intel in this regard contained a threat. 
Section III.F.1 forbids retaliation against an IHV, so that had the 
SRPFJ been available at the time, the threat of retaliation would have 
been without force. Section III.F.2 would have been invoked by the 
Microsoft offer of consideration, which essentially took the form of 
increased support for Intel's microprocessors. Thus, this conduct would 
have been prevented by the SRPFJ.
    37. In addition to likely preventing the anticompetitive acts 
upheld as illegal by the appellate court, the SRPFJ also provides at 
least partial protection with regard to two Microsoft behaviors found 
to be unlawful by the District Court but not upheld as such on appeal. 
(See Table One, items 7, and 13.) In this regard, the SRPFJ addresses 
actions that go beyond the violations upheld by the appellate court.
    38. Designing Windows to override a user's choice of default 
browser other than IE. Section III.H provides partial protection 
against this act. To restore this access would take positive action by 
the end user and could not be initiated and completed by Microsoft 
otherwise. Section III.H.2 allows end users and OEMs to select a Non-
Microsoft Middleware Product to be launched automatically whenever the 
Microsoft Middleware would have been launched in a Top-Level Window and 
have displayed either all of the user interface elements or the 
trademark of the Microsoft Middleware Product. \20\ This requirement 
forces Microsoft to have default in some circumstances and provides a 
``bright line'' rule in a situation where previously Microsoft had 
complete discretion.
---------------------------------------------------------------------------

    \20\ The term ``Non-Microsoft Middleware Product'' is used only 
in Section III.H of the SRPFJ, and my use of the term applies only 
in reference to that section of the proposed decree. Elsewhere, I 
use the term ``rival middleware.''
---------------------------------------------------------------------------

    39. Exclusive agreements with ICPs. Although the appellate court 
did not find these agreements to be unlawful, Section III.G.1 of the 
proposed settlement prevents exclusive and ``fixed percentage'' 
agreements for Microsoft Middleware products with ICPs. In addition, 
Section III.G.2 outlaws an exchange of placement of the ICP's icon on 
the desktop for the ICP refraining from using, distributing, or 
promoting middleware offered by Microsoft's rivals.
    40. Based on the above analysis, I conclude that the SRPFJ is 
likely to stop effectively the Microsoft conduct found to be unlawful 
by the appellate court. The proposed decree also is likely to address 
two areas that were originally found to be unlawful by the District 
Court but reversed on appeal.

B. Does the SRPFJ Prevent Recurrence of the Offending Conduct?

    41. In addition to preventing the recurrence of acts similar to 
those that occurred in the past, the SRPFJ contains provisions to guard 
against future acts that differ substantially from those listed in 
Table Three but would also be anticompetitive. The SRPFJ identifies 
non-Microsoft products whose distribution and usage cannot be impeded 
by Microsoft's actions. Covered products, such as Microsoft Middleware 
Products, are described in terms of their general functionalities and 
not just with reference to specific products now commercially 
available.
    42. In particular, ``Microsoft Middleware Product'' is broadly 
defined in the decree to cover the functionality provided by Internet 
Explorer, Microsoft's Java Virtual Machine, Windows Media Player, 
Windows Messenger, Outlook Express, as well as their successors. In 
addition, new and yet-undreamed-of products in the general categories 
of Internet browsers, email client software, networked client audio/
video client software, and instant messaging software are also covered. 
The SRPFJ also covers any new Microsoft Middleware distributed 
separately from a Windows Operating System Product that is similar to 
the functionality of a rival middleware product and is either 
trademarked or distributed by Microsoft as a major version of a 
Microsoft Middleware Product. In this last category, the new Microsoft 
Middleware Product need not even be something currently recognized as 
middleware. This definition is not perfectly general, and it is 
possible to imagine future Microsoft products that would not fall under 
this definition but nevertheless would still compete with rival 
middleware. However, the middleware definition does appear broad enough 
to capture the types of

[[Page 12122]]

middleware threats most likely to emerge during the term of the 
proposed decree. Similarly, provisions in the proposed decree regarding 
non-discrimination and non-retaliation (i.e., Sections III.A, III.B, 
and III.F) are broad and go beyond the specific acts found to be 
unlawful by the appellate court.
    43. During the effective period of the decree, the Technical 
Committee and other compliance and enforcement measures set out in the 
SRPFJ should work to prevent a recurrence of the offending acts. 
However, before reaching a conclusion about the SRPFJ's compliance with 
this part of the Tunney Act's requirements, there remains the issue of 
possible ``loopholes'' and ``overly-broad exclusions,'' which was 
commented upon in many thoughtful submissions provided during the 
public comment period just concluded. I will discuss below those 
comments pertaining to provisions in the SRPFJ that are intended to 
prevent recurrence of acts such as those described at trial, in the 
general areas of retaliation and exclusive dealing. (Potential 
loopholes in the general area of disclosure of APIs and other technical 
interfaces are discussed in Section III.C of this document.)
    44. Claimed Loopholes. The SRPFJ contains various provisions 
(Sections III.A and III.F) that protect parties from retaliation by 
Microsoft in those cases involving a middleware product that competes 
with a Microsoft Middleware Product and operating system. These 
provisions do not address explicitly the possibility that Microsoft may 
have a competitive concern involving rival middleware that has no 
counterpart at present among Microsoft's suite of middleware products. 
In this situation, Microsoft might retaliate against an OEM, ISV, or 
IHV that supported the product in question, perhaps to prevent it from 
ever becoming a serious threat to its OS monopoly. However, there are 
several reasons why this is unlikely to occur.
    45. First, this action would be blocked by Section III.A.1, which 
forbids Microsoft from retaliating against an OEM supporting, or 
contemplating supporting, any rival software that competes with 
Microsoft Platform Software whether or not Microsoft has a counterpart 
to the rival software. Section III.F.1 contains similar protection for 
ISVs and IHVs. While it is not possible at first glance to rule out the 
occurrence of such an event, further analysis suggests that such an 
event is unlikely to occur. This is because as discussed in Section II 
above, Microsoft's strength is derived from having an operating system 
that runs many applications, and, in the past, Microsoft has 
consistently supported applications that do not compete with its own 
applications. The Microsoft Software Developer's Network and the many 
developer seminars that Microsoft sponsors are evidence in support of 
this position. Second, if Microsoft were to adopt this strategy, the 
strategy itself would impose a cost on Microsoft in that the company 
would have to refrain from developing its own version of the 
threatening software. This would encourage other, non-Microsoft 
developers to produce another version of the competing product and end-
users to use the non-Microsoft middleware product. Also, there remains 
the issue of exactly how Microsoft would retaliate and against whom.
    46. Previously, Microsoft has retaliated against OEMs by charging 
uncooperative OEMs a higher price for Windows. However, this form of 
retaliation is ruled out by Section III.B, which requires that OEMs pay 
royalties pursuant to uniform license agreements that can be viewed by 
other OEMs and by the plaintiffs for monitoring purposes. If 
retaliation were to take the form of manipulation of other types of 
consideration (e.g., MDA discounts), such action would make it 
impossible for Microsoft to comply with Section III.B.3.a of the 
proposed decree, which states that such discounts must be offered to 
all covered OEMs, including OEMs that cooperate with Microsoft.
    47. Based on Microsoft's past practices, Microsoft might withhold 
APIs, documentation, or access to communications and security 
protocols. Such behavior is likely to be an ineffective means of 
retaliation or control. There are thousands of published APIs, and the 
very existence of a Non-Microsoft Middleware Product that prompts 
retaliation implies such a product was built around published APIs and 
technologies, in addition to whatever its developer may have invented 
and embodied in the product. Attempting to manipulate these APIs would 
invariably harm products that are complementary to the Microsoft OS and 
enhance its value. For all these reasons, I believe that Microsoft's 
incentives would be not to retaliate against an ISV regarding a product 
without a Microsoft counterpart. In my opinion, reliance on incentives 
will be superior, in this instance, to detailed regulation.
    48. A second possible loophole is that Microsoft could provide 
special treatment or discriminatory prices on other (non-middleware) 
products as rewards or retaliation, presumably for a third party's 
favoring or impeding a Non-Microsoft Middleware product. (See 
Declaration of Joseph Stiglitz and Jason Furman, hereafter ``Stiglitz 
and Furman Decl.'' at 31, and Declaration of Kenneth J. Arrow, 
hereinafter ``Arrow Decl.,'' at para. 41.) Regarding special treatment, 
I note that if such treatment refers to non-monetary consideration of 
some kind, this behavior would be ruled out by Section III.A.1 of the 
proposed decree. This section of the SRPFJ prohibits Microsoft from 
retaliating against or withholding newly developed forms of non-
monetary compensation from an OEM because the OEM is developing, 
promoting, or using software that competes with Microsoft Platform 
Software.
    49. I also consider the possibility that special treatment might 
take the form of monetary discounts on other Microsoft products, such 
as Microsoft Office. I will assume that the alleged discrimination 
takes the form of requiring the OEM to establish the Microsoft 
Middleware Product as the default on all of its computers. This action 
violates Section III.A.1 and III.A.3 because linking the price of 
Office to an OEM's promotion of rival middleware would represent an 
alteration in Microsoft's commercial relationship with that OEM in 
connection with that OEM's promotion of rival middleware, and the 
withholding of such a discount would occur because it was known to 
Microsoft that the OEM was exercising options provided for by Section 
III.H (e.g., making rival middleware the default). Furthermore, this 
would be a case of preferential treatment within the meaning of Section 
III.G. Since only one middleware product in a given category can by 
definition be the default on a given computer, the OEM could not 
represent that it was commercially feasible for it to give greater or 
equal distribution to the Non-Microsoft Middleware Product.
    50. The third loophole cited in the comments pertains to Section 
III.A and the process that governs how Microsoft must proceed if it 
wants to terminate dealings with an OEM. In the past, Microsoft has had 
the ability to cancel an OEM's Windows license without prior notice. 
The SRPFJ adds constraints to Microsoft's ability to terminate an OEM. 
The SRPFJ requires that Microsoft provide any one of the top twenty 
OEMs (defined by volume) written notice of its intent to cancel, in 
which it must specify the deficiency prompting the cancellation, as 
well as a 30-day opportunity to cure the deficiency. Because Microsoft 
must provide a reason in the written notice and an opportunity for a 
cure, it obviously cannot terminate an OEM for conduct

[[Page 12123]]

authorized under the SRPFJ. Again, Microsoft does not have to do this 
currently. Because Microsoft cannot terminate an OEM's license for 
conduct consistent with the SRPFJ, the presumption is that, if an OEM 
is terminated, the cause must be related to a normal commercial 
dispute. Viewed in this light, I do not agree with Stiglitz and Furman 
when they allege that Section III.A provides Microsoft ``substantial 
leverage'' to force an OEM to distort its choice among competing 
middleware products. (See Stiglitz and Furman Decl. at 31-32.) I do not 
believe that detailed regulation would achieve a better outcome.
    51. This discussion has summarized the major comments on the SRPFJ 
Sections III.A, III.B, and III.F as they relate to retaliation and 
discrimination. On balance, I conclude that these provisions are likely 
to fulfill the Tunney Act requirement that the SRPFJ prevent a 
recurrence of the offending conduct.

C. Will the SRPFJ Restore Competitive Conditions?

    52. As discussed above, the SRPFJ's focus is on restoring the 
competitive threat provided by middleware (see Table Two). This is 
accomplished by providing middleware developers the means to create 
competitive products through: (1) provisions for API disclosure; (2) 
provisions that require Microsoft to create and preserve default 
settings, such that Microsoft's integrated middleware functions will 
not be able to over-ride the selection of third-party middleware; (3) 
the creation of ``add/delete'' functionality that make it easier for 
OEMs and end-users to replace Microsoft middleware functionality with 
independently developed middleware; and (4) requirements for Microsoft 
to license communications protocols embedded in the OS while 
maintaining Microsoft's ability to deploy proprietary technology 
provided separately. These provisions are discussed more fully below.
    53. The SRPFJ requires Microsoft to release certain types of 
technical information to rival middleware suppliers. This information 
is to be provided in order to enable rival software developers to 
configure their products so that they are able to use the same Windows 
capabilities that Microsoft Middleware uses. To better evaluate these 
provisions, recall from above that Microsoft has published thousands of 
APIs, which are used by software developers to allow their products to 
run on Windows. Microsoft rivals (e.g., RealNetworks) use those APIs to 
build products to run on Windows and compete with Microsoft products. 
Microsoft has many more APIs that it does not publish or otherwise make 
available to ISVs. Potentially, some of these unpublished APIs give 
Microsoft products capabilities or features that rival products cannot 
easily duplicate. When these APIs are used by Microsoft Middleware 
Products, the SRPFJ obliges Microsoft to disclose them to ISVs, IHVs, 
IAPs, ICPs, and OEMs meeting certain requirements. The same obligation 
applies to certain types of communications protocols and security 
features developed by Microsoft that are used in connection with its 
Window Operating System products. The sections of the SRPFJ dealing 
with technical disclosure are III.D, III.E, III.I, and III.J.
    54. The API disclosure provisions of the SRPFJ have attracted 
perhaps more comments than any others in the proposed decree. 
Criticisms of these provisions generally follow two lines of argument: 
(1) The proposed decree provides too much latitude, enabling Microsoft 
to delay the release of APIs until a Microsoft product has a decisive 
first-mover advantage over the competition; and (2) Microsoft could 
evade the intent of the proposed decree and avoid releasing this 
information at all. I will first describe the relevant sections of the 
SRPFJ dealing with the API disclosure provisions and then evaluate 
their likely effectiveness.
1. API Disclosure and Communications Protocol Provisions
    55. Section III.D of the proposed decree specifies the main process 
for releasing the APIs and the documentation used by Microsoft 
Middleware to interoperate with Windows. Starting with the release of 
Service Pack 1 for Windows XP or twelve months after the submission of 
the SRPFJ to the Court (whichever is earlier), Microsoft must disclose 
APIs and documentation used in association with Microsoft Middleware. 
Going forward, there are to be disclosures occurring in a ``Timely 
Manner'' whenever there is a new version of a Windows operating system 
product or a new major version of Microsoft Middleware. \21\
---------------------------------------------------------------------------

    \21\ The term ``Timely Manner,'' which governs the release date 
of APIs pursuant to Section III.D, means the time Microsoft first 
releases a beta version of a Windows Operating System Product, 
either through the MSDN or with a distribution of 150,000 or more 
copies.
---------------------------------------------------------------------------

    56. Section III.E pertains to the use of Microsoft's client-server 
communications protocols. It does not apply to the use of 
communications protocols between other types of Microsoft products. The 
basis for the client-server focus is that there is now a growing number 
of applications that run on servers, rather than on the desktop. I 
discussed this factor in my May 1998 Declaration. \22\ It represents a 
strong source of competition to Microsoft in the business computing 
segment and may yet make a serious attack on the applications barrier 
to entry in the desktop PC market. Therefore, it is important that 
rival middleware be able to operate with Microsoft server operating 
systems. It is equally important that a non-Microsoft server be able to 
operate with Windows as efficiently as would a Microsoft server. 
Communications protocols are essential for that purpose and are just as 
necessary to rival middleware developers as is access to Windows APIs. 
By contrast, I have not yet seen an argument that clearly articulates 
why the applications barrier to entry would be threatened by the 
disclosure by Microsoft of communications between other types of 
Microsoft software.
---------------------------------------------------------------------------

    \22\ See May 1998 Sibley Decl. at para. 19.
---------------------------------------------------------------------------

    57. Under Section III.E, starting nine months after the submission 
of the SRPFJ to the Court, Microsoft shall make available to qualifying 
third parties any communications protocol implemented in a Windows 
Operating System Product (on or after the date of SRPFJ submission), 
installed on a client and used to interoperate or communicate with a 
Microsoft server operating system product. This will have both of the 
effects discussed above. It will enable rival middleware to communicate 
with a Microsoft server and also will allow a non-Microsoft server 
operating system to communicate effectively with a Windows operating 
system. To protect Microsoft intellectual property rights, Microsoft 
may charge for the use of these protocols as long as it does so on 
``reasonable and non-discriminatory terms.'' (See SRPFJ at Section 
III.E.) Section III.E also references Section III.I, which says that 
Microsoft must offer to license any intellectual property that it owns 
and that is needed to allow ISVs, IHVs, IAPs, ICPs, or OEMs to exercise 
their rights under the SRPFJ. The SRPFJ also states that all terms 
governing payment must be reasonable and non-discriminatory.
    58. Section III.J can be viewed as ``carving out'' exceptions to 
Section III.D and III.E. Section III.J.1 states that Microsoft cannot 
be required to disclose portions of APIs, documentation, or portions of 
communications protocols if disclosure would ``compromise the security 
of a particular installation or

[[Page 12124]]

group of installations'' in the general areas of anti-piracy, anti-
virus, software licensing, digital rights, encryption, or 
authentication systems, ``including, without limitation, keys, 
authorization tokens or enforcement criteria.'' (See SRPFJ at Section 
III.J.1.) Section III.J.2 similarly allows Microsoft to condition the 
licensing of any API, documentation, or communications protocol 
relating to anti-piracy, anti-virus, license enforcement mechanisms, 
authentication/authorization security, or third party IP protection. 
Microsoft may require that a licensee: (a) have no history of software 
piracy, counterfeiting, etc.; (b) have a ``reasonable business need'' 
for the API, documentation, or communications protocol for a planned or 
shipped product; (c) meets ``reasonable, objective standards'' 
established by Microsoft for certifying the authenticity and viability 
of its business; and (d) agrees to have a third party verify that its 
product complies with the technical specifications for whatever 
Microsoft APIs or interfaces it may use.
    59. Before evaluating these sections of the SRPFJ, one observation 
is in order. The API disclosure required under Section III.D is 
triggered by the existence of Microsoft Middleware, meaning that a 
version of a Microsoft Middleware Product is distributed apart from the 
operating system. Thus, if Microsoft bundles a piece of middleware with 
the operating system and does not distribute this middleware in some 
other way (e.g., by download), then Microsoft need not disclose the 
APIs used by that piece of middleware. There is a current example of 
this situation: Windows Media Player version 8.0 is available only with 
Windows XP. Therefore, Microsoft under the SRPFJ does not have to 
disclose the APIs applicable to Windows Media Player version 8.0. 
However, as discussed below, it would be impractical for Microsoft to 
affect competition in this way.
2. Comments Regarding API Disclosure and Communications Protocol 
Provisions
    60. This group of decree provisions attracted a large number of 
thoughtful comments. Rather than address all of the commentators, I 
will discuss the major comments which tend to recur in the various 
submissions. As noted above, a potential loophole in the SRPFJ is that 
Microsoft's disclosure obligations only begin when it distributes a 
piece of middleware separately from the operating system. If Microsoft 
chooses to bundle this product and does not create a redistributable 
version, the APIs used by that product need not be disclosed. (See 
Stiglitz and Furman Decl. at 29-30, and Comment of Rebecca M. Henderson 
(hereinafter ``Henderson Comment'') at 5-6, and 9, and Comments of 
Software Information Industry Association at 26.) In theory, this 
feature of the SRPFJ could allow Microsoft to avoid disclosing APIs on 
new products and major new versions of current products.
    61. In my opinion, this concern has little practical significance. 
If Microsoft were to follow such a strategy as a matter of broad policy 
to deter competition, it would come at a high price. First, none of the 
installed base of Windows users would have the new product, which alone 
would impose a large cost on Microsoft, if the product's use were at 
all competitively significant, as was the case in 1995 with the 
browser. Second, since competing providers would continue to innovate, 
as RealNetworks has done, at some point Microsoft would face the danger 
(since most users tend not to replace their operating system readily) 
that the Windows user's best option becomes obtaining the relevant 
piece of middleware from Microsoft's competition. Had Microsoft 
refrained from any separate distribution of IE in 1995, the effect 
would have been to solidify Netscape's hold on the browser market. 
Third, this problem is substantive only if the bundled Microsoft 
product uses an API that is not published. Even then, there are 
thousands of published APIs to which competing ISVs can and do write. 
RealNetworks, for example, has always written to these publicly 
available APIs, unless it could persuade Microsoft to produce or reveal 
a particular proprietary API. Based on the comments submitted by 
RealNetworks in this proceeding, its main API concern is not over 
unpublished APIs that only Windows Media Player 8.0 may use (if any), 
but about the Secure Audio Path API, sometimes called SAP. This API is 
used by a previous version of Windows Media Player that was distributed 
separately from the operating system, so Microsoft will have to 
disclose SAP under the SRPFJ. For these reasons, I do not believe that 
the ability of Microsoft to withhold API disclosure by a bundling-only 
strategy is likely to lead to significant competitive harm.
    62. The definition of ``Non-Microsoft Middleware Product'' has also 
been criticized because of the requirement that the middleware product 
have had at least one million copies distributed in the previous year. 
For example, RealNetworks objected to this as ``a huge number of copies 
. . . that will take a great deal of time, money and resources for most 
middleware companies to reach.'' (See Comments of RealNetworks, at 13, 
and Comments of SBC at 40-41.) The comments of RealNetworks also note 
that the above definition of ``Non-Microsoft Middleware Product'' does 
not state whether new versions are to be counted separately. My 
understanding is that the word ``product'' refers for this purpose to 
an aggregation of versions. Thus, if in the course of a single year, 
version 1 of a product had 200,000 copies distributed, version 2 had 
300,000 copies distributed, and version 3 had 500,000 copies 
distributed, it is my understanding that the product would qualify. 
Furthermore, the term ``distributed'' should not be confused with 
``sold.'' Under my reading of the proposed decree, mass mailings of CDs 
(i.e., so-called ``carpet-bombing'') would constitute distribution for 
this purpose, as would ``downloads.'' While one million distributed 
copies might have been significant in the early stages of the Internet, 
the recent explosive growth in the Internet and its use suggests that 
this requirement can be easily met by most, if not all, middleware 
vendors.\23\
---------------------------------------------------------------------------

    \23\ It is worth noting that, even in 1995, within one year of 
the introduction of the Mosaic browser (the first browser with a 
graphical user interface) there were some two million users. See 
Gina Smith, ``Inside Silcon Valley: A High Tech Top 10 Computers & 
Technology,'' San Francisco Chronicle (Jan. 1, 1995).
---------------------------------------------------------------------------

    63. It has been argued that the requirement that the million copy 
threshold must have been reached in the previous year is a further 
impediment, leading to the result that the ``entrepreneur will begin to 
gain some of the settlement rights only a year after the widespread 
distribution of her product. She will be entitled to information about 
how this new product can interact with Windows only after Microsoft has 
imitated the innovation.'' \24\ However, based on my reading of the 
SRPFJ, this concern is misplaced. The million copy requirement only 
comes into play in Section III.H, which is the only section in which 
the term ``Non-Microsoft Middleware Product'' is used. This section is 
solely concerned with the ability of the end user or OEM to have a Non-
Microsoft Middleware Product launch automatically or be featured on the 
desktop. That is, it has nothing to do with the API disclosure 
requirement. Furthermore, it is my understanding that, once a 
particular Non-Microsoft Middleware Product meets the million

[[Page 12125]]

copy requirement and Microsoft has created a default setting, an OEM 
will be able to set as the default a competing product by another 
vendor, even if that competing product has not yet met the one million 
copy requirement. Thus, when RealNetworks asks, ``Must [middleware 
distributors] accumulate one million distributions . . . before they 
are protected?'', it betrays a misunderstanding of this section of the 
proposed decree.\25\
---------------------------------------------------------------------------

    \24\ See Timothy F. Brensnahan, ``A Remedy that Falls Short of 
Restoring Competition'' ANTITRUST, at 69 (Fall 2001) (hereinafter 
``Bresnahan Article'').
    \25\ See Comments of RealNetworks at 14.
---------------------------------------------------------------------------

    64. The proposed release schedule for APIs and documentation has 
also attracted criticism. (See, e.g., Bresnahan Article at 69; and 
Stiglitz and Furman Decl. at 30.) The requirement in Section III.D is 
that, once the initial disclosure for Windows XP has taken place, 
Microsoft must disclose new APIs no later than the date of the last 
major beta release, if the disclosures are triggered by new Microsoft 
middleware, or in a ``Timely Manner,'' if the disclosure is triggered 
by a new Windows operating system product.\26\ Whether this is too long 
a period of time or not appears to depend on the case at hand. For an 
API to be published by Microsoft, it must first be ``hardened,'' which 
means that it must undergo an extensive testing procedure to make sure 
that it works in different programming environments and in the hands of 
developers who may not use it in the same way that Microsoft does. If 
an API has been developed for a Microsoft Middleware Product and has 
not been hardened, it may well take some period of time before it can 
usefully be disclosed to ISVs and others. On the other hand, if that 
Microsoft Middleware Product uses APIs that have been published or that 
have been hardened, then the process would likely be much shorter. 
Thus, the appropriate disclosure period would depend on the case at 
hand, and my own expertise as an economist does not qualify me to opine 
further. I note, however, that alternatives to the SRPFJ on this matter 
do not appear to represent a clear improvement. For example, one 
alternative would be for Microsoft to disclose APIs tentatively at an 
earlier stage, subject to the understanding that further testing might 
cause Microsoft to change them. In this case, a software developer, OEM 
or other party that uses Microsoft APIs may have earlier access to them 
but may well feel reluctant to make extensive use of a very preliminary 
list of APIs, knowing that Microsoft may make changes at a later date. 
From Microsoft's standpoint, to release APIs that are only preliminary 
could pose legitimate risks. If Microsoft were to release a tentative 
new API at the alpha testing stage and were to change the API at a 
later date, even a Microsoft disclaimer could leave Microsoft open to 
charges that it was changing APIs throughout the testing process in 
order to deceive and manipulate. Indeed, the disclaimer would almost 
indemnify Microsoft for such manipulation. Its precise reasons for 
changing the API would then lead to litigation. For these reasons, it 
is unclear that preliminary, earlier disclosure is an obvious 
improvement to the provisions currently embodied in the SRPFJ. Indeed, 
it would probably extend regulation into the testing process, which 
seems likely to reduce and distort innovation in APIs.
---------------------------------------------------------------------------

    \26\ See definition VI.R in the SRPFJ.
---------------------------------------------------------------------------

    65. Other features of the proposed API disclosure process that have 
drawn comment include the limitations contained in Section III.J. For 
example, Professor Bresnahan states that the settlement ``overbroadly 
exempts the most competitively important protocols such as security, 
authentication and identity protocols.'' (Bresnahan Article at 68.) The 
same concern is expressed by Stiglitz and Furman. (See Stiglitz and 
Furman Decl. at 30.) These fears are unfounded, based on my 
understanding of the SRPFJ. In particular, I observe that Section 
III.J.1 exempts from disclosure portions or layers of APIs, 
documentation, and protocols that, if disclosed, would compromise the 
security of a particular actual installation. The exemption, as 
described in the CIS, ``is limited to specific end-user implementations 
of security items such as keys, authorization tokens or enforcement 
criteria.'' (See CIS at 51.) That is, the SRPFJ only limits disclosure 
of specific end-user implementation of security features. For example, 
Microsoft would not have to disclose the actual key used by an actual 
customer. It would not need to disclose an API written especially for 
an actual customer, and no other. These limits appear reasonable. APIs 
relating to general Microsoft technologies for security, etc. must be 
disclosed.
    66. Apart from the disclosure of APIs, there is also the issue of 
the disclosure of the communications protocols between Windows 
installed on a client and a Microsoft server. Several commentators are 
of the opinion that this provision is very limiting and excludes, for 
example, communications between hand-held computers and servers.\27\ As 
discussed above, it is not clear how including such communications 
(e.g., in Section III.E) would reduce Microsoft's monopoly power. I do 
not see a need to extend Section III.E to cover non-desktop products, 
as proposed by the litigating states. The Microsoft operating system 
monopoly has always been centered on the desktop. This is why Section 
III.E focuses on facilitating server-based applications, which provide 
indirect competition to Microsoft. There is no evidence that Microsoft 
has monopoly power in operating systems for handheld computers, set-top 
boxes, etc. Indeed, the operating system sold for use in these areas, 
Windows CE, has been characterized by poor performance since its 
inception and has been out-performed by Palm OS, Blackberry, and other 
such competing operating systems. Similarly, Microsoft is not dominant 
in the server market, and it currently faces competition from servers 
by Linux and others. I present data confirming these claims in Section 
IV below. For these reasons, I am convinced that Section III.E provides 
the right focus. To extend Section III.E to cover additional areas 
would, as I have discussed, certainly increase antitrust regulation 
with no clear rationale or benefit.
---------------------------------------------------------------------------

    \27\ See, e.g., Bresnahan Article at 68; and Henderson Comment 
at 3 and 5-6.
---------------------------------------------------------------------------

    67. There does remain the issue of how Microsoft will decide what 
``reasonable and non-discriminatory'' charges it will set for access to 
these communications protocols. This is a reasonable concern that has 
been raised by several commentators. \28\ The basis for such license 
fees is apparently limited to intellectual property that Microsoft may 
have embedded in these protocols, as set out in Section III.I. Some 
guidance offered for what ``reasonable and non-discriminatory'' might 
mean is in the CIS, where it says that 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.'' (CIS at 49.) Presumably, any charging 
mechanism that excluded substantial numbers of ISVs, IAPs, ICPs, or 
OEMs would violate this requirement. It is my understanding that 
previous DOJ antitrust consent decrees imply that the term ``reasonable 
and non-discriminatory'' is likely to be interpreted as not 
significantly excluding competitors. On this assumption, the lack of 
specific rate-

[[Page 12126]]

setting guidance in Section III.I is not likely to be a severe problem.
---------------------------------------------------------------------------

    \28\ See e.g., Bresnahan Article at 69.
---------------------------------------------------------------------------

    68. Because Section III.B does not constrain the structure or 
levels of the royalty schedule beyond the uniformity requirement, some 
commentators have expressed the concern that Microsoft might be able to 
stay within the confines of this provision but still price in such a 
way as to be anticompetitive. For example, RealNetworks opines that 
Microsoft could ``establish the price of versions of Windows without 
its middleware set as the default at some artificially high price and 
the actual price Microsoft wanted to receive as a cash incentive to 
carry Microsoft's middleware as the default application.'' (See 
RealNetworks Comments at 27.)
    69. Contrary to RealNetwork's hypothetical, Section III.B.3.c 
states that Microsoft cannot discount the price of Windows based on any 
requirement that is inconsistent with the proposed decree. This means 
that Microsoft cannot offer discounts on Windows that are tied to OEMs 
foregoing such options as installing non-Microsoft icons pursuant to 
Section III.C, or setting defaults, or removing Microsoft Middleware 
Products pursuant to Section III.H. For instance, Microsoft cannot set 
the price of Windows at $500 but offer a cash discount of $450 if an 
OEM sets some Microsoft Middleware Product as the default. 
Alternatively, should Microsoft offer a direct payment based on the 
level of support for the Microsoft Middleware Product, this would be a 
case of preferential treatment within the meaning of Section III.G, so 
that the OEM could not give Microsoft preferential status more than 
fifty percent of the OEM shipments.

IV. Issues Not Addressed by the Proposed Decree

    70. Many of the parties publicly commenting about asserted 
loopholes in the proposed decree also have been critical of claimed 
limitations to the remedy achieved by the settlement.\29\ In this 
section, I address the main suggestions for additional remedies 
discussed by these commentators.
---------------------------------------------------------------------------

    \29\ See generally Stiglitz and Furman Decl.; Comment of Robert 
E. Litan, Roger D. Noll, and William D. Nordhaus on the Revised 
Proposed Final Judgment (hereinafter ``Litan et al.'') Arrow Decl.; 
and Bresnahan Article.
---------------------------------------------------------------------------

A. Unbundling of Microsoft Middleware From the OS.

    71. An issue raised in this case is that, if Microsoft proceeds to 
bundle application software with the OS, an available ``stripped down'' 
version of the OS without the application in question should also be 
released.\30\ Alternatively, when Microsoft releases a new operating 
system, it should continue to offer the previous version at the 
original price.
---------------------------------------------------------------------------

    \30\ See, e.g., Arrow Decl. at para. 26.
---------------------------------------------------------------------------

    72. This is a potentially important issue. If the OEM has to pay a 
positive price for a rival middleware product and pays a marginal price 
of zero for the same functionality bundled in the operating system, 
then the competitive battle is stacked against the competitor (see 
Arrow Decl. at para. 27). The critics also suggest that OEMs will not 
want to support more than one product with such functionality, even if 
icons were removed for the Microsoft Middleware version as permitted 
under the SRPFJ. With the underlying Microsoft Middleware code embedded 
in the system, the critics suggest that end users will still find this 
functionality being invoked and thus will have support concerns and 
needs, lessening the OEM interest in carrying the rival middleware. 
Further, the critics claim the availability of the commingled Microsoft 
Middleware code will further encourage ISVs to write applications to 
Microsoft products rather than to Non-Microsoft Middleware.\31\ Thus, 
these commenting economists have urged the DOJ to require the 
unbundling of Microsoft Middleware from Windows Operating System 
Products.
---------------------------------------------------------------------------

    \31\ Arrow asserts that permitting OEMs to remove Microsoft 
Middleware icons but not the underlying code would further undermine 
OEM incentives to carry Non-Microsoft Middleware. (See Arrow Decl. 
at para. 37.) Litan et al. at 44 claim that permitted commingling of 
code will be fatal to the proposed decree by ensuring universal 
distribution of Microsoft Middleware code, which when compared to 
partial distibution of Non-Microsoft Middleware code will encourage 
continued enhancement of the applications barrier to entry.
---------------------------------------------------------------------------

    73. However, on closer inspection, the requirement to have an 
unbundled operating system is highly regulatory and is likely to lead 
to more litigation. For example, to determine the appropriate discount 
for the unbundled operating system, the general approach would 
necessarily involve some estimate of the costs of the Microsoft 
Middleware Products that are to be removed from the bundled version. 
Such estimates, however, are likely to be arbitrary and complex to 
calculate. This is because software development efforts involve 
substantial shared costs between projects and benefit from common 
overhead expenditures. For example, suppose that a given server is used 
for ten development projects, both middleware and non-middleware; the 
cost of this server would have to be allocated between projects. But 
such cost allocation rules are inherently arbitrary.\32\ Should 
corporate overhead be allocated between development projects for the 
purpose of pricing the unbundled operating system? If so, on which of 
the many accounting bases should it be done? How should the cost of a 
computer used by one individual on three different projects be 
allocated between them? To answer questions such as these, regulatory 
agencies (e.g., the Federal Communications Commission (``FCC'') and the 
Federal Energy Regulatory Commission (``FERC'')) evolved highly complex 
case law over a period of decades. Speaking as a regulatory economist 
with nearly three decades of experience, I can assert with confidence 
that such pricing of the unbundled operating system would be a 
regulatory quagmire at least equal in complexity to those that have 
kept regulatory bodies such as the FCC busy for years.
---------------------------------------------------------------------------

    \32\ See, e.g., William J. Baumol, Michael F. Koehn, and Robert 
D. Willing (1987), ``How Arbitrary is `Arbitary'?--or Toward the 
Deserved Demise of Full Cost Allocation,'' 120 Public Utilities 
Fortnightly 16-21.
---------------------------------------------------------------------------

    74. In its comments intended to support the notion of an unbundled 
operating system, SBC unintentionally discredits this proposal. In 
referring to the problem of pricing an unbundled version of Windows, 
SBC states:

    Several such mechanisms are possible. The Final Judgment 
provided that pricing be guided based on bytes of code. . . .. SBC 
believes that it would be preferable to allocate costs between the 
operating system and the removed middleware based on measurement of 
``function point code.'' . . . Alternatively, SBC supports the use 
of a pricing mechanism based on the fully allocated product 
development costs for the operating system product and middleware 
products in questions. (See Comments of SBC at 143).

In this revealing passage, SBC makes it clear that because of the 
numerous and subtle common costs incurred in software development, each 
interested party would have wide scope to select and litigate for the 
(arbitrary) pricing mechanism that favored it the most.
    75. In any case, it appears to be true that many applications on 
the desktop are not paid for by the OEM or (initially) by the end user. 
Indeed, all three of the current major Instant Messaging products are 
available without charge. I am aware of several instances in which 
third-party software applications are included by OEMs in their PC 
offerings, even though similar functionality is bundled by Microsoft in 
Windows XP. For example, Dell Computer offers photo imaging and CD 
``burning'' software with Microsoft XP Home Edition-based PCs even 
though XP

[[Page 12127]]

Home includes similar capabilities.\33\ Dell includes Sierra Imaging's 
Image Expert 2000 software on some systems, pre-installing a premium 
version that is available to the end user for 60 days (an additional 
fee applies to retain premium features after this time limit).\34\ 
Clearly, Microsoft's bundling does not eliminate the OEM's incentive to 
use such alternative applications when they are offered under desirable 
arrangements. Generally in such cases, the business model of an ISV is 
to provide the software to the OEM for free with hope for future fees 
from Web services (or other services) provided to end users through the 
software or from potential upgrade revenue when end users desire 
premium versions of the product. For example, RealNetworks is pursuing 
such a strategy and by August or September 2001 was enjoying usage 
rates approximately twice that of Windows Media Player. \35\ 
RealNetworks' momentum has continued despite the fact that a version of 
Windows Media Player has been bundled with every version of Windows 
since Windows 95. RealNetworks appears to have competed well with 
products produced by Microsoft and bundled in Windows.\36\
---------------------------------------------------------------------------

    \33\ Dell systems shipped with CD-RW capability come with Roxio 
Easy CD Creator, a CD burner software product. A recent article in 
Computer Shopper addresses Windows XP's CD mastering capabilities. 
See Computer Shopper, Feb. 2002, at 131. Another article--``Windows 
XP Tip: My Pictures Folder,'' TechTV, Oct. 26, 2001--reviews the 
photo managing capabilities Microsoft has bundled into XP. Microsoft 
also has a separate product, Microsoft Picture It 2002, that 
provides special effect and other enhanced photo management 
capabilities.
    \34\ Perhaps a more significant example is RealNetworks' RealOne 
media player product, comprising RealPlayer and RealJukebox, 
currently packaged by the OEM Sony in a Windows XP Home Edition Vaio 
Notebook system sold in the retail channel. In December 2001, it was 
also announced that Compaq will begin shipping these RealNetworks 
products as default media players in Presario desktop and notebook 
models designed for consumers. By mid-2002, compaq will be offering 
the newest RealOne Player, with a RealOne icon on the desktop and 
memberships to the RealOne subscription services. See EDP's Weekly 
It Monitor, Dec. 24, 2001. As discussed elsewhere, Windows XP 
bundles a similar media player product (Windows Media Player) in the 
operating system, and yet these OEMs provide the Non-Microsoft 
Middleware product as well.
    \35\ The Wall Street Journal reported (on Sep. 24, 2001) August 
2001 usage figures: ``28.8 million users accessed multimedia files 
on the Web in the RealNetworks format and 13 million did the same in 
Microsoft's format'' (based on Internet measurement firm Netratings 
Inc. figures).
    \36\ Ibid.
---------------------------------------------------------------------------

B. Protections Concerning Microsoft Office Practices

    76. Several commentators suggest it is necessary to require 
Microsoft to ``port'' Office to other operating systems, such as Apple 
MAC OS and Linux. For example, Stiglitz and Furman stated a concern 
that the proposed decree ``does not address any issues relating to the 
pricing, distribution, or porting of Microsoft Office.'' (Stiglitz and 
Furman Decl. at 38.) Stiglitz and Furman and Litan et al. argue that 
the ``porting'' of Office is likely to reduce the applications barrier 
to entry (or at least reduce Microsoft's ability to raise them 
deliberately). (See Stiglitz and Furman Decl. at 42 and Litan et al. 
Comment at 71-72.) I agree that this remedy would be a more direct 
attack on the applications barrier to entry. However, Office has never 
been a significant part of the case brought against Microsoft. Where 
Office has been an issue, it relates to Microsoft's efforts to control 
middleware, such as the ``club'' used against Apple to harm Netscape, 
found to be anticompetitive by the District Court and upheld by the 
Court of Appeals. (See Opinion at 72-74.) The SRPFJ remedies directed 
at ensuring that rival middleware opportunities exist and can be freely 
pursued should be sufficient in this regard.\37\
---------------------------------------------------------------------------

    \37\ In light of the findings in this case overall and of the 
Court of Appeal's condemnation of Microsoft's conduct toward Apple 
regarding Office in particular, it is hard to imagine Microsoft 
attempting the use of the ``club'' again, let alone a party that 
would permit it without threats of litigation and complaints to 
regulators.
---------------------------------------------------------------------------

C. Network Server, Handheld Computer and Web Services Issues

    77. Some commentators would prefer the antitrust remedy to extend 
beyond middleware and the PC environment to cover such emerging product 
areas as servers, handheld devices, and Web services to insure 
Microsoft does not extend its monopoly to dominate additional markets 
and erect new barriers to entry. (See Stiglitz and Furman Decl. at 38-
39; Comments of SBC Communications Inc. (``SBC'') at 42-43; and Arrow 
Decl. at Paras.  55, 68-70.) Arrow, for instance, suggests that end 
users will access the Internet with server and handheld devices, and he 
concludes that the remedy should protect competing server operating 
systems and web services. Given Microsoft's anticompetitive practices, 
he concludes it is reasonable to require parity in access to APIs, 
protocols, and documentation for interoperability across product areas. 
(See Arrow Decl. at Paras.  55, 68-70). These remedies go well beyond 
the scope of the case brought against Microsoft (as well as the 
findings upheld by the appellate court) and also well beyond the 
desktop, where Microsoft has its proven monopoly. Hence, regulatory 
intervention is not called for in these areas, as is further addressed 
in the following assessment of certain specific issues raised relating 
to corresponding Litigating States proposals in these product areas.
1. Servers
    78. Litan et al. point to the increasing importance of client-
server networks and server-based computing and conclude that a new 
platform entrant must not only overcome the application advantages that 
Microsoft illegally obtained in the desk top OS, but must also provide 
compatibility with ``servers which are increasingly relying on 
Microsoft's server operating systems'' (see Litan et al. at 30.) This 
suggestion is at variance with the focus of the present antitrust case, 
which involves Microsoft's desktop monopoly, not the server market. In 
addition, there is no clear monopoly issue in the server market. 
Microsoft's share of server operating systems has grown from 
approximately 27 percent in 1996 to 41 percent in 2000. This gain has 
apparently come at the expense of other PC compatible network software 
providers (such as Novell), but not at the expense of competitors 
likely to be the more relevant factors in the future.\38\ For example, 
according to a 1999 estimate issued by the International Data 
Corporation (``IDC''), Linux's server share more than doubled in 1998 
to reach 17.2 percent.\39\ More recently, IDC has reported that Linux's 
worldwide market share in 2000 of new and upgraded operating systems 
for servers had climbed to 27 percent, ranking it second behind 
Microsoft's share of 41 percent.\40\ Litan et al. acknowledge that 
``the Linux OS has made significant inroads into the server market,'' 
\41\ while IDC confirms that, excepting Microsoft and Linux, ``market 
share declined for other server systems, including Unix''

[[Page 12128]]

over the past year.\42\ For these reasons, I do not believe the server 
market by itself raises any monopoly power issues.
---------------------------------------------------------------------------

    \38\ See Stephen Shankland, Linux Growth Underscores Threat to 
Microsoft, CNET News.com (Feb. 28, 2001); Information Week, p. 86 
(Apr. 21, 1997) (citing 1996 shares as reported by International 
Data Corp.).
    \39\ Steven Brody, IDC Says Linux Likely to Lead OS Growth, 
SunWorld (Mar. 31, 1999), reproduced at http://www.linuxworld.com/linuxworld/lw-1999-03/lw-03-idc.html.
    \40\ See Elise Ackerman, Despite a Tough Road, Linux Has Never 
Been More Popular, San Jose Mercury News (Nov. 25, 2001); Peter 
Galli, Battle Brews Over Linux Server Share, EWEEK (June 10, 2001), 
reproduced at http://zdnet.com.com/2102-11-503810.html (citing also 
Gartner Dataquest estimates of Linux as having a share of server 
shipments of 6 to 8.6 percent share in third quarter 2000).
    \41\ Litan et al. at 25.
    \42\ Computerworld (Feb. 26, 2001). See also Stephen Shankland, 
Linux Sales Surge Past Competitors, CNET News.com (Feb. 9, 2000).
---------------------------------------------------------------------------

2. Handheld Computers and Web Services
    79. Similarly, some commentators are concerned that Microsoft 
practices will lead to dominance in operating systems for handheld 
devices, removing a partial threat to at least some Windows-based 
personal computers. This leads them to assert that the proposed decree 
improperly ignores this segment of the computer industry. Again, this 
remedy seeks a penalty outside the scope of the case. No findings were 
found or upheld relating to Microsoft conduct directed at handheld 
devices or handheld competitors. Further, the Microsoft Windows CE 
operating system has not been gaining systematically on competing 
systems over the last several years, and there is little reason to 
divert the focus of the SRPFJ to this area.\43\
---------------------------------------------------------------------------

    \43\ According to Gartner figures, worldwide market share for 
Windows CE has been between 20 percent and 25 percent over the last 
four years, with no significant trend. See Final 1998 Handheld 
Computer Market Results, Gartner Dataquest (May 17, 1999); Gartner 
Dataquest's Worldwide PDA Forecast, Gartner Dataquest (Dec. 11, 
2000); and Handheld Computer Shipments Rebound in 4Q01, Gartner 
Dataquest Alert (Feb. 15, 2002). While Microsoft is expected to 
improve this position subsequent to the introduction of Pocket PC 
2002 in October 2001, Gartner continues to project Windows CE share 
at no more than 30 percent for 2002. See Microsoft Aims to Dominate 
With Pocket PC 2002, Gartner Dataquest (Sep. 10, 2001).
---------------------------------------------------------------------------

D. Restoring Java as a Competitive Threat

    80. Some commentators have suggested that the proposed decree 
should require mandatory distribution of a Sun-compatible Java runtime 
environment with each copy of Windows (and IE) shipped by Microsoft. 
Critics of the proposed decree have suggested this provision is 
appropriate to attempt to compensate for Sun's lost position and lost 
momentum as Microsoft deceived developers and discouraged distribution 
and use of Sun-compliant Java. (See, e.g., Litan et al. at 25 and 71.) 
Stiglitz and Furman believe this would decrease the applications 
barrier to entry. (See Stiglitz and Furman Decl. at 42.) There is no 
question that the cross platform potential of Java was real, but there 
exists significant uncertainty as to the timing and impact that Java 
would have had absent Microsoft's unlawful conduct, as discussed in the 
Findings of Fact. Furthermore, if there is consumer demand for PCs that 
come with JVMs installed, the OEMs are free to meet that demand and are 
protected from retaliation by Microsoft under the SRPFJ if they do so. 
Therefore, in my opinion, this ``must carry'' provision is 
disproportionate and will improperly preordain market outcomes. 
Furthermore, other platforms or products, aided by the SRPFJ, will have 
an opportunity to serve as a carrier for Java distribution or otherwise 
provide alternative middleware platforms for future application 
developers.

E. Publishing IE Source Code

    81. Similarly, critics have suggested that the proposed decree 
should force the open-source licensing of IE in order to reduce the 
applications barrier to entry and deny Microsoft one of the fruits 
(i.e., the dominant position of IE) of its anticompetitive conduct. 
(See Stiglitz and Furman at 41-42, and Litan et al. at 71.) Litan et 
al. claim that third parties will then ``transform IE into a true 
independent middleware platform,'' ensuring that alternative middleware 
will be ubiquitous even if the SRPFJ anti-retaliatory and disclosure 
provisions are not enough to foster such an alternative.
    82. This claim may well be true, but open-source licensing of IE 
will inflict economic harm on Microsoft by expropriating its 
intellectual property. This appears to be either an effort to collect 
damages from Microsoft or an exercise in competition policy well 
outside the confines of an antitrust case. If it is an attempt to 
collect damages from Microsoft, then it should be linked to an estimate 
of the damages caused by Microsoft's acts. I am not aware that such an 
estimate exists. Moreover, Microsoft is clearly subject to other 
punishment outside this case, as Netscape has recently filed suit 
seeking treble damages for losses associated with Microsoft's 
anticompetitive conduct aimed at eliminating Netscape's browser as a 
competitive threat.

F. Continued Licensing of the Predecessor Version of an Operating 
System

    83. One proposal made by Litan et al. is that, whenever Microsoft 
makes a major release of a Windows Operating System Product, it must 
continue to license the predecessor version of the new product at its 
original price. Possibly, the objective is to limit Microsoft's ability 
to have customers upgrade to the new operating system by increasing the 
price of the predecessor version. Of course, there is nothing 
inherently anticompetitive about inducing customers to upgrade to a new 
major release of an operating system. However, based on my 
understanding of submission of Litan et al., this proposal is designed 
to correct a perceived loophole in the proposed decree. Litan et al. 
state:

    In the absence of this provision, Microsoft could frequently 
offer new, slightly modified versions of the OS that render the 
middleware based on the predecessor APIs unworkable with the new 
version. Middleware developers would be discouraged if they knew 
that Microsoft could raise their costs simply by slightly revising 
the operating system code in such a way that requires the middleware 
to be significantly modified. (Litan et al. at 72.)

    84. It is not possible to assert that the SRPFJ prevents this from 
occurring, but it seems unlikely that Microsoft would find such a 
strategy profitable. First, it would appear to be difficult for 
Microsoft to limit the damage thus created to threatening middleware 
products. By changing APIs in the manner suggested by Litan et al., 
Microsoft would be requiring both ISVs and its own developers to 
rewrite their code substantially. Moreover, such a strategy would be 
counterproductive for Microsoft because it would serve to reduce the 
applications barrier to entry, since the new version of the OS would 
run fewer applications than its predecessor. This necessarily implies 
that Microsoft and its ISVs would have to rewrite, at least in part, 
the thousands of applications available prior to release and would have 
to coordinate the development schedule of these rewrites with each new 
release of the operating system. Microsoft's own spotty record in 
meeting and coordinating the release schedules for even one or two 
major products makes this outcome an unlikely event.
    85. It may be that Microsoft would attempt a less extreme version 
of the Litan et al. scenario, in which only some of the APIs are 
changed between versions of Windows. However, there would still exist 
the problem of limiting the damage to only the middleware that 
Microsoft regards as threatening. Even moderate changes in APIs would 
likely lead to large failures of backward compatibility in Windows 
applications. Thus, to make this strategy work, Microsoft would need to 
reduce the number of published APIs by a significant amount each year. 
This action would certainly ``discourage'' software developers, as 
Litan et al. suggest, but at the same time it would also discourage 
ISVs from writing programs for the Windows desktop.

IV. Conclusions

    86. The antitrust remedy in this case must focus attention on and 
fully

[[Page 12129]]

resolve the appellate court finding that Microsoft engaged in specific 
anticompetitive acts to maintain its operating system monopoly. In 
developing this remedy, it is necessary to balance two broad factors. 
First, the remedy must place constraints on Microsoft's current and 
future behavior so that the unlawful acts stop and do not recur, and 
competitive conditions are restored. However, these constraints should 
not be so intrusive and complex that they themselves distort market 
outcomes. This potential distortion can take many forms, but two of the 
most important are (1) over-extensive government regulation of 
Microsoft that may result in inefficient rent-seeking by Microsoft's 
competitors, or (2) requirements that make Microsoft a less efficient 
competitor. Thus, the difficult task is to create a balanced remedy 
that constrains anticompetitive behavior by Microsoft without limiting 
competition on the merits.
    87. In my opinion, the SRPFJ achieves the right balance. By 
focusing on Microsoft's anticompetitive business practices, its 
provisions eliminate the artificial barriers to entry erected by 
Microsoft that are the source of competitive concern. The provisions in 
the proposed decree are likely to deter conduct that (1) seeks 
exclusivity or (2) is backed by retaliatory threats. The SRPFJ also 
aims to restore and enhance competitive conditions by removing 
technical barriers to fair competition between Microsoft and rival 
middleware suppliers. From an economic standpoint, middleware is 
important because it can expose APIs and has the potential to become an 
applications platform distinct from the Windows OS. The SRPFJ does not 
attempt to preordain market outcomes or to weaken Microsoft as a 
legitimate competitor.
    88. I have considered other proposals carefully, including that of 
the Litigating States. However, in my view, these proposals fail to 
achieve the right balance. In an attempt to erase all theoretical ways 
in which Microsoft could harm competition, these alternative proposals 
tend to require a complex regulatory program that is certain to be 
slow-moving, litigious, and vulnerable to manipulation by Microsoft's 
competitors. For example, the provision for how to price the proposed 
unbundled operating system invites arguments over cost allocations, and 
other ratemaking issues, that have the potential to slow down the 
competitive process.
    89. Finally, in analyzing the SRPFJ, I have had the benefit of 
reviewing a number of thoughtful and probing comments on the proposed 
decree. As the discussion in Section III demonstrates, most of the 
potential problems raised by the various commentators are, in fact, not 
problems at all, but are met by the SRPFJ. However, at first glance 
there does appear to exist potential ways in which Microsoft could 
engage in behavior that reduces competition while claiming nonetheless 
that it satisfied the provisions of the SRPFJ. For example, some 
commentators have alleged Microsoft could (1) sell middleware only as 
bundled with the operating system, (2) set prices for access to its 
client-server communications protocols so high that they exclude 
competition, and (3) change large numbers of APIs frequently through 
numerous releases of new operating systems. Although these strategies 
may be theoretical possibilities, my analysis shows either that these 
acts would be unimportant or that Microsoft would lack the incentive to 
undertake such actions.
    90. In sum, in my opinion, the SRPFJ focuses attention on and fully 
resolves the appellate court finding that Microsoft engaged in a series 
of anticompetitive acts to maintain its OS monopoly. The SRPFJ contains 
provisions that will stop the offending conduct, prevent its 
recurrence, and restore competitive conditions. In my opinion, in light 
of the above, the SRPFJ is in the public interest.
* * * * *
    I declare under penalty of perjury that the foregoing is true 
and accurate. Executed on February 27, 2002 in Austin, Texas.

David S. Sibley.

Appendix A

Curriculum Vitae of Professor David S. Sibley

David S. Sibley, Department of Economics, University of Texas at 
Austin, Austin, TX 78712, Phone: (512) 475-8545, Fax: (512) 471-8899.

Education

1973  Ph.D. in Economics, Yale University
1969  B. A. in Economics, Stanford University

Teaching Fields

Industrial Organization, Economics of Information

Research Fields

Economics of asymmetric information, telecommunications policy, public 
utility pricing, models of firm's internal organization.

Professional Experience

March, 1992-Present: John Michael Stuart Centennial Professor of 
Economics, University of Texas at Austin.
August, 1991-March, 1992: Edward Everett Hale Centennial Professor of 
Economics, University of Texas at Austin.
September, 1983-August, 1991: Research Manager, Bell Communications 
Research, Morristown, NJ. Head of Economics Research Group.
September 1981-September 1983: Member of Technical Staff, Bell 
Laboratories, Murray Hill, NJ.
September 1980-September 1981: Adviser to the Chairman of the Civil 
Aeronautics Board.
January 1980-September 1980: Consultant, Civil Aeronautics Board, 
Washington, D.C.
September 1978-January 1980: Senior Staff Economist, Council of 
Economic Advisers, Executive Office of the President, Washington, D.C.
October 1973-September 1978: Member of Technical Staff, Bell 
Laboratories, Holmdel, NJ.

Teaching

September 1991-Present: Introductory Microeconomics, undergraduate and 
graduate Industrial Organization.
Fall 1989: Visiting Lecturer, Woodrow Wilson School of Public and 
International Affairs, Princeton University. Graduate course in 
regulation and public choice.
September 1983-December 1983: Adjunct Lecturer in Economics, University 
of Pennsylvania. Graduate course on regulation.

Publications

A. Journal Articles

``Pricing Access to a Monopoly Input,'' (with M. J. Doane, M. A. 
Williams, and S. Tsai), Journal of Public Economic Theory, 2001 
(forthcoming).
``Exclusionary Restrictions in U.S. vs. Microsoft,'' (with M.J. Doane 
and A. Nayyar), UWLA Law Review, 2001.
``Raising Rivals' Costs: The Entry of a Upstream Monopolist into 
Downstream Markets,'' (with D. L. Weisman), Information, Economics and 
Policy 10:451-470.
``Having Your Cake--How to Preserve Universal-Service Cross Subsidies 
While Facilitating Competitive Entry,'' (with M.J. Doane and M.A. 
Williams), Yale Journal on Regulation, Summer 1999.

[[Page 12130]]

``The Competitive Incentives of Vertically-Integrated Local Exchange 
Carriers: An Economic and Policy Analysis,'' (with D.L. Weisman), 
Journal of Policy Analysis and Management, Winter 1998.
``Multiproduct Nonlinear Prices with Multiple Taste Characteristics,'' 
(with P. Srinagesh), Rand Journal of Economics, Winter 1997.
``Optional Two-Part Tariffs: Toward More Effective Price Discounting,'' 
(with R. Rudkin) in Public Utilities Fortnightly, July 1, 1997.
``A Bertrand Model of Pricing and Entry,'' (with W.W. Sharkey), 
Economics Letters, 1993.
``Regulatory Incentive Policies and Abuse,'' (with D.M. Sappington), 
Journal of Regulatory Economics, June 1993.
``Optimal Non-linear Pricing With Regulatory Preference over Customer 
Types,'' (with W.W. Sharkery), Journal of Public Economics, February 
1993.
``Ex Ante vs. Post Pricing: Optional Calling Plans vs. Tapered 
Tariffs,'' (with K. Clay and P. Srinagesh), Journal of Regulatory 
Economics, 1992.
``Thoughts on Nonlinear Pricing Under Price Cap Regulation,'' (with 
D.M. Sappington), Rand Journal of Economics, Spring 1992.
``Compensation and Transfer Pricing in a Principal-Agent Model,'' (with 
D.E. Besanko), International Economic Review, February 1991.
``Regulating Without Cost Information: Some Further Thoughts,'' (with 
D.M. Sappington), International Economic Review, November 1990.
``Asymmetric Information, Incentives and Price Cap Regulation,'' Rand 
Journal of Economics, Fall 1989.
``Optimal Two Part Tariffs for Inputs,'' (with J.C. Panzar), Journal of 
Public Economics, November 1989.
``Regulating Without Cost Information: The Incremental Surplus Subsidy 
Scheme,'' (with D.M. Sappington), International Economic Review, May 
1989.
``Optimal Consumption, the Interest Rate and Wage Uncertainty,'' (with 
D. Levhari), Economics Letters, 1986.
``Reply to Lipman and Further Results,'' International Economic Review, 
June 1985.
Public Utility Pricing Under Risk: A Generalization,'' Economics 
Letters, June 1985.
``Optimal Non-Uniform Pricing,'' (with M.B. Goldman and H.E. Leland), 
Review of Economic Studies, April 1984.
``Efficiency and Competition in the Airline Industry,'' (with D.R. 
Graham and D.P. Kaplan), Bell Journal of Economics, Spring 1983.
``Optimal Nonlinear Pricing for Multiproduct Monopolies,'' (with L.J. 
Mirman), Bell Journal of Economics, Autumn 1980.
``A Dynamic Model of the Firm with Stochastic Regulatory Review,'' 
(with V.S. Bawa), International Economic Review, October 1980.
``Public Utility Pricing Under Risk: The Case of Self-Rationing,'' 
(with J.C. Panzar), American Economic Review, December 1978.
``Regulatory Commission Behavior: Myopic vs. Forward-Looking,'' (with 
E.E. Bailey), Economic Inquiry, June 1978.
``Optimal Decisions with Estimation Risk,'' (with L.C. Rafsky, R.W. 
Klein and R.D. Willig), Econometrica, November 1977.
``The Demand for Labor in a Dynamic Model of the Firm,'' Journal of 
Economic Theory, October 1977.
``Optimal Foreign Borrowing with Export Revenue Uncertainty,'' (with 
J.L. McCabe), International Economic Review, October 1976.
``Permanent and Transitory Income Effects in a Model of Optimal 
Consumption with Wage Income Uncertainty,'' Journal of Economic Theory, 
August 1975.
``A Note on the Concavity of the Mean-Variance Problem,'' Review of 
Economic Studies, July 1975.

B. Reports and Articles in Conference Volumes, and Other Publications

``U.S. v. Microsoft: Were the Exclusionary Practices Anticompetitive'' 
(with Michael J. Doane), Computer Industry Newsletter, American Bar 
Association, Spring 2000, Vol. 5., No. 1.
``Optional Tariffs for Access in the FCC's Price Cap Proposal,'' (with 
D.P. Heyman and W.E. Taylor), in M. Einhorn (ed.), Price Caps and 
Incentive Regulation in the Telecommunications Industry, Kluwer, 1990.
Report to the Governor, The Task Force on Market-Based Pricing of 
Electricity. Co-authored with D.M. Sappington, Appendix III.
``An Analysis of Tapered Access Charges for End Users,'' (with W.E. 
Taylor, D.P. Heyman and J.M. Lazorchak), published in the Proceedings 
of the Eighteenth Annual Williamsburg Conference on Regulation, H. 
Treeing (ed.), Michigan State, 1987.
``Deregulation and the Economic Theory of Regulation,'' (with W.W. 
Sharkey), in Proceedings of the Eleventh Annual Telecommunications 
Policy Research Conference, 1983.
``Antitrust Policy in the Airline Industry,'' (with S.B. Jollie), Civil 
Aeronautics Board, October 1982. Transmitted by the CAB to Congress as 
part of proposed sunset legislation.
``Optimal Non-Uniform Pricing for Electricity: Some Illustrative 
Examples,'' (with R.W. Koenker), in Sichel (ed.) Public Utility 
Ratemaking in an Energy-Conscious Environment, Praeger, 1979.
``The Dynamics of Price Adjustment in Regulated Industries,'' (with 
E.E. Bailey), in Proceedings of IEEE Conference on Systems Control, 
1974.

C. Books:

Co-editor of Telecommunications Demand Analysis: An Integrated View, 
North-Holland, 1989.
The Theory of Public Utility Pricing, (with S.J. Brown), Cambridge 
University Press, 1986. Second printing 1986. Third printing 1989. 
Revised edition planned.

Current Research Areas

Telecommunications policy, especially access pricing and optional 
tariff design; Design of incentive mechanisms; Organizational slack/
informational asymmetries.

Other Professional Activities

Associate Editor of the Journal of Regulatory Economics.
Consultant to the Governor of New Jersey's Task Force on Market-Based 
Pricing of Electricity.
Referee for National Science Foundation and numerous professional 
journals.
Consulting for Bell operating companies on a variety of pricing and 
public policy issues.
Memberships: American Economic Association; listed in Who's Who in the 
East 1990.

Response of United States to Public Comments on the Revised 
Proposed Final Judgment

In the United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Microsoft Corporation, 
Defendant;Response of the United States to Public Comments on the 
Revised Proposed Final Judgment.

[Civil Action No. 98-1232 (CKK)]

    Next Court Deadline: March 6, 2002; Tunney Act Hearing

[[Page 12131]]

Dated: February 27, 2002.
Charles A. James,
Assistant Attorney General.
Deborah P. Majoras,
Deputy Assistant Attorney General.
Phillip R. Malone,
Renata B. Hesse,
David Blake-Thomas,
Paula L. Blizzard,
Kenneth W. Gaul,
Adam D. Hirsh,
Jacqueline S. Kelley,
Steven J. Mintz,
Barbara Nelson,
David Seidman,
David P. Wales,
Attorneys.
Philip S. Beck,
Special Trial Counsel.
U.S. Department of Justice,
Antitrust Division,
601 D Street NW., Suite 1200
Washington, DC 20530-0001
(202) 514-8276.

Table of Contents

Introduction
I. General Comments
    A. Should Never Have Brought Suit
    B. Allegations Of Political Influence
    C. Removing The ``Fruits'' Of Microsoft's Anticompetitive Conduct
    D. The Litigating States' Proposal
    E. Fines
    F. Senate Hearing
II. Tunney Act Issues
    A. Adequacy Of The United States' Competitive Impact Statement
    1. The CIS Complies With The Requirements Of The Tunney Act
    2. The CIS Recites ``A Description And Evaluation Of Alternatives 
To Such Proposal Actually Considered By The United States''
    B. The United States Fully Complied With All Tunney Act 
Requirements Regarding Determinative Documents
    C. Timing And Process Of Hearing
    1. The Court Has Discretion To Determine The Nature And Format Of 
The Tunney Act Proceedings
    2. An Evidentiary Hearing Is Not Required In This Case
    3. The Court Is Not Required To Permit Any Third-Party 
Participation
    4. Allowing Third-Party Participation Through An Evidentiary 
Hearing Would Unnecessarily Delay And Complicate These Proceedings
    5. The Tunney Act Proceedings Should Not Be Held In Conjunction 
With, Or Rely Upon Evidence From, The Litigating States' Remedy Hearing
    D. Standard Of Review Under The Tunney Act
    1. The Tunney Act Requires That Entry Of The RPFJ Be ``In the 
Public Interest''
    2. The Court Should Grant Deference to the Judgment of the United 
States
    E. Microsoft's Compliance With Section 16(g)
III. Definitions
    A. Definition Of ``ISV'' (RPFJ Sec. VI.I)
    B. ``Microsoft Middleware'' (RPFJ Sec. VI.J)
    1. Distributed Separately To Update A Windows Operating System 
Product
    2. Trademarked Or A Major Version Of Any Microsoft Middleware 
Product
    3. Same Or Substantially Similar Functionality
    4. Includes At Least The Software Code That Controls Most Or All Of 
The User Interface
    5. Major Updates
    C. ``Microsoft Middleware Product'' (RPFJ Sec. VI.K)
    D. ``Non-Microsoft Middleware'' (RPFJ Sec. VI.M)
    E. ``Non-Microsoft Middleware Product'' (RPFJ Sec. VI.N)
    F. ``Personal Computer'' (RPFJ Sec. VI.Q)
    G. ``Trademarked'' (RPFJ Sec. VI.T)
    H. ``Windows Operating System Product'' (RPFJ Sec. VI.U)
    1. Microsoft's Discretion
    2. Prior Windows Versions
    3. Operating Systems for Other Devices
IV. OEM Provisions
    A. Overreliance On OEMs
    B. Non-Retaliation (RPFJ Sec. III.A)
    1. Section III.A Is Sufficiently Broad
    2. Section III.A Properly Allows Microsoft To Enforce Intellectual 
Property Rights
    3. Section III.A Protects OEMs From Arbitrary Termination Of Their 
Licenses
    4. Requiring Proof Of Knowledge Is Necessary And Can Be Met
    5. Microsoft's Permitted Use Of ``Consideration'' Is Appropriate
    6. The RPFJ Uses The Common Language Definition Of ``Retaliate''
    C. Uniform Terms (RPFJ Sec. III.B)
    1. Top Twenty OEMs
    2. MDAs Or Other Discounts
    3. OEMs Should Be Able To Negotiate
    4. Volume Discounts
    5. Termination--Cause, Materiality, And Notice
    6. Servers Or Office
    7. Key License Terms
    8. Prohibition On Enforcing Agreements Inconsistent With The RPFJ
    D. Freedom Of OEMs To Configure Desktop (RPFJ Sec. III.C)
    1. Section III.C.1
    2. Section III.C.2
    3. Section III.C.3
    4. Section III.C.4
    5. Section III.C.5
    6. Comparison To Litigating States' Proposal
    E. Microsoft's Obligations To Provide Add/Remove Functionality And 
Automatic Invocations (RPFJ Sec. III.H)
    1. Obligation To Provide Add/Remove Functionality
    2. Obligation To Provide Automatic Invocations And Exceptions
    a. Obligations To Provide Automatic Invocations
    b. Exceptions To The Obligation To Provide Automatic Invocations
    3. Microsoft's Ability To Change Configurations
    4. Timing Issues
    F. Commingling Of Operating System Code And Middleware Code
V. Retaliation Against ISVs or IHVs (RPFJ Sec. III.F)
    A. Comments On Section III.F.1
    B. Comments On Section III.F.2
    C. Comments On Section III.F.3
VI. Exclusionary Agreements (RPFJ Sec. III.G)
    A. Omissions
    B. Exemptions
VII. Disclosure Provisions (RPFJ Secs. III.D, III.E)
    A. Disclosure Of APIs (RPFJ Sec. III.D)
    1. Product Issues
    a. Microsoft's Ability To Manipulate The Definitions To Avoid 
Disclosure
    b. Products Other Than Microsoft Middleware
    c. Products Other Than Windows Operating System Products
    2. API Issues
    a. Definition Of ``API''
    b. Definition Of ``Documentation''
    c. Source Code Access
    d. Intellectual Property Issues
    3. Timing Issues
    a. First Disclosures: Windows XP Service Pack 1 Or No Later Than 
November 2002
    b. Triggered By New Version Of Microsoft Middleware: Last Major 
Beta Test Release
    c. Triggered By New Version Of Windows Operating System Product: 
Timely Manner (RPFJ Sec. VI.R)
    B. Disclosure Of Communications Protocols (RPFJ Sec. III.E)
    1. Product Issues
    a. Windows Operating System Product
    b. Microsoft Server Operating System Product
    c. Non-Microsoft Client Operating Systems
    d. Server-To-Server Communications
    e. Other Devices
    2. Communications Protocols,

[[Page 12132]]

Disclosure And Licensing
    a. Definition Of ``Communications Protocols'' (RPFJ Sec. VI.B)
    b. The Meaning Of ``Interoperate''
    c. License For Use
    d. The Meaning Of ``Natively''
    e. Licensing On ``Reasonable And Non-Discriminatory Terms''
    3. Timing Issues
    C. Compulsory Licensing (RPFJ Sec. III.I)
    1. Reasonable And Non-Discriminatory Royalty
    2. Restriction On Sublicenses
    3. Cross-Licenses
    4. Scope Of Intellectual Property Rights
    5. Comparison To Litigating States' Proposal
    D. Security Carve-Outs (RPFJ Sec. III.J)
    1. Limitation On Obligations To Document, Disclose Or License
    2. Conditioning Licenses On Certain Requirements
    E. Disclosure Of File Formats
VIII. Enforcement
    A. The Enforcement Powers Of Plaintiffs And The Court
    B. The Technical Committee
    1. Technical Committee Powers
    2. Composition And Control Of The Technical Committee
    C. Internal Compliance
    D. Voluntary Dispute Resolution
    E. Proposals For A Special Master
    F. Proposed Reporting Requirements
IX. Termination
X. Comparing the RPFJ to the IFJ
    A. Structural Relief vs. Conduct Restrictions
    B. Anti-Tying Provisions
    C. Intentionally Disabling Rival Software
    D. Agreements Limiting Competition
XI. Other Proposed Remedies
    A. Restrictions On Software Development Tools
    B. Java Must-Carry
    C. Porting Microsoft Office
    D. Licensing Of Predecessor Versions Of Windows
    E. Industry Standards
    F. Protection For Large End Users
    G. Non-Retaliation For Participation In Litigation
XII. Miscellaneous Comments
    A. Microsoft's ``.Net'' Initiative
    B. Course Of Conduct
    C. Restoring Java/Netscape Threats
    D. Microsoft's Responses To The Litigating States' RFAs
    1. Meeting Of The Minds
    2. Objections To Language In The CIS As ``Vague And Ambiguous''
    E. ``Open Source'' Community
    F. ``Reasonableness'' Standard
    G. Computers For Schools

In the United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Microsoft Corporation, 
Defendant; Response of the United States to Public Comments on the 
Revised Proposed Final Judgment.

[Civil Action No. 98-1232 (CKK)]

    Next Court Deadline: March 6, 2002; Tunney Act Hearing.
    1. Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act (``Tunney Act''), 15 U.S.C. 16(b)-(h), the United States 
hereby responds to the public comments received regarding the Revised 
Proposed Final Judgment (RPFJ) in this case.
    2. Simultaneously with this Response, the parties have filed a 
Second Revised Proposed Final Judgment (SRPFJ), which includes 
modifications to which the United States, Microsoft, and the Settling 
States have agreed.\1\ Because every comment addresses the RPFJ, this 
Response is couched in terms of, and generally refers to, the proposed 
decree before the modifications (i.e., the RPFJ), addressing the 
modifications of the SRPFJ only as required. However, the decree the 
Court should enter is the modified version of the RPFJ--that is, the 
SRPFJ.
---------------------------------------------------------------------------

    \1\ The United States also filed, simultaneously with this 
Response, a Memorandum Regarding Modifications Contained in Second 
Revised Proposed Final Judgment. The SRPFJ is a logical growth of 
the RPFJ, its incremental modifications responding to public 
comments, and the overall result further advances the public 
interest.
---------------------------------------------------------------------------

Introduction \2\
---------------------------------------------------------------------------

    \2\ A full description of the history of this litigation--both 
procedural and substantive--can be found in Memorandum Of the United 
States in Support Of Entry Of the Revised Proposed Final Judgment 1-
11 (filed Feb. 27, 2002) (``U.S. Memorandum'').
    \3\ In addition, nine State plaintiffs (the ``Settling States'') 
from New York v. Microsoft Corp., No. 98-CV-1233 (D.D.C.) (CKK) 
(``New York''), agreed to settle their dispute with Microsoft under 
RPFJ. Ten other plaintiffs from New York (the ``Litigating States'') 
did not agree to the terms of the RPFJ and are continuing their suit 
in a separate proceeding.
---------------------------------------------------------------------------

    3. The United States and Microsoft \3\ filed the RPFJ on November 
6, 2001, thereby proposing to end on mutually agreeable terms 
litigation that began on May 18, 1998. Pursuant to the requirements of 
the Tunney Act, the United States filed its Competitive Impact 
Statement (CIS) on November 15, 2001, and published the RPFJ, CIS, and 
a description of the procedures for submitting public comments on the 
proposed decree in the Federal Register on November 28, 2001. 66 FR 
59452 (2001). The United States also posted information on those 
procedures on the Department of Justice website. See http://www.usdoj.gov/atr/cases/ms-settle.htm>.
    4. The 60-day public comment period began on November 28, 2001, and 
ended on January 28, 2002. \4\ During that period, the United States 
received 32,329 public comments. This was by far the most comments ever 
received on any proposed decree under the Tunney Act. By comparison, 
the number of comments received on the RPFJ vastly exceeds the number 
received in the AT&T case--which completely restructured the 
telecommunications industry--by more than an order of magnitude. United 
States v. AT&T, 552 F. Supp. 131, 135 (D.D.C. 1982) (``over six hundred 
documents''), aff'd mem. sub. nom. Maryland v. United States, 460 U.S. 
1001 (1983); 47 FR 21214-24 (1982) (listing name and address of each 
commentor on proposed AT&T decree, with length of comment in pages).\5\
---------------------------------------------------------------------------

    \4\ The United States also chose to accept and treat as Tunney 
Act comments various communications from members of the public 
commenting on the proposed settlement that were received by the 
Department of Justice beginning on November 5, 2001, the first 
business day following submission of the initial Proposed Final 
Judgment to the Court, even though the official 60-day comment 
period had not yet begun. See 15 U.S.C. 16(b) (60-day period begins 
upon publication in the Federal Register.)
    \5\ By contrast, the United States' 1994 consent decree with 
Microsoft generated only five public comments. See 59 FR 59,426, 
59,427-29 (1994).
---------------------------------------------------------------------------

    5. The large volume of comments in this case reflects, in part, the 
widespread use of electronic mail to submit comments (approximately 90-
95% of the comments were submitted via e-mail, as opposed to 
approximately 5-10% via facsimile and fewer than 1% via hand delivery) 
and the fact that various groups, both opposed to and in favor of entry 
of the RPFJ, placed solicitations on their websites or sent mass 
electronic mailings urging submission of comments on the proposed 
settlement.\6\
---------------------------------------------------------------------------

    \6\ See, e.g., http://www.salon.com/tech/col/rose/2002/01/16/competitor/index/html>.
---------------------------------------------------------------------------

    6. Approximately 1,500 comments were unrelated to either the United 
States v. Microsoft case generally or the RPFJ specifically, or were 
merely duplicate copies of comments by the same individual or entity. A 
small number of these submissions are simply advertisements or, in at 
least one case, pornography. The United States has not filed these 
comments with the Court and does not intend to publish them. 
Approximately 1700 comments relate to other antitrust suits against 
Microsoft.\7\ Most of these comments address only the proposed 
settlement of the private, class action against Microsoft, and not the 
RPFJ; erring on the side of over-inclusiveness, the United States has 
filed these latter unrelated comments with the Court and will publish 
them.
---------------------------------------------------------------------------

    \7\ Porcher. The Response generally uses abbreviations to 
identify commentors. An index of comments cited, along with unique 
identifying numbers, is found in Appendix A to this Response.

---------------------------------------------------------------------------

[[Page 12133]]

    7. Approximately 22,750 comments express an overall view of the 
RPFJ. Of these, roughly 5,700 do not, for example, attempt to analyze 
the substance of the RPFJ, do not address any of its specific 
provisions, and do not describe any particular strengths or 
shortcomings of it.\8\ Approximately 16,700 comments can be 
characterized as containing some generally limited analysis of the 
RPFJ. These comments typically are one-to-two pages and contain limited 
discussion of issues related to the RPFJ. \9\ The remaining 350 
comments expressing an overall view can be characterized as containing 
a degree of detailed substance concerning the RPFJ. These comments 
range from one- or two-page discussions of some aspect of the RPFJ, to 
100-plus-page, detailed discussions of numerous of its provisions or 
alternatives. \10\ There is substantial overlap among these more 
substantial comments in terms of the issues and arguments that they 
address. Of these roughly 350 comments, the United States characterized 
47 as ``detailed'' comments based on their length and the detail with 
which they analyze significant issues relating to the RPFJ. \11\ There 
is also considerable duplication of the issues addressed and arguments 
raised among these ``detailed'' comments.
---------------------------------------------------------------------------

    \8\ Reid; Karkess.
    \9\ Becker; Gallagher.
    \10\ Daly; Love.
    \11\ The United States provided copies of these detailed 
comments to the Court on February 14, 2002, and posted copies of 
these comments on the Department of Justice website on February 15, 
2002. These comments may be found at http://www.usdoj.gov/atr/cases/msmajor.htm>
---------------------------------------------------------------------------

    8. Of the total comments received, roughly 10,000 are in favor of 
or urge entry of the RPFJ, roughly 12,500 are opposed, and roughly 
9,500 do not directly express a view in favor of or against entry. For 
example, a significant number of comments contain opinions concerning 
Microsoft generally (e.g., ``I hate Microsoft''), or concerning this 
antitrust case generally (e.g., ``This case should never have been 
brought''), but do not state whether they support or oppose entry of 
the RPFJ.
    9. In the remainder of this Response, the United States responds to 
the various types of comments according to the issues that the comments 
raise. For example, we respond to comments that raise issues relating 
to the disclosure provisions of the RPFJ (Sections III.D and III.E) in 
one section, and we respond to comments that suggest that the United 
States should have pursued a structural remedy against Microsoft in 
another section. Although the United States has reviewed and 
categorized every comment individually, it is not responding to 
comments on an individual comment-by-comment basis; rather, it 
summarizes the issues raised by specific comments and provides 
references for locating these issues in specific comments. On each 
issue, the Response refers to some of the comments that raised it; \12\ 
other comments may raise the same issue but are not identified in this 
Response.
---------------------------------------------------------------------------

    \12\ Thus, unless otherwise noted, citations to specific 
comments merely are representative of comments on that issue, and 
should not be interpreted as an indication that other comments were 
not reviewed.
---------------------------------------------------------------------------

I. General Comments

A. Should Never Have Brought Suit

    10. Many comments complain about the legitimacy of the charges 
brought against Microsoft. These comments typically characterize the 
prosecution of Microsoft as an unjustified assault upon a successful 
business, and often refer to the benefits Microsoft has generated for 
the economy and shareholders. These comments object to the RPFJ as 
unnecessary relief. \13\
---------------------------------------------------------------------------

    \13\ CMDC 1-11; Skinn 1; Wagstaff 1; Lloyd 1; Peterson 1; Bode 
1; Poindexter 1; Williams 1.
---------------------------------------------------------------------------

    11. Comments challenging the validity of the United States' case, 
or alleging that it should not have been brought, are challenges to the 
initial exercise of the United States' prosecutorial discretion and are 
outside the scope of this proceeding. The purpose of this proceeding is 
not to evaluate the merits of the United States' case. A Tunney Act 
proceeding is not an opportunity for a ``de novo determination of facts 
and issues,'' but rather ``to determine whether the Department of 
Justice's explanations were reasonable under the circumstances'' 
because ``[t]he balancing of competing social and political interests 
affected by a proposed antitrust decree must be left, in the first 
instance, to the discretion of the Attorney General.'' United States v. 
Western Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993) (citations 
omitted). Courts consistently have refused to consider ``contentions 
going to the merits of the underlying claims and defenses.'' United 
States v. Bechtel, 648 F.2d 660, 666 (9th Cir. 1981). Accordingly, 
those comments seeking to challenge the legitimacy of the United 
States' underlying case against Microsoft are beyond the purview of 
appropriate Tunney Act inquiry.
    12. Nevertheless, the United States notes in response to these 
comments that, prior to filing the Complaint, the United States 
conducted an extensive and thorough investigation into specific 
Microsoft practices that unlawfully restrained competition in the PC 
operating system market. This investigation led the United States to 
conclude that Microsoft undertook several illegal actions to protect 
its market position. Both the District Court's decision and the 
unanimous, en banc Court of Appeals' decision ``uphold[ing] the 
District Court's finding of monopoly power in its entirety,'' and 
affirming in part ``the District Court's judgment that Microsoft 
violated Sec. 2 of the Sherman Act by employing anticompetitive means 
to maintain a monopoly in the operating system market,'' United States 
v. Microsoft Corp., 253 F.3d 34, 51, 46 (D.C. Cir. 2001) (en banc) (per 
curiam) (``Microsoft''), support the United States' conclusion.

B. Allegations of Political Influence

    13. Certain commentors allege that the RPFJ resulted from improper 
influence exerted by Microsoft on the United States. They generally 
base their allegations on the fact and size of Microsoft's political 
contributions and assert that, because the RPFJ does not contain the 
relief that the commentors prefer, the RPFJ must be the result of 
malfeasance or corruption on the part of the United States. \14\
---------------------------------------------------------------------------

    \14\ Relpromax 3-4, 18, 20-22, Ex. 10; CCIA 18-34 & Decl. Edward 
Roeder; ProComp 78-86.
---------------------------------------------------------------------------

    14. The commentors' allegations, however, lack any factual support. 
Commentors contend that Microsoft extensively lobbied both the 
legislative and executive branches of the federal government to bring 
an end to the litigation. \15\ By citation to Microsoft's lobbying and 
political contributions, commentors apparently seek to raise an 
inference of impropriety on the part of representatives of the 
Antitrust Division of the Department of Justice. Commentors suggest 
that these representatives somehow were corrupted by Microsoft's 
general lobbying activities.
---------------------------------------------------------------------------

    \15\ Commentors also allege that Microsoft has failed adequately 
to disclose lobbying contacts as required by the Tunney Act, 15 
U.S.C. Sec. 16(g). Pursuant to the Court's Order dated February 13, 
2002, Microsoft will respond to allegations of deficiencies in its 
compliance with Sec. 16(g).
---------------------------------------------------------------------------

    15. Allegations that the substance of the RPFJ reflects any kind of 
political corruption are meritless. Just as a judge should not accept 
conclusory allegations of bias or prejudice based upon mere opinions or 
rumors as the basis for disqualification, \16\ so too must

[[Page 12134]]

allegations of corruption on the part of Department of Justice 
attorneys be supported by something more than supposition and innuendo. 
\17\ Actual evidence of corruption is required in order to support 
rejection of a consent decree. Mere speculation and conjecture are 
insufficient. Because there is simply no credible evidence of 
corruption in this case, there are no specific facts to which the 
United States can respond on this issue.
---------------------------------------------------------------------------

    \16\ See, e.g., United States v. Haldeman, 559 F.2d 31, 134 
(D.C. Cir. 1976); In re United States, 666 F.2d 690, 695 (1st Circ. 
1981) (a judge should ignore ``rumors, innuendos, and erroneous 
information published as fact in the newspapers''); McClelland v. 
Gronwaldt, 942 F. Supp. 297 (E.D. Tex. 1996).
    \17\ Lobbying activities by the defendant, even though 
``intensive and gross,'' are insufficient to establish corruption on 
the part of the United States. See, e.g., United States v. 
Associated Milk Producers, 394 F. Supp. 29, 39-40 (W.D. Mo. 1975), 
aff'd, 534 F.2d 113 (8th Cir. 1976).
---------------------------------------------------------------------------

    16. More generally, the comments on this issue ignore the 
indisputably neutral influences on the settlement process, such as (1) 
the decision of nine independent States to join the settlement, (2) the 
decision by the Court of Appeals in Microsoft, which significantly 
narrowed the scope of Microsoft's potential liability and cast 
substantial doubt on the legal viability of potential remedies, 
particularly divestiture, and (3) the interest in obtaining prompt 
implementation of remedies without the delay inherent in further 
litigation and appeals.

C. Removing the ``Fruits'' of Microsoft's Anticompetitive Conduct

    17. Certain public comments suggest that the RPFJ does not 
sufficiently remove the ``fruits'' of Microsoft's illegal conduct, \18\ 
and that the decree must go further than simply barring Microsoft from 
further bad behavior. \19\ Such criticism is not well-taken. As the 
United States previously stated in the CIS (at 24), the restoration of 
competition is the ``key to the whole question of an antitrust 
remedy,'' United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 
326 (1961). Competition was injured in this case principally because 
Microsoft's illegal conduct maintained the applications barrier to 
entry into the PC operating system market by thwarting the success of 
middleware that had the potential to erode that barrier. 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. In this context, the fruit of 
Microsoft's unlawful conduct was Microsoft's elimination of the ability 
of potentially threatening middleware to undermine the applications 
barrier to entry without interference from Microsoft. The RPFJ 
addresses and remedies precisely this issue.
---------------------------------------------------------------------------

    \18\ AOL 31; Henderson 10; Gifford 8; Litan 58-59; RealNetworks 
10; SIIA 7-8, 44-48.
    \19\ Nader/Love 6.
---------------------------------------------------------------------------

    18. Criticism of the RPFJ's alleged failure to remove the fruits of 
Microsoft's unlawful conduct falls into two general categories: (1) 
comments that define ``fruits'' consistently with the Court of Appeals' 
ruling, as described in the preceding paragraph, but claim that the 
RPFJ does not restore competitive conditions sufficiently that 
middleware has the potential to flourish without risk of interference 
from Microsoft; and (2) comments whose definition of ``fruits'' is 
inconsistent with either the claims alleged in this case, the Court of 
Appeals' decision, or both.
    19. The first group argues that the RPFJ permits Microsoft to 
retain the fruits of its illegal conduct by allowing it ``free rein to 
squash nascent, albeit unproven competitors at will,'' \20\ and does 
not sufficiently remove the applications barrier to entry.\21\ In the 
phrasing of one commentor, as a result of its anticompetitive conduct 
toward Netscape, Microsoft allegedly is left with the freedom from a 
competitive environment in which threats could be nurtured.\22\ As 
described in detail below (see Sections III-VII), however, the RPFJ 
protects the ability of middleware to compete by imposing a variety of 
affirmative duties and conditions on Microsoft. The RPFJ is devised to 
ensure that middleware developers have access to the necessary 
information--e.g., through disclosure of APIs and server communications 
protocols--to create middleware that can compete with Microsoft's 
products in a meaningful way.\23\ It also restricts Microsoft's conduct 
toward OEMs and others, and thus opens the door for competing 
middleware to obtain necessary support, promotion, and distribution.
---------------------------------------------------------------------------

    \20\ ProComp 29-30 (quoting Microsoft, 253 F.3d at 79). 
Similarly, CCIA complains that one of the chief advantages gained by 
Microsoft was the ability to control the browser, not just as a 
source of a alternate OS-neutral APIs, but specifically as the 
gateway to Internet computing. As such, this commentor defines the 
fruit as the ``suppressed development of competitive threats,'' but 
criticizes the decree as not addressing this concern.
    \21\ Kegel 3.
    \22\ Catavault 9.
    \23\ Certain comments assert that erosion of the applications 
barrier to entry would be accomplished better through mandatory 
support of cross-platform Java. Litigating States 17; SIIA 49; 
Nader/Love 6. For a discussion regarding the United States' decision 
to promote opportunities for all middleware, rather than a 
particular competitor, see the discussion of comments that propose a 
``Java Must Carry'' provision, at Paras. 428-29 below.
---------------------------------------------------------------------------

    20. The second group of commentors sets forth a variety of 
different views regarding what the ``fruit of the illegal conduct'' is 
in this case. Many of these comments rely on assertions that exceed the 
scope of either the liability findings in this case, or the theory of 
the case generally, or both. For example, some comments define the 
fruit as Microsoft's enduring monopoly in its Windows operating system 
and suggest that an appropriate remedy must directly attack the 
operating system monopoly.\24\ But the United States never alleged in 
this case that Microsoft illegally acquired its operating system 
monopoly. And neither the District Court nor the Court of Appeals 
adopted the view that Microsoft ``would have lost its position in the 
OS market but for its anticompetitive behavior.'' Microsoft, 253 F.3d 
at 107; see also United States v. Microsoft Corp., 84 F. Supp. 2d 9, 
111 at para. 411 (D.D.C. 1999) (``Findings of Fact'') (``There is 
insufficient evidence to find that, absent Microsoft's actions, 
Navigator and Java already would have ignited genuine competition in 
the market for Intel-compatible PC operating systems.''). In keeping 
with the original framework of the case and the Court of Appeals' 
decision, the United States believes that there is no basis for 
imposing a remedy that seeks to strip Microsoft of its position in the 
operating system market.
---------------------------------------------------------------------------

    \24\ Sun 6.
---------------------------------------------------------------------------

    21. Other commentors define the ``unlawful fruit'' as Microsoft's 
control of the browser market and contend that any remedy must prevent 
Microsoft from using similar conduct to gain control of services that 
rely on Internet Explorer.\25\ Other criticism is directed toward the 
decree's failure to ban contractual tying.\26\ A number of commentors, 
including the Litigating States, propose that Microsoft be required to 
offer open source licenses to Internet Explorer source code without 
royalty.\27\ These commentors claim that, because Microsoft's intent in 
offering Internet Explorer as a free product was central to its 
unlawful conduct, the open source remedy may be appropriate to restore 
competition and deprive Microsoft of the fruits of its unlawful 
conduct.\28\ Similarly, certain commentors propose that Microsoft be

[[Page 12135]]

required to port Internet Explorer to other operating systems.\29\
---------------------------------------------------------------------------

    \25\ SILA 7-8; CCIA 42; Litigating States' Proposal Sec. 17.
    \26\ AOL 31-32.
    \27\ CCC 19-20; Harris 15; Litigating States' Proposal 16-17 
(Sec. 12); PFF 30; SSI 19, 45.
    \28\ CCC 19-20.
    \29\ 19-20; Palm 13.
---------------------------------------------------------------------------

    22. Stripping Microsoft of its market position in the browser 
market or banning contractual tying, however, are remedies that are not 
warranted on the existing record. This case was not a monopoly 
leveraging case, and the Court of Appeals reversed the District Court's 
judgment as it related to attempted monopolization of the browser 
market, and vacated and remanded the District Court's judgment on the 
tying claim. Microsoft, 253 F.3d at 46. The remedy in this case must be 
evaluated in terms of the viable claims remaining after the Court of 
Appeals' decision; under that construct, remedial measures targeted at 
Internet Explorer are unsupportable.
    23. In particular, neither open sourcing the Internet Explorer 
source code nor requiring Microsoft to port Internet Explorer to other 
operating systems would be an appropriate remedy. As one commentor 
notes, that remedy would benefit Microsoft's competitors rather than 
ensuring a level playing field for all participants in the software 
industry.\30\ Most importantly for consumers, it would not 
significantly enhance those competitors' incentives or ability to 
develop new or better products. The disclosure provisions of the RPFJ 
instead provide middleware developers with access to sufficient 
information for interoperability that will allow them to create 
middleware--including browsers--that have the ability to compete with 
Microsoft's middleware in a meaningful way.\31\ The goal of the RPFJ is 
to restore the opportunity for middleware of all types. The United 
States believes that this approach is consistent with the Court of 
Appeals' opinion and will sufficiently deprive Microsoft of the fruits 
of its unlawful conduct.
---------------------------------------------------------------------------

    \30\ CompTIA 17 (mandatory sharing of source code).
    \31\ Carroll 4 (``It's the external behavior that's important 
for interoperability, not the internal design.'')
---------------------------------------------------------------------------

D. The Litigating States' Proposal

    24. A number of comments suggest that the United States should have 
proposed a remedy similar to the proposal submitted by the Litigating 
States in their remedy proceeding with Microsoft in New York.\32\ The 
United States' primary consideration when crafting the RPFJ was to 
focus on the practices engaged in by Microsoft that the Court of 
Appeals found unlawful. As explained in the CIS, elsewhere in this 
Response, and in the U.S. Memorandum, the United States believes that 
the RPFJ takes the correct approach toward addressing the 
anticompetitive conduct found by the Court of Appeals, preventing its 
recurrence, and restoring lost competitive conditions in the 
marketplace. \33\
---------------------------------------------------------------------------

    \32\ See Plaintiff Litigating States' Remedial Proposals 
(``Litigating States' Proposal''). The Litigating States' Proposal 
is Exhibit B to the Litigating States' comment. Comments that 
advocate the Litigating States' Proposal include SBC 131-132; AOL 
58-61; Litan 69-74; PFF 29-31; CFA 101; Davis; Pratt.
    \33\ We again note, as discussed in the U.S. Memorandum and 
elsewhere in this Response, that the Litigating States' Proposal and 
RPFJ are to be evaluated under different standards, and are properly 
addressed separately by the Court. We address the Litigating States' 
Proposal for the sole upurpose of responding to those commentors 
(including the Litigating States themselves) who contend that the 
United States should have adopted a remedy identical, or similar, to 
the proposal by the Litigating States.
---------------------------------------------------------------------------

    25. Where relevant, we have addressed the differences between the 
Litigating States' proposals and their counterparts in the RPFJ and 
have responded to the comments that address these differences. The 
Litigating States' Proposal also contains several provisions that are 
not directly comparable to any of the provisions in the RPFJ. For the 
reasons described below, the United States believes that such 
provisions are not appropriate as a remedy for the violations found by 
the Court of Appeals.

E. Fines

    26. Many comments criticize the RPFJ for not imposing monetary 
damages on Microsoft. According to these critics, the decree does not 
``include anything that would make Microsoft pay for its past 
misdeeds.'' \34\ Others similarly complain that the proposed decree 
does not contain any provision for the disgorgement of illegal 
profits.\35\ Still others complain that the decree should have required 
Microsoft to reimburse the United States for the attorneys' fees 
expended on this case.\36\
---------------------------------------------------------------------------

    \34\ Nader/Love 6; Holland 1; Brinkerhoff 1; McWilliams 1; Lewis 
1; Harris 2; Alexander 2.
    \35\ KDE 17; Maddux para. 2; Thomas 2-3.
    \36\ Philips; Wong.
---------------------------------------------------------------------------

    27. Monetary damages, including attorneys' fees, are not available 
to the United States in this case. This is a government civil action 
for injunctive relief, and monetary damages are not available in such 
actions. See 15 U.S.C. 4 (authorizing the United States ``to institute 
proceedings in equity to prevent and restrain such violations'') 
(emphasis added). Cf. 15 U.S.C. 15(a) (damages available to United 
States when it is ``injured in its business or property''). Moreover, 
the goals of the remedy in this case are to enjoin the unlawful 
conduct, prevent its recurrence, and restore competitive conditions in 
the market affected by Microsoft's unlawful conduct. 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). The RPFJ 
accomplishes these goals. By contrast, punishment is not a valid 
goal.\37\
---------------------------------------------------------------------------

    \37\ See United States v. E.I. du Pont de Nemours & Co., 366 
U.S. 316 326 (1961); United States v. Oregon State Med. Soc'y, 343 
U.S. 326, 333 (1952); United States v. Nat'l Lead Co., 332 U.S. 319, 
338 (1947).
---------------------------------------------------------------------------

F. Senate Hearing

    28. The Senate Judiciary Committee submitted a comment consisting 
of the record from its hearing on December 12, 2001, ``The Microsoft 
Settlement: A Look to the Future.'' The hearing record consists of the 
following items: (1) A list of witnesses at the hearing; (2) a 
transcript of the hearing; (3) written statements of Senators Leahy, 
Hatch, Kohl, Durbin and Sessions; (4) written statements of Charles A. 
James (Assistant Attorney General--Antitrust Division, U.S. Department 
of Justice), Jay L. Himes (New York Attorney General's Office), Charles 
F. Rule (counsel to Microsoft), Professor Lawrence Lessig (Stanford Law 
School), Dr. Mark N. Cooper (Consumer Federation of America), Jonathan 
Zuck (Association for Competitive Technology), Matthew Szulick (Red 
Hat, Inc.), and Mitchell E. Kertzman (Liberate Technologies); (5) 
written statements submitted for the record of Ralph Nader and James 
Love (Consumer Project on Technology), Mark Havlicek (Digital Data 
Resources, Inc.), Jerry Hilburn (Catfish Software, Inc.), Lars H. 
Liebeler (Computing Technology Industry Association), and Dave Baker 
(EarthLink, Inc.); (6) the RPFJ; (7) News Statement of Citizens Against 
Government Waste; (8) letter from Senator Hatch to Assistant Attorney 
General James; (9) letter from Assistant Attorney General James to 
Senator Hatch; (10) letter from Robert H. Bork to Senators Leahy and 
Hatch; (11) letter from James L. Barksdale to Senators Leahy and Hatch; 
(12) letter from Vermont Attorney General William H. Sorrell to Steven 
A. Ballmer; (13) written questions of Senators Leahy, Hatch, Kohl, 
DeWine, Durbin, and McConnell; and (14) answers to written questions 
from Assistant Attorney General James, Professor Lawrence Lessig, 
Mitchell Kertzman, Matthew Szulik, Charles F. Rule, Jonathan Zuck, and 
Jay L. Himes.

[[Page 12136]]

    29. The materials submitted by the Senate Judiciary Committee 
constitute a self-contained record of the Committee's comments on the 
settlement (in the form of both questions and written and oral 
statements) submitted to the Department of Justice, and the 
Department's responses to those comments. As such, the United States 
does not respond again here to those comments specifically. The United 
States notes, however, that many of the Committee's comments on the 
settlement are identical to or overlap with other comments (including 
an individual comment from Senator Kohl), to which the United States 
does respond.

II. Tunney Act Issues

A. Adequacy Of The United States' Competitive Impact Statement

    30. Several commentors claim that the CIS fails to comply with the 
Tunney Act.\38\ Thus, one commentor contends that the CIS is deficient 
for failing to include substantive economic analysis.\39\ Another 
contends that the CIS is too terse, and therefore does not meet the 
requirements of the statute, the standard set by the CIS filed by the 
United States in AT&T (47 FR 7170-01), or requirements of agency 
rulemakings.\40\ Other commentors assert that the CIS is inadequate for 
failing to provide a detailed explanation for rejection of alternative 
remedies.\41\ Still other commentors fault the CIS for allegedly 
misstating or adding terms to the RPFJ.\42\ One commentor specifically 
criticizes the CIS' lack of explanation of (1) the use of a definition 
of ``Middleware'' in the RPFJ that differs from that used by the Court 
of Appeals; (2) the lack of a Java-related remedy; (3) the failure of 
the RPFJ to prohibit all forms of retaliation; and (4) the failure of 
the RPFJ to address all of the harms identified by the Court of 
Appeals.\43\ Another comment also contends that the United States has 
failed to produce ``determinative documents,'' as required by 15 U.S.C. 
16(b).\44\
---------------------------------------------------------------------------

    \38\ These comments include ProComp 80-82; CCIA 33-34; AOL 53-
56; PFF 10-17; AAI 12; Relpromax 8-9, Ex. 11. Similar issues also 
were raised in the complaint filed in American Antitrust Institute 
v. Microsoft, Civ. No. 02-CV-138 (D.D.C.) (CKK), and Motion 
Intervention filed by Relpromax Antitrust, Inc.
    \39\ Relpromax 8-9.
    \40\ PFF 10-17.
    \41\ AAI 12; PFF 15.
    \42\ ProComp 82; CCIA 33-34.
    \43\ AOL 53-56.
    \44\ Further explanation of the United States' compliance with 
its obligations under the Tunney Act is contained in the U.S. 
Memorandum, Part II.
---------------------------------------------------------------------------

    31. As this recitation shows, while the commentors couch their 
objections in terms of an alleged failure by the United States to 
comply with the Tunney Act, for the most part the objections are in 
substance comments on the RPFJ itself. Because the CIS fully complies 
with the Tunney Act requirements, none of the objections is well taken.
1. The CIS Complies With the Requirements of the Tunney Act
    32. Congress enacted the Tunney Act, among other reasons, ``to 
encourage additional comment and response by providing more adequate 
notice [concerning a proposed consent judgment] to the public,'' S. 
Rep. No. 93-298, at 5 (1973) (``Senate Report''); H.R. Rep. No. 93-
1463, at 7 (1974) (``House Report''), reprinted in 1974 U.S.C.C.A.N. 
6535, 6538. The CIS is the primary means by which Congress sought to 
provide more adequate notice to the public. The Tunney Act requires 
that the CIS ``recite':
    (1) The nature and purpose of the proceeding;
    (2) A description of the practices or events giving rise to the 
alleged violation of the antitrust laws;
    (3) An explanation of the proposal for a consent judgment, 
including an explanation of any unusual circumstances giving rise to 
such proposal or any provision contained therein, relief to be obtained 
thereby, and the anticipated effects on competition of such relief;
    (4) The remedies available to potential private plaintiffs damaged 
by the alleged violation in the event that such proposal for the 
consent judgment is entered in such proceeding;
    (5) A description of the procedures available for modification of 
such proposal; and
    (6) A description and evaluation of alternatives to such proposal 
actually considered by the United States.

15 U.S.C. 16(b).

    33. When Senator Tunney introduced the bill that became the Act, he 
explained that a purpose of the six items of information required in a 
CIS was to ``explain to the public[,] particularly those members of the 
public with a direct interest in the proceeding, the basic data about 
the decree to enable such persons to understand what is happening and 
make informed comments o[r] objections to the proposed decree during 
the 60-day period.'' 119 Cong. Rec. 3452 (1973) (Remarks of Sen. 
Tunney) (``Tunney Remarks'').\45\ The purpose could be achieved, 
Senator Tunney suggested, without adding greatly to the United States' 
workload: the six prescribed items ``do not require considerably more 
information than the complaint, answer and consent decree themselves 
would provide and, therefore, would not be burdensome requirements.'' 
The Antitrust Procedures and Penalties Act: Hearings on S. 782 and S. 
1088 Before the Subcomm. on Antitrust and Monopoly of the Senate Comm. 
on the Judiciary, 93d Cong. 3 (1973) (``Senate Hearings'') (statement 
of Sen. Tunney) (``Tunney Statement''). In light of the more than 
30,000 public comments concerning the RPFJ submitted to the United 
States, there can be little debate that the CIS contained sufficient 
information for the public to make ``informed comments o[r] 
objections'' relating to the RPFJ.
---------------------------------------------------------------------------

    \45\ The other purpose, Senator Tunney explained, was to focus 
the attention of the parties during settlement negotiations. Tunney 
Remarks, 119 Cong. Rec. at 3452.
---------------------------------------------------------------------------

    34. There is no serious dispute that the CIS satisfies the 
requirements of the Tunney Act with respect to items 1, 2, 4, and 5 
listed above. Also as discussed above, most of the comments purporting 
to address item 3 (explanation of the proposed judgment) in fact are 
complaints about the substance of the RPFJ and not the sufficiency of 
the CIS. These comments are addressed in this Response according to the 
provision of the RPFJ to which they apply. To the extent that any 
comments intend to suggest that the explanation in the CIS itself is 
deficient, the United States believes that the CIS is more than 
adequate to its intended purpose of describing the proposed decree's 
provisions and eliciting public comments.
2. The CIS Recites ``A Description And Evaluation Of Alternatives To 
Such Proposal Actually Considered By The United States''
    35. Section V of the CIS (CIS at 60-63) describes alternatives the 
United States considered and rejected,\46\ and describes the reasons 
why they were rejected. It explains why the United States viewed the 
RPFJ as a superior alternative to continued litigation; why the United 
States decided not to continue to seek a break-up of Microsoft; and the 
reasons for differences between the interim conduct provisions of the 
Initial Final Judgment (IFJ), United States v. Microsoft Corp., 97 F. 
Supp. 2d 59, 66-69 (D.D.C. 2000),

[[Page 12137]]

vacated, 253 F.3d 34, 46 (D.C. Cir. 2001) (en banc) (per curiam), and 
the provisions of the RPFJ. It also lists a number of other remedy 
proposals, the criteria used to evaluate them, and the results of that 
evaluation. The recitations contained in the CIS are fully consistent 
with providing ``basic data about the decree to enable [members of the 
public with a direct interest] to understand what is happening and make 
informed comments o[r] objections to the proposed decree,'' 119 Cong. 
Rec. 3452 (1973) (Tunney Remarks), and with Senator Tunney's view that 
the statutory requirements should not be burdensome. See Tunney 
Statement. The number and nature of the comments themselves suggest 
that the level of analysis in the CIS was more than adequate to 
stimulate informed public comment about the proposed remedy and about 
the relative merits of alternative remedies. As the United States 
described recently in its response to AAI's lawsuit,\47\ the recital 
complied with the statutory requirement and fulfilled its purpose.
---------------------------------------------------------------------------

    \46\ As the CIS makes clear (CIS at 63), it does not describe 
literally every remedial proposal considered and rejected. The 
statute should not be interpreted to require that the CIS do so, for 
such a requirement would be unduly burdensome and serve no useful 
purpose. As Senator Tunney said, the CIS ought to provide ``some of 
the alternatives that were considered by the Department.'' Senate 
Hearings at 108 (remark of Sen. Tunney) (emphasis added).
    \47\ United States' Motion to Dismiss, AAI v. Microsoft Corp., 
No. 02-CV-138 (D.D.C.) (CKK), at 16-23 (Feb. 8, 2002) (``Br. Dismiss 
AAI''); see also U.S. Memorandum at 20-28.
---------------------------------------------------------------------------

B. The United States Fully Complied With All Tunney Act Requirements 
Regarding Determinative Documents

    36. The Tunney Act requires the United States to make available to 
the public copies of ``any other materials and documents which the 
United States considered determinative in formulating [the proposed 
final judgment].'' 16(b). The CIS explained that the United States is 
not filing any determinative documents in this case because there are 
none within the meaning of the statute. One comment says that this 
disclosure is deficient,\48\ but it is mistaken.
---------------------------------------------------------------------------

    \48\ ProComp 81-82.
---------------------------------------------------------------------------

    37. The United States did not file any determinative documents with 
the Court or disclose any in the CIS for the simple reason that there 
are no such documents in this case. The Court of Appeals has addressed 
the definition of ``determinative documents'' in a Tunney Act case. 
Mass. Sch. of Law at Andover, Inc. v. United States, 118 F.3d 776 (D.C. 
Cir. 1997) (``MSL''). In MSL, the court held that a third party was not 
entitled a wide range of documents from the government's files.\49\ The 
United States there said the statute referred to documents ``that 
individually had a significant impact on the government's formulation 
of relief--i.e., on its decision to propose or accept a particular 
settlement.'' Id. at 784 (quoting brief of the United States). The 
court concluded that the statutory language ``seems to point toward the 
government's view . . . and confines Sec. 16(b) at the most to 
documents that are either `smoking guns' or the exculpatory opposite.'' 
Id. The court added that ``[t]he legislative history in fact supports 
the government's still narrower reading.'' Id.; see also United States 
v. Bleznak, 153 F.3d 16, 20-21 (2d Cir. 1998) (only documents that were 
a ``substantial inducement to the government to enter into the consent 
decree'' need be disclosed). No court of appeals has said 
otherwise.\50\
---------------------------------------------------------------------------

    \49\ See also Br. Dismiss AAI 19-21.
    \50\ ProComp cites United States v. Central Contracting Co., 527 
F. Supp. 1101, 1104 (E.D. Va. 1981), in which the court called 
``almost incredible'' the United States' representation that no 
determinative documents existed. After further review, and 
acknowledging that in most cases a ``smoking gun'' document will not 
exist, the court adopted a broader standard under which, even if 
documents are individually not determinative, they can be 
determinative in the aggregate. See United States v. Central 
Contracting Co., 537 F. Supp. 571, 575 (E.D. Va 1982). The United 
States does not believe that there are determinative documents in 
this case even under the standard of Central Contracting. But in any 
event, Central Contracting's broad definition of determinative 
documents has not been followed by any Tunney Act court, has been 
squarely repudiated by one district court, United States v. Alex. 
Brown & Sons, Inc., 169 F.R.D. 532, 541 (S.D.N.Y. 1996) (``Central 
Contracting's broad definition of `determinative doucments' may 
conflict with Congress's intent to maintain the viability of consent 
decrees'') (cited with approval in MSL, 118 F.3d at 785), aff'd sub 
nom. United States v. Bleznak, 153 F.3d 16 (2d Cir. 1998), and 
cannot be reconciled with decisions of the Court of Appeals for the 
District of Columbia Circuit and the Second Circuit. See MSL, 118 
F.3d at 784; Bleznak, 153 F.3d at 20 (citing MSL and quoting `` 
`smoking gun' or exculpatory opposite'' with approval). Central 
Contracting is simply not good law in this regard.
---------------------------------------------------------------------------

    38. Thus, the commentor who asserts that the United States must 
have failed to comply with the statute because it ``cannot be 
accurate'' that no determinative documents exist,\51\ misapprehends the 
meaning of ``determinative documents.'' The United States simply did 
not consider any document in this case to be a ``smoking gun or its 
exculpatory opposite'' with a significant impact on the formulation of 
its decision regarding the RPFJ.
---------------------------------------------------------------------------

    \51\ ProComp 81.
---------------------------------------------------------------------------

C. Timing and Process of Hearing

    39. Several comments say that an evidentiary hearing with third 
party participation is necessary and that the hearing should be held in 
conjunction with--or even after--the remedy hearing in New York. We 
disagree.
1. The Court Has Discretion To Determine the Nature and Format of the 
Tunney Act Proceedings
    40. A court in a Tunney Act proceeding is vested with great 
discretion concerning the nature of any proceedings to review a 
proposed consent decree. Congress clearly intended that ``the trial 
judge will adduce the necessary information through the least time-
consuming means possible,'' see S. Rep. No. 298, 93d Cong. 6 (1973) 
(``Senate Antitrust Report''); H.R. Rep No. 93-1463, 93d Cong. Sess. 8 
(1974), reprinted in 1974 U.S.C.C.A.N. 6535, 6539 (``House Antitrust 
Report''), even though the court may take other steps as it may deem 
appropriate. 15 U.S.C. 16(f). The procedural devices enumerated in 
Section 16(f) are discretionary--the legislative history characterizes 
them as ``tools available to the district court or [sic] its use, but 
use of a particular procedure is not required.'' 119 Cong. Rec. 3453 
(Feb. 6, 1973) (Remarks of Sen. Tunney). Such procedures were made 
discretionary ``to avoid needlessly complicating the consent decree 
process.'' Id.
    41. The legislative history further indicates that Congress did not 
intend the Tunney Act to produce lengthy hearings on the merits and 
thereby undermine the incentives for the United States and defendants 
to reach settlements in civil antitrust cases. See Senate Antitrust 
Report at 3. Rather, Congress meant to retain the consent decree as a 
viable settlement option, calling it ``a substantial antitrust 
enforcement tool.'' See Senate Antitrust Report at 6-7; House Antitrust 
Report at 8; United States v. Microsoft Corp., 56 F.3d 1448, 1456 (D.C. 
Cir. 1995) (``Microsoft I'').
2. An Evidentiary Hearing Is Not Required in This Case
    42. Several commentors argue that the Court should conduct an 
evidentiary hearing given the complexity and importance of this 
case.\52\ But the Tunney Act does not mandate a hearing or trial. See 
United States v. Airline Tariff Publ'g Co., 836 F. Supp. 9, 11 n.2 
(D.D.C. 1993); United States v. NBC, 449 F. Supp. 1127 (C.D. Cal. 
1978). Indeed, such a hearing could largely defeat the principal 
considerations behind the RPFJ: to avoid the uncertainty of a trial and 
to obtain ``prompt relief in a case in which illegal conduct has long 
gone unremedied.'' CIS at 60. The legislative history ``clearly and 
expressly establishes that `[i]t [was] not the intent of the committee 
to compel a hearing or trial on the public interest issue.' '' NBC, 449 
F. Supp. at 1143-44 (quoting Senate Antitrust Report, quoted with 
approval in House Antitrust Report at 8-9).

[[Page 12138]]

Instead, the ``Tunney Act expressly allows the court to make its public 
interest determination on the basis of the competitive impact statement 
and response to comments alone.'' United States v. Enova Corp., 107 F. 
Supp. 2d 10, 17 (D.D.C. 2000).
---------------------------------------------------------------------------

    \52\ AAI 12; AOL 55-58; Novell 34-35; ProComp 84.
---------------------------------------------------------------------------

    43. The court may, in its discretion, invoke additional procedures 
when it determines that such proceedings may assist in the resolution 
of issues raised by the comments. See id. But the legislative history 
indicates that ``[w]here the public interest can be meaningfully 
evaluated simply on the basis of briefs and oral argument, this is the 
approach that should be utilized.'' House Antitrust Report at 8. ``Only 
where it is imperative that the court should resort to calling 
witnesses for the purpose of eliciting additional facts should it do 
so.'' Id. Even in AT&T, which at the time was considered ``the largest 
and most complex antitrust action brought since the enactment of the 
Tunney Act,'' the court concluded that ``none of the issues before it 
require[d] an evidentiary hearing,'' and instead invited briefing from 
interested individuals and allowed participation through oral argument 
at the two-day hearing on the proposed modifications to the final 
judgment that were at issue. AT&T, 552 F. Supp. at 145, 219.
    44. It is not imperative to hold an evidentiary hearing in this 
case because the Court has sufficient information to determine whether 
to approve a consent decree. United States v. Associated Milk 
Producers, 394 F. Supp. 29, 45 (W.D. Mo.), aff'd, 534 F.2d 113 (8th 
Cir. 1976); United States v. G. Heileman Brewing Co., 563 F. Supp. 642, 
650 (D. Del. 1983). In this case, the Court already has the benefit of 
a broad array of materials to assist in making the public interest 
determination. Over 30,000 public comments were submitted, including 
detailed comments from, among others, some of Microsoft's primary 
competitors and most vociferous critics (such as Sun Microsystems, AOL/
Time Warner, and RealNetworks) as well as computer and software 
industry trade groups representing the interests of such firms (such as 
ProComp, CCIA, and SIIA). The Court also has this Response, as well as 
additional briefing submitted by the United States, Microsoft, and the 
Settling States. The Court has scheduled a two-day hearing on the RPFJ, 
during which the Court has indicated it will hear oral argument from 
the United States, Microsoft, and the Settling States, as well as pose 
questions to the parties. The Court has further indicated that it may 
hear brief oral argument from third parties during the hearing, 
although the precise nature of third-party participation, if any, is 
still under consideration. The Court will have access to a sufficient 
body of materials to determine whether the RPFJ is in the public 
interest without resorting to an evidentiary hearing that would both 
delay and unnecessarily complicate the evaluation of the RPFJ.
3. The Court Is Not Required To Permit any Third-Party Participation
    45. Whether and to what extent to allow third parties to 
participate is left to the Court's discretion; the Tunney Act permits, 
but does not require, the Court to authorize third-party participation. 
15 U.S.C. 16(f)(3). Courts usually deny third-party participation in 
Tunney Act proceedings both because the potential for delay outweighs 
the benefit from intervention (see, e.g., United States v. IBM Corp., 
1995 WL 366383 (S.D.N.Y. June 19, 1995)) and because interested third 
parties are heard through the comments process. United States v. G. 
Heileman Brewing Co., 563 F. Supp. 642, 652 (D. Del. 1983); United 
States v. Carrols Devel. Corp., 454 F. Supp. 1215, 1221-22 (N.D.N.Y. 
1978). That is particularly true in this case, where a large number of 
highly interested and motivated third parties have taken full advantage 
of the opportunity to submit extensive comments that set forth their 
views of the RPFJ and whether the Court should enter it. As a result, 
although the Court ultimately may choose to hear from third 
parties,\53\ they have already had a full and effective mechanism to 
present to the Court any arguments or concerns they believe it should 
address in its public interest determination.
---------------------------------------------------------------------------

    \53\ CCC 2; ProComp 84-86.
---------------------------------------------------------------------------

4. Allowing Third-Party Participation Through an Evidentiary Hearing 
Would Unnecessarily Delay and Complicate These Proceedings
    46. Insofar as commentors claim that third parties should be 
allowed to participate in an evidentiary hearing, doing so would serve 
only to complicate and delay these proceedings. Allowing third-party 
participation in an evidentiary hearing would delay the much-needed 
relief the United States seeks in the public interest. As the court in 
IBM wisely observed, `` `[a]dditional parties always take additional 
time. Even if they have no witnesses of their own, they are a source of 
additional questions, objections, briefs, arguments, motions and the 
like which tend to make the proceedings a Donnybrook Fair.' '' IBM, 
1995 WL 366383, at *5 (quoting Crosby Steam Gage & Valve Co. v. 
Manning, Maxwell & Moore, Inc., 51 F. Supp. 972, 973 (D. Mass. 1943)).
    47. Much of the ``evidence'' that such commentors seek to present 
during an evidentiary hearing consists of materials that have been, or 
could have been, included in their public comment submissions \54\ or 
that could be addressed through briefing and oral argument, should the 
Court choose to allow such third-party participation. Resubmitting such 
materials through the form of testimony would result only in delay and 
a waste of judicial resources. The commentors--who already have been 
given an opportunity fully to be heard--have not demonstrated that an 
evidentiary hearing would in any way advance the public interest or 
permit them to improve materially on the points made in the extensive 
comments already submitted.
---------------------------------------------------------------------------

    \54\ AOL 53; Litan 59-60; ProComp 84-86.
---------------------------------------------------------------------------

5. The Tunney Act Proceedings Should Not Be Held in Conjunction With, 
or Rely Upon Evidence From, the Litigating States' Remedy Hearing
    48. Finally, a number of comments propose that the Court consider 
the RPFJ either in conjunction with, or after, consideration of the 
Litigating States' proposed remedy in New York. Some argue that the 
Court should not make its determination regarding the RPFJ until after 
the Litigating States have presented their case, claiming that such an 
approach is necessary to avoid prejudicing the Litigating States' 
case.\55\ Others assert that the Court should hold a hearing on the 
RPFJ, if at all, only after the Litigating States' hearing.\56\ 
Finally, at least one commentor proposes that the Court hold a single 
hearing to evaluate all possible remedial options, including the 
Litigating States' proposal, the RPFJ, and major structural 
remedies.\57\
---------------------------------------------------------------------------

    \55\ AAI 11: SIIA 8-9.
    \56\ AOL 58-61; Litan 59-60; Novell 3, 34-35.
    \57\ PFF 4.
---------------------------------------------------------------------------

    49. These proposals are ill-advised and unworkable for a number of 
reasons. First, the RPFJ and the Litigating States' proposed remedy are 
to be evaluated separately and under different standards. See U.S. 
Memorandum at 35-46. Second, it would be inappropriate to introduce 
evidence relating to New York in this Tunney Act proceeding. The United 
States is not a party to New York, has not participated in the 
discovery or other aspects of that case, has played no role in the 
development of the evidence related to that case, and will not 
participate in that hearing. Consideration of evidence from that

[[Page 12139]]

case in this proceeding, therefore, would be inappropriate. Cf. Fed. R. 
Evid. 804(b)(1) (testimony given in another hearing in a different 
proceeding can be admitted against a party only ``if the party against 
whom the testimony is now offered or . . . a predecessor in interest, 
had an opportunity and similar motive to develop the testimony by 
direct, cross, or redirect examination'').
    50. Finally, proposals to have the two cases considered 
concurrently, or to postpone consideration of the RPFJ until after the 
remedial hearing in New York, unnecessarily would delay the Court's 
public interest determination regarding the RPFJ. See U.S. Memorandum 
at 74-78. The Litigating States' hearing is scheduled to begin on March 
11, 2002. The parties there have proposed between 170 and 300 hours of 
total testimony in that case. See Joint Status Report 2, No. 98-CV-1233 
(Feb. 13, 2002). Although the Court has indicated that the proposed 
length is far longer than it expected or believes is reasonably 
necessary, the Court has not yet determined the precise format or 
length of that hearing. See Tr. 2/15/02 at 26-27, No. 98-CV-1233. In 
all likelihood, the hearing could last several weeks.
    51. All of these proposals stand to delay consideration, and entry 
of, the RPFJ by the Court. Delay of this nature, which will not result 
in the Court hearing more or better information about the settlement, 
is not only unnecessary but also subverts one of the primary goals of 
both the RPFJ and the Tunney Act--prompt relief.\58\ The Court 
therefore should not postpone entry of the RPFJ.
---------------------------------------------------------------------------

    \58\ Although Microsoft has agreed to be bound by much of thye 
RPFJ pending its entry (Stipulation para. 2 (Nov. 6, 2001)), some 
important provisions become effective only after entry. See, e.g., 
RPFJ Sec. IV.B (Technical Committee must be created ``[w]ithin 30 
days of entry of this Final Judgment''); id. Sec. IV.C (Microsoft's 
internal compliance program beings ``within 30 days of entry'').
---------------------------------------------------------------------------

D. Standard of Review Under The Tunney Act \59\
---------------------------------------------------------------------------

    \59\ The standard to be applied in this proceeding is discussed 
in U.S. Memorandum, Part II.
---------------------------------------------------------------------------

    52. Numerous comments address the standard of review applicable 
under the Tunney Act to the RPFJ.\60\ These comments range from brief 
references to the language of the Tunney Act \61\ to lengthy discourses 
on the correct standard citing legislative history, case law, and 
treatises.\62\
---------------------------------------------------------------------------

    \60\ RealNetworks 5-10; Red Hat 9-10; SBC 21-32; Litan 4-11, 31-
42; Sen. Kohl 2; Kegel 3; KDE 1-2; Elhauge 5-6, 10, 13; Economides 
4; CFA 2; CompTIA 4-5; CCIA 9-11, 18-41; AAI 2-13; ACT 2-18; SIIA 9-
11; WLF 3-4; PFF 1-9; ProComp 1-25; Novell 30-37; AOL 1-9.
    \61\ WLF 3; CFA 2; Kegel 3; Sen. Kohl 2; KDE 1-2; CompTIA 4-5.
    \62\ ProComp 1-25; ACT 2-18; AAI 2-13; CCIA 9-11; Litan 4-11; 
SBC 21-32.
---------------------------------------------------------------------------

    53. These comments have at least three overriding themes. First, 
most agree, citing Microsoft, that the correct standard for relief is 
to unfetter a market from anticompetitive conduct, terminate the 
illegal monopoly, deny to the defendant the fruits of its illegal 
conduct, and ensure that no practices remain likely to result in 
monopolization in the future.\63\ Second, most argue that, because of 
the procedural posture of the case, the judgment of the United States 
in agreeing to the RPFJ as an appropriate resolution of the charges it 
brought and the case it proved is due little or no deference.\64\ And 
finally, many argue, again because of the procedural posture of the 
case, that the District Court is required to apply a more stringent 
review, and even entitled to fashion its own relief based upon an 
independent review of the record.\65\ Although the commentors correctly 
identify the relevant standard of relief set forth by the Court of 
Appeals, they are incorrect in concluding that the procedural posture 
of the case eliminates any need for deference to the judgment of the 
United States or justifies a court-created remedy. In essence, these 
commentors argue that the Court of Appeals' mandate precluded the 
possibility of a negotiated settlement. It did not. The Court of 
Appeals recognized that even a litigated remedy should be ``tailored to 
fit the . . . drastically altered scope of Microsoft's liability . . . 
.'' Microsoft, 253 F.3d at 107. As explained in the U.S. Memorandum, 
and below in Sections IV through XII, the RPFJ fits that altered scope 
of liability.
---------------------------------------------------------------------------

    \63\ CCIA 9, 34-38; Red Hat 9; ProComp 2, 16-20; Litan 34; AOL 
2-8; Kegel 3; SIIA 9-10.
    \64\ ProComp 2, 12, 20-23 (no deference); AAI 5-9; CCIA 9-10, 
19-33: SBC 30.
    \65\ Novell 30-37; RealNetworks 5-10; ProComp 15-23; AOL 4-9; 
Litan 33-36; SBC 29-32; AAI 4-13; CCIA 19-39.
---------------------------------------------------------------------------

1. The Tunney Act Requires That Entry of the RPFJ Be ``In the Public 
Interest''
    54. As noted by the United States in its CIS and by virtually all 
commentors remarking on the issue, the Tunney Act requires that the 
Court determine whether entry of the RPFJ is ``in the public 
interest.'' 15 U.S.C. 16(e). In making that determination, the Court 
may consider:

    (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.

Id. (emphasis added). As is apparent from the permissive language of 
the statute, these factors for consideration are discretionary.\66\
---------------------------------------------------------------------------

    \66\ S.Rep. No. 93-298, at 6(1973).
---------------------------------------------------------------------------

    55. In determining whether the RPFJ is in the public interest, the 
Court may properly consider whether ``the remedies [are] so inconsonant 
with the allegations charged as to fall outside of the `reaches of the 
public interest.' '' United States v. Microsoft Corp., 56 F.3d 1448, 
1461 (D.C. Cir. 1995) (``Microsoft I'') (internal citations omitted). 
In Microsoft I, and again in Massachusetts School of Law at Andover, 
Inc. v. United States, 118 F.3d 776 (D.C. Cir. 1997) (``MSL''), the 
D.C. Circuit explained that this inquiry entails consideration of four 
specific factors:

    The district court must examine the decree in light of the 
violations charged in the complaint and should withhold approval 
only [1] if any of the terms appear ambiguous, [2] if the 
enforcement mechanism is inadequate, [3] if third parties will be 
positively injured, or [4] if the decree otherwise makes ``a mockery 
of judicial power.'' See [Microsoft I, 56 F.3d] at 1462.

MSL, 118 F.3d at 783.\67\
---------------------------------------------------------------------------

    \67\ For further discussion of these factors, see U.S. 
Memorandum at 36-42.
---------------------------------------------------------------------------

    56. The requirements of an antitrust remedy are familiar. As the 
Court of Appeals noted in remanding this case:

    A remedies decree in an antitrust case must seek to ``unfetter a 
market from anticompetitive conduct,'' Ford Motor Co.[ v. United 
States], 405 U.S. [562, ] 577 [(1972)], to ``terminate the illegal 
monopoly, deny to the defendant the fruits of its statutory 
violation, and ensure that there remain no practices likely to 
result in monopolization in the future,'' United States v. United 
Shoe Mach. Corp., 391 U.S. 244, 250 . . . (1968); see also United 
States v. Grinnell Corp., 384 U.S. 563, 577 . . . (1966).

253 F.3d at 103.

    57. The Court of Appeals also emphasized, however, that the `` 
`[m]ere existence of an exclusionary act does not itself justify full 
feasible relief against the monopolist to create maximum competition.' 
'' Id. at 103 (quoting 3 Antitrust Law para. 650a, at 67). The scope of 
the remedy must be clearly related to the anticompetitive effects of 
the illegal conduct. Microsoft I, 56 F.3d at 1460 (quoting 
International Salt Co.

[[Page 12140]]

v. United States, 332 U.S. 392, 401 (1947)). Although an antitrust 
conduct remedy is not limited to enjoining precisely the conduct found 
to be unlawful, e.g., United States v. Hartford-Empire Co. v. United 
States, 323 U.S. 386, 409 (1945); AT&T, 522 F. Supp. at 150 n.80, 
nevertheless ``the remedies must be of the ``same type or class'' as 
the violations, and the court is not at liberty to enjoin ``all future 
violations of the antitrust laws, however unrelated to the violations 
found by the court.' '' Microsoft I, 56 F.3d at 1460.\68\
---------------------------------------------------------------------------

    \68\ Nor may relief in a civil antitrust case be punitive. See 
page 15 & n.37 above.
---------------------------------------------------------------------------

2. The Court Should Grant Deference to the Judgment of the United 
States
    58. Commentors assert that the current procedural posture of the 
case, after trial and affirmance on appeal, eliminates any need for 
deference to the judgment of the United States. Commentors urge the 
Court to undertake an independent review of the record, and even 
substitute a litigated remedy for that of the RPFJ. Such a result is 
inconsistent with the purposes and intent of the Tunney Act.
    59. As explained in the U.S. Memorandum, the Court's assessment of 
the adequacy of the RPFJ must take into account the risks and 
uncertainties of further litigation that would be required before there 
could be an adjudicated final judgment, safe from further challenge on 
appeal, that would remedy the anticompetitive harm attributable to 
conduct found to violate the Sherman Act. See U.S. Memorandum at 45-46. 
The Court of Appeals explained in Microsoft I that it is 
``inappropriate for the judge to measure the remedies in the decree as 
if they were fashioned after trial. Remedies which appear less than 
vigorous may well reflect an underlying weakness in the government's 
case, and for the district court to assume that the allegations in the 
complaint have been formally made out is quite unwarranted.'' Id. at 
1461.\69\
---------------------------------------------------------------------------

    \69\ Congress intended that the statutory ``public interest'' 
concept encompass ``compromises made for non-substantive reasons 
inherent in the process of settling cases through the consent decree 
procedure.'' House Report at 12.
---------------------------------------------------------------------------

    60. This case does differ from Microsoft I in that there have been 
both findings of fact and conclusions of liability affirmed on appeal. 
But the difference is one of degree, not kind. Although the Court of 
Appeals in this case affirmed the District Court's judgment of 
liability for monopoly maintenance, it emphasized that neither it, nor 
the District Court, had so far found ``a causal connection between 
Microsoft's exclusionary conduct and its continuing position in the 
operating systems market,'' 253 F.3d at 106-07, sufficient to justify 
structural relief (although it did not rule out the possibility that 
the District Court would find such a connection on remand).\70\ 
Moreover, the Court of Appeals vacated the District Court's judgment of 
liability with respect to tying, id. at 84 (leaving open the 
possibility of further litigation on remand), and reversed as to 
attempted monopolization, id. at 80-84; it also limited the scope of 
the conduct found to constitute illegal monopolization, reversing on 8 
of the 20 acts found by the District Court. The remedy ultimately 
imposed on remand, the Court of Appeals directed, ``should be tailored 
to fit the wrong creating the occasion for the remedy.'' Id. at 107.
---------------------------------------------------------------------------

    \70\ Among the goals of an antitrust decree are ``terminat[ing] 
the illegal monopoly'' and ``deny[ing] to the defendant the fruits 
of its statutory violation.'' Microsoft, 253 F.3d at 103 (internal 
quotation omitted). But plaintiffs never alleged, and neither the 
District Court nor the Court of Appeals found, that Microsoft 
acquired its monopoly unlawfully. See id. at 58 (Microsoft 
``violated Sec. 2 by engaging in a variety of exclusionary acts . . 
. to maintain its monopoly''); see also Microsoft I, 56 F.3d at 
1452. Thus, whether, and to what extent, Microsoft now has an 
``illegal monopoly'' depends on whether its unlawful conduct 
increased or extended Microsoft's monopoly--that is, whether the 
fruits of its statutory violations included increments to the 
magnitude or duration of its market power. Again, neither the 
District Court nor the Court of Appeals found this direct causal 
connection between the conduct and the continuance of the monopoly.
---------------------------------------------------------------------------

    61. In the absence of a settlement, therefore, the United States 
would face the prospect of extended litigation with respect to the 
numerous issues related to relief in this case. An appeal likely would 
follow the conclusion of the proceedings in the District Court. 
Microsoft also might choose to seek Supreme Court review of the Court 
of Appeals' decision affirming its liability for monopolization. See 
Petition for a Writ of Certiorari, No. 01-236 (listing issues for 
future petition). Despite the Findings of Fact and Conclusions of Law, 
and despite the Court of Appeals' affirmance of a number of the 
holdings, including liability for monopolization, the ultimate outcome 
of continued litigation is uncertain, and the path of litigation would 
be both risky and costly in terms of resources that might otherwise be 
devoted to other antitrust enforcement concerns.\71\
---------------------------------------------------------------------------

    \71\ See Note, The Scope of Judicial Review of Consent Decrees 
under the Antitrust Procedures and Penalties Act of 1974, 82 Mich. 
L. Rev. 153, 175 n.143 (1974) (``The legislative history of the 
[Tunney Act] should make the courts sensitive to the efficient 
allocation of the Department's resources in making their public 
interest determinations.'').
---------------------------------------------------------------------------

    62. Thus, although the litigation risks the United States faces 
here are not identical to the litigation risks it faces when it 
negotiates a settlement prior to trial, the teaching of Microsoft I 
remains applicable. The District Court's evaluation of the RPFJ is 
properly informed by the public interest in a certain and timely remedy 
for Microsoft's unlawful conduct and must take account of the 
uncertainties and risks of further litigation, an inquiry that properly 
respects the realistic choices the United States faced in deciding to 
settle the case on the negotiated terms of the RPFJ.
    63. Moreover, in making its determination, the District Court 
properly accords significant weight to the United States' predictive 
judgments as to the efficacy of remedial provisions. Indeed, such 
deference is proper even outside the consent decree context. See Ford 
Motor Co, v. United States, 405 U.S. 562, 575 (1972) (``once the 
Government has successfully borne the considerable burden of 
establishing a violation of law, all doubts as to the remedy are to be 
resolved in its favor'') (quoting United States v. E.I. du Pont de 
Nemours & Co., 366 U.S. 316, 334 (1961)). Similarly, it is proper to 
defer to the United States as representative of the public interest 
when the parties are requesting entry of an agreed-upon judgment.\72\
---------------------------------------------------------------------------

    \72\ See, e.g., United States v. Paramount Pictures, Inc., 334 
U.S. 131, 177 (1948); United States v. Borden Corp., 347 U.S. 514, 
518 (1954); United States v. Bechtel Corp., 648 F.2d 660, 666 (9th 
Cir. 1981).
---------------------------------------------------------------------------

    64. As the Court of Appeals has explained, the degree of deference 
the trial court gives to ``the government's predictions as to the 
effect of the proposed remedies'' in a Tunney Act proceeding may vary 
with the extent of the court's familiarity with the market and other 
factors. Microsoft I, 56 F.3d at 1461. But, as the Court of Appeals 
also emphasized, even a court that has extensive relevant expertise 
should not lightly reject the government's predictions. For example, in 
the case of the AT&T decree--``a decree the oversight of which had been 
the business of a district judge for several years,'' Microsoft I at 
1460--the Court of Appeals instructed that the district court should 
not reject an agreed-upon modification of the decree unless the court 
had `` `exceptional confidence that adverse antitrust consequences 
[would] result--perhaps akin to the confidence that would justify a 
court in overturning the predictive judgments of an administrative 
agency.' '' Id. (quoting United States v. Western Elec. Co., 993 F.2d 
1572, 1577 (D.C. Cir. 1993)). Indeed, if courts do not give appropriate 
deference to the United States' views,

[[Page 12141]]

Tunney Act proceedings will become equivalent to the proceedings that 
lead to adjudicated judgments with adjudicated remedies.
    65. Commentors are also incorrect in their assertion that the 
procedural posture of the case requires the District Court to fashion 
and impose an adjudicated judgment. The District Court's role in making 
this public interest determination differs from its role in formulating 
an adjudicated judgment. Because the District Court ``is evaluating a 
settlement, it is not as free to exercise its discretion in fashioning 
a remedy,'' AT&T, 552 F. Supp. at 151, as it would be in a case 
litigated to an adjudicated judgment. The District Court is not 
``empowered to reject [the remedies sought] merely because [it] 
believe[s] other remedies [are] preferable.'' Microsoft I, 56 F.3d at 
1460. In this procedural setting, the District Court's ``function is 
not to determine whether the resulting array of rights and liabilities 
``is the one that will best serve society,'' but only to confirm that 
the resulting settlement is `` `within the reaches of the public 
interest.' '' Id. (quoting United States v. Western Elec. Co., 990 F.2d 
283, 309 (D.C. Cir. 1990) (``Triennial Review Opinion'') (emphasis in 
original), in turn quoting United States v. Bechtel Corp., 648 F.2d 
660, 666 (9th Cir. 1981), in turn quoting United States v. Gillette 
Co., 406 F. Supp. 713, 716 (D. Mass. 1975)).
    66. This standard reflects not only the proper role of a court of 
equity asked to lend its authority to the parties' agreement, but also 
the critical role that consent decrees play in effective public 
antitrust enforcement. See Senate Report at 5 (``the consent decree is 
of crucial importance as an enforcement tool, since it permits the 
allocation of resources elsewhere''); 119 Cong. Rec. 24,600 (1973) 
(Statement of Sen. Gurney) (Tunney Act ``is designed to enhance the 
value and effectiveness of the consent decree as a tool of public 
policy''). A consent decree, such as the RPFJ, is the product of 
negotiation. The parties weigh the benefits of prompt and certain 
resolution of the case against the possibility that continued 
litigation might improve their respective positions. Settlements 
potentially offer the public the benefits of more timely and certain 
relief, as well as significant savings in judicial and prosecutorial 
resources. But if courts refused to enter any consent decree that did 
not match precisely the relief the court would have imposed in the 
absence of a settlement, ``defendants would have no incentive to 
consent to judgment and this element of compromise would be destroyed. 
The consent decree would thus as a practical matter be eliminated as an 
antitrust enforcement tool, despite Congress' directive that it be 
preserved.'' AT&T, 552 F. Supp. at 151.
    67. Thus, even in the AT&T case, a case of unparalleled public 
importance in which the trial court had unusual familiarity with both 
the evidence and the legal arguments of the parties, see id., the court 
determined to approve the parties' settlement ``[i]f the [proposed] 
decree meets the requirements for an antitrust remedy.'' Id. at 153. 
The court made clear that it intended to follow that standard whether 
or not the proposed decree corresponded to the decree the court itself 
would have imposed had the parties pushed forward to an adjudicated 
judgment. See id. at 166 n.147 (noting that if the case ``were to 
proceed to final judgment and liability were found, the Court might 
determine that [certain measures not part of the proposed decree] are 
appropriate remedies, either as alternatives to the divestiture of the 
Operating Companies or in addition to such divestiture'').

E. Microsoft's Compliance With Section 16(g)

    68. Several comments question whether Microsoft made adequate 
disclosures under 15 U.S.C. 16(g).\73\ At the February 8, 2002, Status 
Conference, the Court directed Microsoft to brief the issue of its 
compliance with Section 16(g), and expressed its assumption that this 
issue was one that ``the government isn't necessarily going to be 
commenting on, but it is something that is [Microsoft's] 
responsibility.'' \74\ The United States therefore supplies the 
following information concerning the purpose of the disclosures 
required pursuant to Section 16(g), but does not respond to the 
substance of the comments that question Microsoft's compliance with the 
requirements of Section 16(g).
---------------------------------------------------------------------------

    \73\ Relpromax 21-23; CCC 3; CCIA 26-32.
    \74\ Tr. 2/8/02 at 16-17.
---------------------------------------------------------------------------

    69. The Tunney Act treats disclosure requirements intended to 
inform public comment regarding a proposed consent judgment entirely 
separately from the other disclosure requirements set forth in the Act. 
To facilitate public comment on a proposed consent judgment in a 
government civil antitrust case, the Tunney Act provides, in a single 
subsection, that the proposed decree itself must be published in the 
Federal Register, along with a CIS, which the United States must 
furnish to any person requesting it. 15 U.S.C. 16(b). In addition, that 
same subsection requires the United States to file in the Tunney Act 
district court, and any other district court the Tunney Act court 
designates, copies of the proposed decree and ``any other materials and 
documents which the United States considered determinative in 
formulating such proposal.'' Id. But the Tunney Act does not depend 
solely on the Federal Register to inform the public. The next 
subsection, 15 U.S.C. 16(c), requires the United States to publish, 
repeatedly, summaries of the proposal and the CIS, together with a list 
of the determinative documents made available for ``meaningful public 
comment,'' in general circulation newspapers.
    70. By contrast, the lobbying provision at issue here, Section 
16(g), merely requires defendants in antitrust cases to file their 
disclosure statements with the Tunney Act court--there are no 
requirements of public notice, Federal Register publication, newspaper 
summaries, or distribution to other district courts. Moreover, the 
statutory provisions addressing disclosure of information supporting 
informed public comment (Sections 16(b), (c)), appear immediately 
before the provisions dealing with consideration of, and response to, 
public comment (Section 16(d)) and the court's public interest 
determination (Sections 16(e), (f)). The lobbying provision comes after 
all of those Sections. The statutory structure thus makes clear the 
different purposes of the two different kinds of disclosure 
provisions.\75\ Thus, even if Microsoft failed to satisfy the 
requirements of Section 16(g), that would not provide any basis to 
begin the comment period anew and further delay entry of the RPFJ.\76\
---------------------------------------------------------------------------

    \75\ Although the statutory language is unambiguous, legislative 
history also bears out the distinction. The Senate Report notes that 
the ``bill seeks to encourage additional comment and response by 
providing more adequate notice to the public,'' S. Rep. No. 93-298 
at 5, and goes on to describe the provision of information to the 
public. As in the Tunney Act, the Report's description of the 
lobbying provision is separated from its treatment of the provision 
of information to the public by another topic entirely, the court's 
public interest determination. See id. at 6-7. The House Report is 
to the same effect. See H.R. Rep. No. 93-1463 at 6-7. (information 
provided to public through Federal Register and newspapers; id. at 9 
(lobbying disclosures).
    \76\ For a fuller discussion, see Br. Dismiss AAI at 24-28.
---------------------------------------------------------------------------

III. Definitions

A. Definition of ``ISV'' (RPFJ Sec. VI.I)

    71. Several comments address Section VI.I, which defines ``ISV'' as 
``an entity other than Microsoft that is engaged in the development or 
marketing of software products.'' All of the comments concern the 
breadth of the definition.

[[Page 12142]]

    72. Several commentors misread the definition, contending that 
``ISV'' inappropriately covers only companies creating software that 
runs on Windows Operating System Products.\77\ The definition shows on 
its face that this concern is misplaced: any ``software product'' is 
covered, whether or not it runs on Windows.
---------------------------------------------------------------------------

    \77\ Palm 10; Carroll 2.
---------------------------------------------------------------------------

    73. Several commentors suggest expanding the definition of ``ISV'' 
explicitly to include developers of particular categories of products. 
One commentor worries that Microsoft could construe the definition to 
exclude developers or marketers of non-Microsoft operating systems, and 
suggests that the definition be modified to include them 
explicitly.\78\ Another worries that the definition does not clearly 
encompass developers of software products designed to run on new 
versions of Windows or on other next-generation devices, and that it 
excludes vendors of competing servers.\79\ These concerns are misplaced 
and, therefore, the proposed modifications are unnecessary. The RPFJ 
defines ``ISV'' to include developers or marketers of ``software 
products,'' and that very broad category of products unambiguously 
includes operating systems (including server operating systems), 
operating system products (including server operating system products), 
and software designed to run on any platform on any device.
---------------------------------------------------------------------------

    \78\ Red Hat 24.
    \79\ AOL, Klain, 9-10, 12.
---------------------------------------------------------------------------

    74. Other commentors express concern that individuals, particularly 
individual developers writing and trading code within the ``open 
source'' community, might not qualify as ``entities'' and so might not 
qualify as ``ISVs'' under Definition VI.I.\80\ The RPFJ, however, sets 
no minimum size or organizational standard for an ``entity.'' Any 
individual or group of individuals, whether incorporated or not, that 
otherwise meets the definition of ``ISV'' is considered to be an ISV 
within the meaning of the RPFJ.
---------------------------------------------------------------------------

    \80\ AAI 38; KDE 16; Wang 1.
---------------------------------------------------------------------------

B. ``Microsoft Middleware'' (RPFJ Sec. VI.J)

    75. Many commentors criticize the RPFJ definition of Microsoft 
Middleware. Occasionally, a commentor simply fails to realize which 
middleware definition, Microsoft Middleware Product or Microsoft 
Middleware, is used in a given section.\81\ To review, Microsoft 
Middleware Product describes functionality and products, as an end user 
might perceive them. This definition is used in Sections III.C and 
III.H, as well as indirectly, via the Microsoft Platform Software 
definition, in Sections III.A, III.F and III.G.
---------------------------------------------------------------------------

    \81\ Henderson 5-6; Gifford 3.
---------------------------------------------------------------------------

    76. In contrast, the Microsoft Middleware definition describes 
software code, and is only used in Sections III.D and III.G. Most 
commentors focus on its use in Section III.D concerning API disclosure. 
The reason Microsoft Middleware is directed at software code and not 
functionality is that it is difficult to take any given piece of 
functionality and identify exactly which pieces of software code 
correspond to that functionality. For instance, a word processor 
displays text on a screen, and that is a functionality that the end 
user associates with the word processor. The software code that draws 
characters on the screen, however, is driven largely by code that many 
would consider part of the operating system. The word processor uses 
some of its own software code and some of the operating systems 
services to make the functionality appear to the user. Therefore, to 
avoid confusion and disagreements over which software code corresponded 
to which functionality, the United States designed a software code-
based definition for use in Section III.D.
    77. In response to comments, two of the specific requirements of 
the Microsoft Middleware definition have been changed in the SRPFJ to 
more clearly reflect the parties' intent. Each requirement and any 
associated modifications are discussed individually below. For 
reference, the complete revised definition is as follows:
    RPFJ Section VI.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 or is marketed by Microsoft as a major version of 
any Microsoft Middleware Product defined in Section VI.K.1; and
    3. provides the same or substantially similar functionality as a 
Microsoft Middleware Product.
    Microsoft Middleware shall include 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 the 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.
1. Distributed Separately To Update a Windows Operating System Product
    78. Some commentors argue that it is inappropriate for Microsoft 
Middleware to depend on separate distribution from a Windows Operating 
System Product.\82\ They argue that there is no logical reason for such 
a distinction and that requiring separate distribution merely provides 
another way for Microsoft to avoid its disclosure requirements.
---------------------------------------------------------------------------

    \82\ CCIA 65; AAI 20-21; ProComp 44; NetAction 12; Novell 9-10; 
Maddux para. 19; Kegel 5, 23; SIIA 18.
---------------------------------------------------------------------------

    79. The definition requires separate distribution for two reasons. 
First, there must be a straightforward and enforceable way to determine 
which software code is implicated. Separate distribution provides a 
clear line between two segments of code. Moreover, interfaces between 
pieces of code that have never been distributed separately are more 
likely to be internal interfaces that are not tested or durable. In 
contrast, interfaces between separately distributed pieces of code are 
more often tested and durable, because there is always the risk that 
the other side of the interface will be a different version than 
expected. Interfaces that are not tested and durable may be unreliable, 
potentially resulting in malfunctions.
    80. Second, the competitive significance of middleware products 
such as browsers and media players will be relatively small if they are 
never distributed in any form separate from a Windows Operating System 
Product. If Microsoft chooses only to distribute its programs by 
including them in Windows, then it will not be able to reach the large 
installed base of Windows machines. Instead, Microsoft will only be 
able to offer new versions when users choose to upgrade their operating 
system or buy new computers. Competing middleware products, in 
contrast, would not be limited to such methods of distribution and 
might offer many new versions over the course of the two to three year 
hardware upgrade cycle. Thus, while a competitor might offer three new 
versions of its program every year, Microsoft only would be able to 
offer a single version every two to three years. In the past, with 
programs such as Internet Explorer, Windows Media Player, and Windows 
Messenger, Microsoft always has offered separate versions available for 
download.
    81. Commentors point to specific products that have never been 
distributed separately and argue that

[[Page 12143]]

they should be included. Several commentors point out that Windows 
Media Player 8, sometimes referred to as Windows Media Player for 
Windows XP, is only included in Windows XP and that the interfaces 
between this player and the operating system will not be disclosed.\83\ 
This is correct. However, the interfaces between Windows Media Player 
7.1, the latest version available for download or redistribution, will 
be disclosed. While there may be some unique interfaces that Windows 
Media Player 8 uses to call on services in Windows XP, the United 
States is not aware of any such interfaces that are not also in Windows 
Media Player 7.1. Thus, for example, the API for a digital rights 
management technology called Secure Audio Path is a key interface used 
by Windows Media Player 7.1 and thus will be disclosed. Moreover, if 
Windows Media Player 8 is ever distributed separately in the future, 
then its interfaces would be disclosed.
---------------------------------------------------------------------------

    \83\ CCIA 65; RealNetworks 12; Maddux para. 19.
---------------------------------------------------------------------------

    82. Other commentors argue that Active Directory, a Microsoft 
directory service, should be Microsoft Middleware, but it does not 
qualify because it has never been distributed separately from a Windows 
Operating System Product.\84\ As this commentor notes, however, 
directory services ``have become competitively critical links between 
the desktop and network computing.'' \85\ Accordingly, directory 
services are most protected under Section III.E, which addresses the 
licensing of Communications Protocols used natively by Windows 
Operating System Products to interoperate with Microsoft server 
operating system products. For instance, if Active Directory software 
is included natively in Windows XP and that software uses a 
Communications Protocol to communicate with a Windows 2000 server, then 
the Communications Protocol must be available for license. Thus, a 
competing active directory service could license and implement the 
Communications Protocol and communicate with Windows XP using the same 
method as Active Directory.
---------------------------------------------------------------------------

    \84\ Novell 13-16.
    \85\ Novel 13.
---------------------------------------------------------------------------

 2. Trademarked or a Major Version of Any Microsoft Middleware Product
    83. The second requirement for Microsoft Middleware is that the 
software code either be Trademarked or marketed by Microsoft as a major 
version of any Microsoft Middleware Product as defined in Section 
VI.K.1. This is a modification reflected in the SRPFJ that differs from 
the RPFJ version, which required that software satisfy the Trademark 
requirement in order to be considered Microsoft Middleware. The SRPFJ 
modification means that software can now satisfy this element of the 
definition by being either (1) Trademarked, or (2) marketed as a major 
version of any of the named Microsoft Middleware Products as defined in 
Section VI.K.1 (i.e., Internet Explorer, Microsoft's Java Virtual 
Machine, etc.).
    84. Many commentors argue that the Trademarked requirement is 
inappropriate, or that at a minimum, many existing Microsoft Middleware 
Products would not have any corresponding Microsoft Middleware 
code.\86\ Turning to the latter, several argue that products such as 
Internet Explorer, Windows Media Player, Microsoft's Java Virtual 
Machine, and Window Messenger arguably were not Trademarked as that 
term is defined in the RPFJ, or argue that the Trademarked requirement 
was not appropriate. The United States does not necessarily agree with 
any or all of these arguments concerning whether these particular 
products satisfied the definition of Trademarked. To clarify any issues 
surrounding the status of these products, however, the Microsoft 
Middleware definition was modified to include explicitly the software 
code that is marketed by Microsoft as a major version of any Microsoft 
Middleware Product under VI.K.1. The limitation in the modified 
language to a major version of a Microsoft Middleware Product is simply 
a restatement of the limitation in the last paragraph of the 
definition, discussed further below, which limits the covered software 
code to that identified as a major version of a Microsoft Middleware 
Product. This change should resolve many of the concerns raised. Under 
the revised definition, each Microsoft Middleware Product discussed by 
commentors has corresponding Microsoft Middleware.
---------------------------------------------------------------------------

    \86\ CFA 93-94; CCIA 65-67; AOL 49-50; AAI 21; ProComp 44-46; 
Palm 9-10; Novell 10; Maddux para. 19; Litan 51; KDE 16; Gifford 3; 
Sen. Kohl 2-3; Relpromax 14; SBC 36-38; Giannandrea 6; SIIA 27-28.
---------------------------------------------------------------------------

    85. Other commentors argue that inclusion of the Trademarked 
requirement has no relation to the function of the software code and 
should not be part of the Microsoft Middleware definition. The 
requirement that the software code satisfy the Trademarked definition 
is based on the business reality that Microsoft develops logos and 
names for marketing the technologies that it wishes developers and 
consumers to adopt. Software code that is not marketed under a 
distinctive logo or a name that satisfies the definition of Trademarked 
is unlikely to achieve the widespread usage needed for competitive 
significance. Additionally, this definition was not intended to capture 
security patches, minor ``bug'' fixes, or other small downloads that 
Microsoft makes available via Windows Update. Limiting the covered 
software code to that which is Trademarked or marketed as a major 
version of a Microsoft Middleware Product under Section VI.K.1 ensures 
that code not comprising a ``product,'' as that term is generally 
understood by the public, will not be included.
3. Same or Substantially Similar Functionality
    86. Some commentors opine that Microsoft Middleware should not be 
required to have the same or substantially similar functionality as a 
Microsoft Middleware Product. Microsoft Middleware Products, as 
defined, include only products distributed with a Windows Operating 
System Product. Commentors argue that software that comes under some 
concept of middleware should be included, regardless of whether it is 
the same or substantially similar to a Microsoft Middleware Product. 
For instance, some commentors argue that Microsoft Office should be 
Microsoft Middleware, and the interfaces between Office and a Windows 
Operating System Product should be disclosed.\87\
---------------------------------------------------------------------------

    \87\ Palm 9-10; Kegel 13; SBC 38-39; SIIA 17-20, 38-41, 62-64; 
Johnson 5.
---------------------------------------------------------------------------

    87. The focus of the plaintiffs' case was never Internet Explorer 
or middleware technologies that were only distributed separately; the 
focus was always on applications that were both integrated into Windows 
and distributed separately. One of the reasons that Microsoft's 
anticompetitive actions were able to have the effect that they did was 
that they covered multiple distribution channels. Internet Explorer and 
Microsoft's Java Virtual Machine were bundled with Windows, and they 
were included in the ``First Wave'' contracts with ISVs covering 
separately distributed products, and they were available for separate 
download.
    88. The disclosure of interfaces between software that is not the 
same or substantially similar to functionality distributed with a 
Windows Operating System Product is beyond the scope of the case as it 
emerged from the Court of Appeals. For example, even assuming arguendo 
that Office has some characteristics that make it middleware, Office 
has never been integrated into Windows or referred to by Microsoft as

[[Page 12144]]

being part of a Windows Operating System Product. Office is a separate 
product that is purchased separately.
    89. Finally, some commentors argue incorrectly that requiring 
Microsoft Middleware to have the same or substantially similar 
functionality as a Microsoft Middleware Product encourages commingling 
of software code.\88\ Commingling of code, as discussed by the Court of 
Appeals and the District Court, is ``placing code specific to Web 
browsing in the same files as code that provided operating system 
functions.'' Microsoft, 253 F.3d at 65. Products can be distributed 
with Windows and not have their code commingled with operating system 
functions. To the contrary, requiring software to be both distributed 
separately and substantially similar to software distributed with 
Windows encourages the opposite: because the code must be distributed 
separately, there must be a clear distinction between code that belongs 
to the Microsoft Middleware and code that belongs to the operating 
system. If all the code for a Microsoft Middleware Product is 
commingled into operating system files, then the separately distributed 
Microsoft Middleware version will be enormous and constitute a 
redistribution of the operating system. Clearly, such a separate 
distribution would be unworkable.
---------------------------------------------------------------------------

    \88\ Novell 10; Palm 10; Maddux para. 19; Real Networks 11, 28; 
SBC 37, 39.
---------------------------------------------------------------------------

4. Includes at Least the Software Code That Controls Most or all of the 
User Interface
    90. The RPFJ included a fourth requirement, that Microsoft 
Middleware must include at least the software code that controls most 
or all of the user interface elements of that Microsoft Middleware. 
This provision now has been clarified in the SRPFJ such that it is no 
longer the fourth required element, but is a separate paragraph at the 
end of the definition. This change reflects the fact that the first 
three requirements are sufficient to define Microsoft Middleware. The 
now-separate sentence always was intended to be a minimum size or 
``floor'' as to the collection of software code that is included in a 
particular piece of Microsoft Middleware. This ``floor'' prevents 
Microsoft from arbitrarily breaking up into separate pieces the 
software code of what would otherwise be Microsoft Middleware, thereby 
omitting from the Microsoft Middleware definition certain critical or 
significant pieces of code that constitute the Microsoft Middleware. 
Some commentors read this provision to mean that Microsoft could create 
artificially small subsets of code containing only the user interface 
elements of Microsoft Middleware Products.\89\ Commentors point out 
that the interfaces between user interface elements and the Windows 
Operating System Product are unlikely to be competitively 
significant.\90\ This modification does not substantively change this 
definition, but instead makes clear that this provision governs the 
scope of what code must be included in the Microsoft Middleware.
---------------------------------------------------------------------------

    \89\ CCIA 64; Pantin 32; Palm 10: Novell 10-11; Harris 11.
    \90\ CCIA 64; Harris 11.
---------------------------------------------------------------------------

5. Major Updates
    91. The last paragraph of Microsoft Middleware discusses software 
code described as part of, and distributed separately to update, a 
Microsoft Middleware Product. That code shall be deemed Microsoft 
Middleware if it is identified by a new major version number, i.e., a 
whole number (``6.0'') or a by a number with a single digit to the 
right of the decimal point (``7.1''). Several commentors argue that 
Microsoft can withhold interfaces simply by updating its products with 
version numbers such as ``7.11'' that do not qualify as major versions, 
and that the major version limitation is inappropriate.\91\
---------------------------------------------------------------------------

    \91\ Pantin 12, 32; NetAction 10, 13; Kegel 5; Harris 11; Maddux 
para. 15.
---------------------------------------------------------------------------

    92. It was necessary to draw a line to include some code updates as 
Microsoft Middleware and exclude others. Per standard software 
engineering practices, Microsoft assigns every change to the code a new 
version number, and the importance of the change is designated by how 
far to the right the number is. For instance, a tiny change may be 
designated by an increase from 5.011 to 5.012; a slightly larger change 
is designated as going from 5.01 to 5.02, and a major version is 
designated as 5.1 to 5.2. Although Microsoft maintains these version 
numbers, they are not always advertised to the public because small 
changes are not advertised as new, improved, or updated products. 
Rather, products that are significant upgrades that will be promoted to 
the public are designated with new major version numbers.
    93. The United States does not believe that requiring Microsoft 
continuously to review small changes to its Microsoft Middleware would 
yield significant competitive effects that would outweigh the costs to 
Microsoft. Significantly improved features, including those based on 
better APIs, are most likely to be designated by new major version 
numbers. Microsoft has little reason to develop a new feature based on 
improved services from the operating system, such as improved speed or 
better coordination with other operating system functions, and then not 
promote that feature to developers or consumers. Moreover, should 
Microsoft Middleware use a new API in an update that is not a new major 
version, then that API still will be disclosed, at a minimum, when the 
next new major version is released. The only way for Microsoft to hide 
an API indefinitely is to never release a new major version, which 
historically has not happened and is not likely to happen in the 
future.

C. ``Microsoft Middleware Product'' (RPFJ Sec. VI.K)

    94. A number of commentors address Section VI.K, which defines 
``Microsoft Middleware Product.'' This definition is referenced in 
Sections III.C (prohibiting Microsoft from imposing certain 
restrictions on OEM licensees) and III.H (ensuring OEM flexibility in 
product offerings) and, as subsumed by Section VI.L's definition of 
``Microsoft Platform Software,'' is also referenced in Sections III.A 
(prohibiting retaliation against OEMs), III.F (constraining Microsoft's 
relationships with ISVs), and III.G (prohibiting certain exclusionary 
contracts). ``Microsoft Middleware Product'' means either the 
functionality provided by one of a set of existing, named products 
(e.g., Internet Explorer) and their successors or, for products that do 
not now exist, the functionality that meets several specific 
conditions.
    95. Contrary to the views of several commentors, the definition 
does not limit Microsoft Middleware Products to a set of products that 
now exist, and so does not fail to account for future development.\92\ 
This critique ignores the second part of the definition, which explains 
what future technology will be considered Microsoft Middleware 
Products. Similarly, there are no limits in the definition on the kinds 
of products (in the commentor's words, ``categories of applications'') 
that may, in the future, be considered Microsoft Middleware 
Products.\93\ It thus is inaccurate to state that the Litigating 
States' proposed definition (Provision 22(x)) of Microsoft Middleware 
Product applies to products to be developed in the future and the RPFJ 
does not.\94\
---------------------------------------------------------------------------

    \92\ SBC 38; AOL 49; Henderson 6.
    \93\ SBC 39 n.7.
    \94\ SBC 158-59.
---------------------------------------------------------------------------

    96. Although the Litigating States' proposed definition of 
Microsoft Middleware Product is somewhat

[[Page 12145]]

broader than the definition in the RPFJ, the United States believes 
that its definition is clearer and therefore more enforceable. Unlike 
the Litigating States' list of current products, for example, the 
RPFJ's list (Section VI.K.1) consists solely of known named products; 
there is no room to debate, for instance, exactly what ``systems and 
enterprise management software'' (Litigating States Provision 22(c)i) 
is and is not covered.
    97. Similarly, the RPFJ's restriction on future products to those 
that are Trademarked helps clearly to define the set of covered 
products and reflects the business reality that Microsoft often names 
and markets the technologies that it wishes developers and consumers to 
adopt. Microsoft has little incentive to bury its new products inside 
other applications in order to avoid having it meet the Trademark 
standard, as one commentor worries.\95\ Some commentors claim that the 
Trademarked requirement would leave out many Microsoft products 
currently in the market, but the commentors do not identify any 
particular product.\96\
---------------------------------------------------------------------------

    \95\ AOL, Klain 6.
    \96\ Palm 10.
---------------------------------------------------------------------------

    98. The Litigating States object that the definition of Microsoft 
Middleware Product, as it pertains to future products, excludes 
software that has not been distributed separately from a Windows 
Operating System Product or that is not similar to a competitor's 
product.\97\ The nature of their concern is unclear, however, given 
that the Litigating States' own definition of Microsoft Middleware 
Product in their own Proposed Final Judgment contains very similar 
exclusions.\98\
---------------------------------------------------------------------------

    \97\ Litigating States, Ex. A 18.
    \98\ Litigating States, Ex. B at 34-35.
---------------------------------------------------------------------------

    99. Some commentors object to the omission of Microsoft Office from 
the list of existing products that are Microsoft Middleware Products 
within the meaning of the RPFJ, pointing to Office's status as 
middleware and its large market share among office suites.\99\ Others 
object to the omission of other specific products or technologies, 
e.g., Microsoft Outlook, MSN Messenger, MSN RunTime, MSN Explorer, the 
MSN client software, Passport, Microsoft Exchange, Microsoft Visual 
Studio, Microsoft, Net, and software that synchronizes handheld devices 
with PCs.\100\ The reasons for the omission of these products from the 
definition vary. Some of these products have never been part of a 
Windows Operating System Product, but only are installed separately and 
so logically should not be included in the list of Microsoft Middleware 
Products (e.g., Microsoft Office, Outlook, handheld synchronization 
software, Microsoft Visual Studio, Microsoft Exchange). Others, such as 
Microsoft .Net, are in fact covered as to the elements that products 
marketed under the .Net label are among the products named in the 
definition of Microsoft Middleware Product.\101\ And some lack the 
competitive significance of the products that are included in the list 
of existing Microsoft Middleware Products (e.g., MSN Explorer, MSN 
Messenger).
---------------------------------------------------------------------------

    \99\ SBC 38 n.6; SIIA 18.
    \100\ AOL 49-50, Klain 13; Palm 9-10; SIIA 19.
    \101\ AOL, Klain 13; Palm 9-10; Kegel 6.
---------------------------------------------------------------------------

    100. The definition of Microsoft Middleware Product goes well 
beyond the Internet browser and Java technologies that, as threats to 
the Windows operating system against which Microsoft took 
anticompetitive actions, were at issue in this case. Further, this 
definition balances the desire to include future middleware products--
the character of which no one can accurately predict--with the need for 
certainty in compliance and enforcement.

D. ``Non-Microsoft Middleware'' (RPFJ Sec. VI.M)

    101. The definition of Non-Microsoft Middleware is one of the most 
important definitions in the RPFJ, but it received very little 
criticism by commentors. Non-Microsoft Middleware is the term used most 
often to describe the products that the decree is intended to protect. 
Toward that end, it is one of the broadest definitions in the decree.
    102. One criticism, which while serious was based on an inadvertent 
error, points out that due to the definition of API, on which Non-
Microsoft Middleware depends, it might be impossible for any Non-
Microsoft software to satisfy the definition. \102\ These commentors 
point out that the API definition only includes Microsoft APIs, 
rendering the other definitions that use the term API nonsensical. This 
was an inadvertent error in the RPFJ, and it has been corrected in the 
SRPFJ. The previous definition of API has been inserted directly in 
Section III.D, which was the only section it was designed to address. A 
generic definition of API, which is intended to invoke the common usage 
of the term API, and not to be tied to Microsoft products, has been 
inserted as definition VI.A. The definition now reads: ``'API'' means 
application programming interface, including any interface that 
Microsoft is obligated to disclose pursuant to III.D.'' See also 
Section VII.(A)(2) below.
---------------------------------------------------------------------------

    \102\ AAI33-34; Giannandrea 7.
---------------------------------------------------------------------------

    103. One commentor argues that certain important software 
categories such as web-based software and digital imaging software are 
not present in any of the middleware definitions.\103\ This assertion 
is incorrect, because neither of the Non-Microsoft Middleware 
definitions use any categories at all; both cover any software 
functionality that otherwise meets the requirements. Given that these 
definitions provide the substance of what the decree protects, it would 
be inappropriate to place any category restrictions, such as digital 
imaging software, in the definition. In a somewhat similar fashion, one 
commentor argues that there is no longer any demand for Non-Microsoft 
Middleware, but bases his argument on browsers, failing to realize that 
Non-Microsoft Middleware can have any functionality.\104\
---------------------------------------------------------------------------

    \103\ Litigating States, Ex. B 17, 28.
    \104\ Gifford 8.
---------------------------------------------------------------------------

    104. One commentor argues that the definition proposed by the 
Litigating States or the definition from the IFJ would be preferable, 
but offers no specific criticisms of Non-Microsoft Middleware.\105\ 
Another commentor suggests that ``non-Microsoft software product'' be 
replaced with ``non-Microsoft technology'' but also states that the 
definition seems appropriate to define middleware.\106\
---------------------------------------------------------------------------

    \105\ SBC 158.
    \106\ Pantin Comment VI.5, VI.3.
---------------------------------------------------------------------------

    105. One commentor argues that the definition should not be limited 
to software that runs on Windows Operating System Products, because 
that limitation leaves Microsoft free to retaliate against middleware 
software that runs on other devices, such as servers and 
handhelds.\107\ The intended meaning of this comment is unclear, 
because the retaliation section of the decree applicable to ISVs and 
IHVs, Section III.F, does not use the term Non-Microsoft Middleware.
---------------------------------------------------------------------------

    \107\ Palm 9.
---------------------------------------------------------------------------

    106. Finally, the Non-Microsoft Middleware definition is criticized 
on the ground that Netscape 1.0 would not have satisfied it, because 
the earliest version of Netscape did not expose a range of 
functionality to ISVs through published APIs.\108\ Nevertheless, the 
United States finds this definition completely appropriate, because it 
is the presence of APIs that allows middleware to threaten the 
applications barrier to entry. To remove the requirement for APIs from 
the definition would be to ignore the theory of the

[[Page 12146]]

case.\109\ Moreover, whether or not software has published APIs is 
completely within the control of the software developer.
---------------------------------------------------------------------------

    \108\ Giannandrea 7.
    \109\ Stockton 2 (argues that middleware has very little to do 
with exposing APIs).
---------------------------------------------------------------------------

E. ``Non-Microsoft Middleware Product'' (RPFJ Sec. VI.N)

    107. Several comments raise issues relating to the definition of 
Non-Microsoft Middleware Product.\110\ The majority of these comments 
relate to subsection (ii) of the definition, which requires that ``at 
least one million copies'' of the product have been distributed in the 
United States within the previous year.\111\ Other commentors complain 
that the definition does not include web-based software.\112\ Finally, 
one commentor questions whether Netscape Navigator would have satisfied 
the definition of Non-Microsoft Middleware Product because it does not 
expose Microsoft APIs.\113\
---------------------------------------------------------------------------

    \110\ Thomas 5-6; Sen. Kohl 2; Palm 9; SBC 40-41, 159; ProComp 
65-66; AOL 50; AOL, Klain 13-14; PFF 21; Litigating States, Ex. A 
17-18; CCIA 85; Litan 50; RealNetworks 13-14; AAI 34; Giannandrea 7.
    \111\ Thomas 5-6; Sen. Kohl 2; Palm 9; SBC 40-41, 159; ProComp 
65-66; AOL 50; AOL, Klain 13-14; PFF 21; Litigating States, Ex. A 
17-18; CCIA 85; Litan 50; RealNetworks 13-14.
    \112\ Litigating States, Ex. A 18; AOL 50; AOL, Klain 14.
    \113\ AAI 34.
---------------------------------------------------------------------------

    108. The RPFJ's provisions apply generally not only to a wide range 
of currently marketed middleware products, but also to products that 
have not yet been developed. Certain of these provisions, of course, 
impose affirmative obligations on Microsoft to take actions vis-a-vis 
middleware products. To ensure that Microsoft can undertake these 
obligations in compliance with the RPFJ's provisions (and that the 
United State can enforce them), the characteristics of what products 
will be considered middleware in the future must be defined today 
according to objective criteria. The definition of Non-Microsoft 
Middleware Product relates and is incorporated into the portion of the 
definition of Microsoft Middleware Product that sets forth the 
characteristics that future products must meet to be considered 
Microsoft Middleware Products.
    109. The one-million-copy limitation applies only to the 
affirmative obligations that Microsoft make public the APIs used in its 
own middleware products (as set forth in Section III.D), and redesign 
the operating system to provide a competing middleware product 
``default'' status, i.e., the ability to override automatically 
Microsoft middleware functions integrated into the operating system (as 
set forth in Section H). The limitation strikes the proper balance 
between (1) the substantial costs associated with such documentation 
and redesign efforts, which these obligations require and (2) the 
competitive potential of products with fewer than one million copies 
distributed. In a nutshell, it prevents Microsoft from having to 
undertake documentation and redesign work any time an ISV has a concept 
for a product it decides to call ``middleware.'' In a world of about 
625 million PC users and software distribution via downloads and direct 
mail, distribution of only one million copies, rather than sales, 
installation or usage, is a relatively minor threshold in the software 
industry today. Indeed, almost ten years ago the Mosaic browser 
achieved distribution to over 2 million people in ``just a year.'' Gina 
Smith, Inside Silicon Valley, A High-Tech Top 10 Computers & 
Technology, San Francisco Examiner, 1995 WL 4901748 (Jan. 1, 1995).
    110. Web-based software and web-based services are not explicitly 
excluded from the definition of Non-Microsoft Middleware Product. Any 
portion of web-based software or services that runs on a Windows 
Operating System Product and otherwise meets the requirements of the 
definition could qualify as a Non-Microsoft Middleware Product. To the 
extent that any Microsoft software natively implemented in a Windows 
Operating System Product communicates natively with a Microsoft server 
operating system product, the Communications Protocols must be 
available for license pursuant to Section III.E.
    111. Finally, the suggestion that Netscape Navigator could not 
satisfy the definition of Non-Microsoft Middleware Product in the RPFJ, 
because Navigator does not expose Microsoft APIs, is correct where the 
erroneous definition of API contained in the RPFJ is applied. Based on 
comments that correctly identified a flaw in the definition of API, 
however, the United States and Microsoft have agreed to modify the 
definition. See Section VII(A)(2) below. Under the new definition of 
API in the SRPFJ, \114\ Netscape Navigator would qualify as a Non-
Microsoft Middleware Product.
---------------------------------------------------------------------------

    \114\ Definition VI.A in the SRPFJ now reads: ```API' means 
application programming interface, including any interface that 
Microsoft is obligated to disclose pursuant to III.D.''
---------------------------------------------------------------------------

F. ``Personal Computer'' (RPFJ Sec. VI.Q)

    112. A few commentors raise concerns about the RPFJ's definition of 
``Personal Computer.'' \115\ See RPFJ Sec. VI.Q. This definition is 
referenced in RPFJ Sections III.A (prohibiting retaliation against 
OEMs) and III.H (ensuring OEM flexibility in product offerings), and in 
Definitions VI.H (``IHV''), VI.O (``OEM''), VI.P (``Operating 
System''), and VI.U (``Windows Operating System Product'').
---------------------------------------------------------------------------

    \115\ Clapes 22; Litigating States 35 (offering own definition); 
ProComp B-2 (offering own definition).
---------------------------------------------------------------------------

    113. One commentor argues that the definitions of ``Personal 
Computer'' and ``Windows Operating System Product'' might, when read 
together, unintentionally exclude future Microsoft operating systems 
from the RPFJ's provisions. The commentor expresses concern that the 
restriction of ``Personal Computer'' to a computer ``configured so that 
its primary purpose is for use by one person at a time'' would, in 
combination with the restriction of ``Windows Operating System 
Product'' to software distributed ``for use with Personal Computers,'' 
cause future Microsoft operating systems not to be covered by the RPFJ 
if Microsoft continues its evolution toward operating systems--like 
Windows XP--that facilitate shared or multiple-person use or that 
facilitate home networking.\116\ This concern is unwarranted. What 
Windows XP allows is for different users of the same computer (e.g., 
members of the same family) to store individualized settings in the 
computer and access them through personal passwords. Whether or not a 
computer is configured primarily to facilitate use by different people 
at different moments in time is immaterial to whether it is configured 
primarily to be used by one person at a given moment in time--the 
relevant criterion for its designation as a Personal Computer in the 
RPFJ.
---------------------------------------------------------------------------

    \116\ SBC 43, n.10.
---------------------------------------------------------------------------

    114. Several commentors question the exclusion of machines made by 
Apple Computer from the definition of ``Personal Computer.'' \117\ 
Apple's machines do not contain ``Intel x86 compatible (or successor) 
microprocessors,'' and so do not fall within the meaning of the 
definition. Indeed, Apple computers were expressly excluded from the 
relevant market in which Microsoft was found to be a monopolist. See 
Microsoft, 253 F.3d at 52. The sole conduct that the United States 
alleged, and the Court of Appeals found, to be unlawful relating to 
Apple computers was the exclusive dealing arrangement that Microsoft 
imposed on Apple. See id. at 74. Section III.G.1 of

[[Page 12147]]

the RPFJ fully addresses this conduct by prohibiting such exclusive 
arrangements with certain entities, including ISVs--a category that 
unquestionably includes Apple. Modifying the definition of Personal 
Computer to include Apple computers would improperly expand the scope 
of the RPFJ beyond the liability findings in this case.
---------------------------------------------------------------------------

    \117\ Maddux para. 58; Giannandrea 7.
---------------------------------------------------------------------------

    115. Other commentors raise concern about the final sentence in 
Section VI.Q, \118\ which reads: ``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.'' One commentor 
appears to suggest that any such devices for which Microsoft eventually 
offers a version of a Windows Operating System Product should be 
considered Personal Computers for purposes of the RPFJ.\119\ The United 
States disagrees with the commentors' views that any change to expand 
application of the RPFJ to software written for, for example, 
telephones and pagers, is justified by the Court of Appeals' decision 
in this case, which is limited to the illegal maintenance by Microsoft 
of its monopoly in operating systems for Intel-compatible PCs.\120\ 
Moreover, such a change would be inconsistent with the intent of the 
RPFJ to identify Personal Computers with clarity because it would 
create unmanageable circularity: a Personal Computer would be a machine 
for which a Windows Operating System Product is available, and a 
Windows Operating System Product would be a product designed for use 
with a Personal Computer.
---------------------------------------------------------------------------

    \118\ Palm 8-9, 14-15
    \119\ Pantin 34.
    \120\ Maddux para. 58; Pantin 34; Alexander (unpaginated).
---------------------------------------------------------------------------

G. ``Trademarked'' (RPFJ Sec. VI.T)

    116. A number of commentors address the scope of the definition of 
``Trademarked'' in the RPFJ.\121\ Most of these commentors suggest that 
the definition is too broad and would permit Microsoft to evade its 
disclosure obligations under the RPFJ by manipulating its use of 
trademarks.\122\ Several commentors complain that basing the 
determination of whether a product is either Microsoft Middleware or a 
Microsoft Middleware Product on whether the product has been 
Trademarked is inappropriate because it permits Microsoft to manipulate 
the application of the middleware definitions to its products.\123\
---------------------------------------------------------------------------

    \121\ KDE 15-16; Litan 51; ProComp 44-45; CCIA 65-67; SBC 38 
n.5; Pantin 36; Giannandrea 6.
    \122\ For a discussion of issues relating to the intersection of 
the definition of Trademarked with the definitions of Microsoft 
Middleware and Microsoft Middleware Product, see Sections III(B) and 
III(C) above.
    \123\ ProComp 44-45; CCIA 65-67; Pantin 36; Giannandrea 6.
---------------------------------------------------------------------------

    117. The definition of Trademarked is designed to ensure that the 
Microsoft Middleware and Microsoft Middleware Products that Microsoft 
distributes (either for free or for sale) to the market as commercial 
products are covered by the RPFJ. Thus, the definition of Trademarked 
correctly describes the manner in which businesses typically identify 
the source of the products that they distribute in commerce, while 
seeking to carve out from the definition products, such as ``bug'' 
fixes, that might be distributed under the Microsoft or the 
Windows names but that are not of commercial significance.
    118. Several commentors argue that the exception for generic or 
descriptive terms contained in the Trademarked definition is a 
significant loophole that will permit Microsoft to exempt many products 
from coverage by the RPFJ.\124\ The exception for generic and 
descriptive terms, however, simply reflects the reality that products 
distributed in commerce under such names may not be trademarked unless 
the names develop secondary meaning. Under the Trademarked definition, 
Microsoft simply announces in advance that it will not claim such terms 
as trademarks and, therefore, that such terms never will gain secondary 
meaning. It is for precisely this reason that 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 are not exempted from coverage as 
Trademarked, because such marks are inherently distinctive.
---------------------------------------------------------------------------

    \124\ ProComp 44-45; KDE 15-16; CCIA 65-67; SBC 38 n.5.
---------------------------------------------------------------------------

    119. At least one commentor suggests that 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, conceivably operates to remove 
automatically trademark protection from marks that Microsoft already 
has registered but that also fall within this description.\125\ But 
this portion of the definition of Trademarked does not operate in that 
manner. Instead, this clause 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 will be unable 
to claim trademark protection for such marks in perpetuity.
---------------------------------------------------------------------------

    \125\ See CCIA, at 66-67 (``Indeed, Microsoft could plausibly 
argue that the Windows Media mark does not come within the 
`Trademarked' definition as it is, since even that mark consist of 
no more than the Windows mark in combination with the 
generic term `media.' RPFJ Sec. VI(T) may therefore embody 
Microsoft's disclaim[er of] any trademark rights in such descriptive 
or generic terms apart from the Microsoft or 
Windows trademarks.''').
---------------------------------------------------------------------------

H. ``Windows Operating System Product'' (RPFJSec. VI.U)

    120. Definition U defines ``Windows Operating System Product'' to 
mean ``the software 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. . . 
.'' In general terms, the term 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.
1. Microsoft's Discretion
    121. Various comments address the final sentence of Definition U, 
which reads: ``The software code that comprises a Windows Operating 
System Product shall be determined by Microsoft in its sole 
discretion.'' Some of the comments assert, incorrectly, that permitting 
Microsoft the discretion to determine what package of software is 
labeled as a ``Windows Operating System Product'' for purposes of the 
RPFJ will allow Microsoft to re-label as part of the ``Windows 
Operating System Product'' code that would otherwise be middleware and 
thereby avoid having that code constitute ``Microsoft Middleware'' or 
provide the functionality of a ``Microsoft Middleware Product'' under 
the RPFJ.\126\ Microsoft could, these commentors hypothesize, 
essentially ``decide for purposes of the decree obligations where the 
OS stops and where middleware begins,'' \127\ and thereby evade the 
decree's technical

[[Page 12148]]

provisions, including the disclosure provisions of Section III.D \128\ 
or the removal provisions of Section III.H.
---------------------------------------------------------------------------

    \126\ AOL 20 n.19; CCIA 53; Harris 12; KDE 12; Litan 43-44; 
ProComp 7; SBC 42; SIIA 26; TRAC 8.
    \127\ CCIA 53.
    \128\ Litan 9, 43; RealNetworks 11; SIIA 25-27.
---------------------------------------------------------------------------

    122. These comments are incorrect. Microsoft's discretion under 
Definition U as to its packaging decisions (i.e., what it chooses to 
ship labeled as ``Windows'') does not give it the ability to exclude 
software code from the application of any other relevant definition of 
the RPFJ. Thus, nothing in Definition U alters the fact that, under the 
RPFJ, software code that Microsoft ships labeled as ``Windows'' can 
also constitute ``Microsoft Middleware'' or a ``Microsoft Middleware 
Product.'' So long as software code or the functionality it provides 
meets the requirements of any other definition(s) in the RPFJ, 
Microsoft's ``discretion'' under Definition U to call it part of a 
Windows Operating System Product will not change the result.\129\ Thus, 
for example, Internet Explorer is both a Microsoft Middleware Product 
and part of a Windows Operating System Product.
---------------------------------------------------------------------------

    \129\ Indeed, this sentence in Definition U merely confirms what 
Microsoft already had the power to do--label the package of what it 
calls its own operating system products. The sentence does not 
narrow or alter the operative provisions of the RPFJ; those 
provisions principally rely on other definitions, such as Microsoft 
Middleware Product, regardless of how Microsoft labels its operating 
system.
---------------------------------------------------------------------------

    123. A number of commentors also assert that the final sentence of 
Definition U might be read to transform what otherwise would be two 
separate products for antitrust purposes into one, or somehow to 
immunize Microsoft from potential liability for illegal tying.\130\ 
Such a reading is untenable. Nothing in this provision, or in the RPFJ 
as a whole, purports to, or could, alter the application of the 
antitrust laws to Microsoft's conduct or its products. In particular, 
the RPFJ does not grant Microsoft any new rights or any immunity under 
the antitrust laws with respect to otherwise illegal tying or product 
integration. Similarly, Microsoft's decision to distribute certain 
software code as part of a Windows Operating System Product for 
purposes of this definition does not in any way affect the status or 
characterization of such code under the antitrust laws or the 
application of those laws to such code--e.g., whether software 
Microsoft says is part of the package it distributes as its ``Windows 
Operating System Product'' is or is not a separate ``product'' for 
antitrust purposes.
---------------------------------------------------------------------------

    \130\ AAI 29; CCIA 53; RealNetworks 11.
---------------------------------------------------------------------------

2. Prior Windows Versions
    124. A few commentors \131\ suggest that Definition U. also should 
include--in addition to the software code Microsoft distributes as 
Windows 2000 Professional, Windows XP Home and Professional, and their 
successors--prior versions of Windows, including Windows 9x (Windows 
95, Windows 98, Windows 98 Second Edition, and Windows ME) and Windows 
NT 4.0. These Microsoft operating systems were not included in the 
RPFJ's definition of Windows Operating System Product because their 
current commercial and competitive significance is significantly more 
limited than the operating systems included in the definition. For 
example, Windows 95, as its name suggests, was first shipped by 
Microsoft some seven years ago and is no longer actively distributed by 
Microsoft, while Windows 98 and 98 Second Edition will soon enter a 
phase of restricted availability.\132\ Windows Millennium Edition (ME), 
though much more recent, has enjoyed only limited success and already 
has been supplanted as Microsoft's primary OS by Windows 2000 and 
Windows XP, both of which are covered by Definition U.
---------------------------------------------------------------------------

    \131\ Giannandrea 1-2; NetAction 2, 6-8; Pantin 36.
    \132\ Microsoft's product website indicates that Windows 95 was 
designated as being in the ``Non-Supported phase'' (where licenses 
may no longer be available and support is limited) on November 30, 
2001; Windows 98, Windows 98 SE, and Windows 4.0 will all enter the 
``Extended'' phase (where licenses may no longer be available to 
consumers and support is somewhat limited) on June 30, 2002. See 
http://www.microsoft.com/windows/lifecycleconsumer.asp>.
---------------------------------------------------------------------------

    125. The OEM-related provisions of the RPFJ, including Sections 
III.A, III.B, III.C, and III.H, apply primarily to OEMs' ongoing 
shipments of Microsoft operating systems with their new PCs, not to the 
installed base, and the great majority of those shipments today and 
going forward will be Windows 2000, Windows XP, and successors. 
Further, the provisions of Sections III.D and III.H, which require 
certain technical or design changes by Microsoft to its Windows 
Operating System Products, are relevant largely to OEM and consumer 
choices regarding operating systems that will be shipped under the 
RPFJ, rather than the installed base of operating systems that have 
already been distributed. Finally, the disclosure provisions of Section 
III.D are likely to have the greatest competitive significance for 
Windows 2000 and Windows XP and their successors, because those 
operating systems represent the versions of Windows to which the great 
majority of developers are likely to write middleware or applications. 
Going forward, developers are unlikely to write middleware or 
applications to any significant degree to the older, 9x operating 
systems, because those versions are built on a different code base than 
that underlying Windows 2000, Windows XP, and future versions of 
Windows.
3. Operating Systems for Other Devices
    126. Finally, a few commentors suggest that Definition U should be 
broadened to include operating systems for non-desktop PCs and non-PC 
devices, such as tablet PCs and handheld devices,\133\ and even 
operating systems used in ``an extensive set of devices,'' most with 
little or no similarity to PCs, including, among others, smart phones, 
digital cameras, retail point of sale devices, automobile computing 
systems, industrial control devices, and smart cards.\134\
---------------------------------------------------------------------------

    \133\ Kegel 6; SBC 42-43.
    \134\ SBC 43.
---------------------------------------------------------------------------

    127. There is no basis in the Court of Appeals' opinion for such a 
sweeping definition and the sweeping scope of coverage of the RPFJ that 
would follow from it. Plaintiffs' case focused on Microsoft's 
anticompetitive use of its PC operating system monopoly to thwart 
emerging middleware threats to the applications barrier to entry into 
the PC OS market that protected that monopoly. The Court of Appeals 
affirmed the District Court's finding that Microsoft possessed a 
monopoly in a market for PC operating systems, and that it engaged in a 
variety of illegal actions to maintain that monopoly. Extending, as 
these commentors urge, each of the provisions of the RPFJ to a wide 
variety of non-PC devices--all of them outside of the relevant market 
proved at trial and upheld on appeal--is unwarranted and unrelated to 
any proper remedial goal in this case.

IV. OEM Provisions

A. Overreliance on OEMs

    128. Several commentors suggest that the RPFJ burdens OEMs with the 
responsibility of injecting competition into the operating system 
market, a burden that, in the view of these commentors, the OEMs are 
not financially or technically capable of bearing. Under this view, the 
low margins and fierce price competition in the OEM business will deter 
OEMs from undertaking the costs and risks of exercising their new 
flexibility, guaranteed by RPFJ Section III.H, to replace access to 
Microsoft Middleware Products with access to Non-Microsoft

[[Page 12149]]

Middleware Products.\135\ To correct this perceived problem in the 
RPFJ, one commentor proposes to require Microsoft to license the binary 
code of its Windows Operating Systems Products to ISVs and system 
integrators at the lowest license fee that Microsoft charges to any OEM 
or other customer; the ISVs or system integrators would be allowed to 
repackage Windows with non-Microsoft middleware and applications and 
license the new package to interested OEMs or other consumers.\136\
---------------------------------------------------------------------------

    \135\ ProComp 56-57; CCIA 58-59; CCIA, Stiglitz & Furman 32-33; 
SIIA 56-60.
    \136\ SIIA 56-60.
---------------------------------------------------------------------------

    129. The argument that competitive pressures constrain OEMs, and so 
will make them unwilling to load non-Microsoft middleware, ignores the 
fact that the OEMs will respond to competitive pressures in choosing 
what software to offer consumers. The low margins and fierce 
competition in the OEM industry make OEMs more sensitive to consumer 
preferences, not less. If an OEM believes it can attract more customers 
by replacing a Microsoft product with a non-Microsoft product, it will 
do so; if not, it will not. And, indeed, this is precisely the way that 
a market should work. Thus, the success of the RPFJ in ensuring 
competitive conditions should not be judged by which choices OEMs make; 
rather it should be judged by whether OEMs have the opportunity to make 
those choices, free from contractual restrictions and fear of 
retaliation.
    130. Similarly, the likely competitive impact of the RPFJ cannot be 
evaluated by looking at how OEMs have responded to the limited freedom 
to replace Microsoft's desktop icons in Windows XP that Microsoft 
voluntarily offered to OEMs in a letter dated July 11, 2001. Several 
commentors leap from the observation that no OEM has so far chosen to 
remove Internet Explorer from the desktop to the assertion that 
therefore the RPFJ's provisions permitting the removal of end-user 
access to Microsoft Middleware Products will have no competitive 
effect.\137\
---------------------------------------------------------------------------

    \137\ SIIA 16; CCIA 54-55; AOL 15-16; ProComp 60.
---------------------------------------------------------------------------

    131. Such a leap is unwarranted for several reasons. First, the 
RPFJ will grant OEMs significantly greater flexibility to customize 
Windows compared to Microsoft's voluntary offer. An OEM's 
``experience'' under Microsoft's July 11 letter does not equate to 
experience under the RPFJ. The United States believes that it is quite 
possible that OEMs will choose to take advantage of the RPFJ's 
flexibility even if they have not taken advantage of the very limited 
flexibility Microsoft has offered them so far. In fact, at least one 
OEM recently showed that it will replace Microsoft middleware when it 
believes other options are more profitable: Compaq announced, on 
December 12, 2001, that its main consumer line of PCs will ship with 
RealNetworks' RealOne Player, rather than Microsoft's Windows Media 
Player, set as the default media player.\138\ Second, other OEMs may 
have been reluctant to start customizing their systems until a final 
judgment is in place and they know the precise contours of their 
options. Third, as explained above, even if an OEM chooses not to 
replace Microsoft products with non-Microsoft products, that does not 
detract from the value of providing the OEM with the flexibility to do 
so. The RPFJ is intended to protect the competitive process, not to 
impose particular competitive outcomes.
---------------------------------------------------------------------------

    \138\ See Compaq Press Release, Dec. 12, 2001, http://www.compaq.com/newsroom/pr/2001/pr2001121204.html.
---------------------------------------------------------------------------

    132. More broadly, the emphasis in the RPFJ on provisions to free 
OEMs' choices is entirely appropriate, given their importance in the 
case. The Court of Appeals found that OEM preinstallation was ``one of 
the two most cost-effective methods by far'' of distributing browsers, 
and that Microsoft used various license restrictions on OEMs to 
``prevent[] OEMs from taking actions that could increase rivals' share 
of usage.'' Microsoft, 253 F.3d at 60, 62. The RPFJ's provisions 
reflect that preventing Microsoft from defeating future middleware 
threats through restrictions and pressure on the OEM channel is 
essential to ensuring that there are no practices likely to result in 
monopolization in the future.

B. Non-Retaliation (RPFJ Sec. III.A)

    133. Section III.A of the RPFJ prohibits a broad range of 
retaliatory conduct by Microsoft. Specifically, Microsoft may not 
retaliate against an OEM based upon the OEM's contemplated or actual 
decision to support certain non-Microsoft software. This section 
assures OEMs the freedom to make decisions about middleware or other 
operating systems without fear of reprisal.
    134. Commentors express several concerns about Section III.A.\139\ 
Although some commentors congratulate the United States for provisions 
that are procompetitive, represent real benefits to consumers, and take 
the club out of Microsoft's hand,\140\ others believe that this section 
is not broad enough. Some commentors propose, for example, that the 
section be expanded to cover: (1) all software, including Microsoft 
Office; \141\ (2) entities other than OEMs; \142\ (3) threats of 
retaliation; \143\ (4) all forms of retaliation; \144\ (5) retaliation 
for any lawful acts undertaken by an OEM; \145\ (6) existing forms of 
non-monetary consideration and all monetary consideration; \146\ and 
(7) shipping PCs without an operating system.\147\ One commentor seeks 
to eliminate from Section III.A Microsoft's ability to enforce its 
intellectual property rights through patent infringement suits.\148\ 
Commentors also believe that the Section does not protect OEMs from 
arbitrary termination of their Windows licenses.\149\ Commentors 
further claim that the standard contained in Section III.A. of 
subjective, actual knowledge is too hard to meet,\150\ and that 
Microsoft's ability to offer Consideration is too broad.\151\ Finally, 
some commentors object to the RPFJ's failure to define ``retaliation.'' 
\152\
---------------------------------------------------------------------------

    \139\ RealNetworks 24-25; AAI 25-34; SBC 91-100; Harris 4; Bast 
2-3; Thomas 2-3; Red Hat 11-13, 16-18, 22-23; Alexander 2; KDE 13-
14; CFA 88-89, 93-95; CompTIA 5; PFF 19; ProComp 55-60; Pantin 4-7; 
Palm 14-15; CCIA 85-87, and Stiglitz & Furman 31-32; AOL 34-38; AOL, 
Klain 2-3; Nader/Love 1-6; Maddux Paras.  2-4; Sen. Kohl 4; Lococo 
1.
    \140\ Nader/Love 2; CompTIA 5.
    \141\ SBC 97; Sen. Kohl 3-4; Nader/Love 2; AOL, Klain 2; Pantin 
4-7; ProComp 59; PFF 19; AAI 31-33.
    \142\ SBC 95-96, 99; Schulken 1; McBride 1 (should apply to 
Xbox).
    \143\ Palm 14; Red Hat 22-23; ACT 27.
    \144\ Sen. Kohl 4; Pantin 4-7; ProComp 59; CFA 88-89; Young 1.
    \145\ Pantin 6-7.
    \146\ RealNetworks 24-25; AOL, Klain 3.
    \147\ Pantin 4-7; Harris 4; Alexander 2; Godshall 1 (shipping 
PCs with a single non-Windows operating system); Miller 2; Hafermalz 
1; Scala 1; Schulze 2; Peterson 3; Burke 2.
    \148\ Red Hat 11-13, 16-18, 22-23.
    \149\ AOL, Klain 3; CCIA 85-86; Pantin 6-7; Harris 4.
    \150\ SBC 97; ProComp 59; KDE 13.
    \151\ Maddux para. 5; AOL, Klain 3.
    \152\ SBC 96; Red Hat 16-17.
---------------------------------------------------------------------------

1. Section III.A Is Sufficiently Broad
    135. Section III.A is designed to prevent Microsoft from 
undertaking actions against OEMs that have the purpose and effect of 
impairing an OEM's ability freely to choose to distribute and support 
middleware that may threaten Microsoft's operating system 
monopoly.\153\ See also CIS at 25.

[[Page 12150]]

The Section is logically limited to retaliation against OEMs,\154\ as 
no evidence was presented at trial to show that entities other than 
OEMs, ISVs, and IHVs have been subject to retaliation in the past, or 
that other entities are so dependent upon commercial relations with 
Microsoft (or Microsoft's Consideration) that they are susceptible to 
retaliation.
---------------------------------------------------------------------------

    \153\ Levy 1 (settlement adequate). This would include linking 
the price or terms of Office to the promotion of rival middleware. 
Doing so would represent an alteration in Microsoft's commercial 
relationship with that OEM because of that OEM's promotion of 
middleware.
    \154\ Section III.F addresses retaliation against ISVs and IHVs.
---------------------------------------------------------------------------

    136. Comments suggesting that Section III.A is deficient because it 
fails to address threats of retaliation similarly are misplaced. 
Section III.A ensures that Microsoft cannot retaliate based upon the 
OEM's contemplated or actual decision to support certain non-Microsoft 
software. Threats of retaliation are empty when Microsoft cannot follow 
through on them.
    137. Some commentors contend that Microsoft should be prohibited 
from all forms of retaliation, noting that Section III.A does not 
prohibit retaliation that is unrelated to middleware. Commentors urge 
the Court to expand Section III.A. to prohibit retaliation for any 
lawful act by an OEM. This position, however, misapprehends the case. 
This case dealt with Microsoft's actions with respect to middleware 
threats to Microsoft's operating system. The RPFJ prohibits Microsoft 
both from repeating those actions found to be illegal, and from 
undertaking other, similar acts that may protect its operating system 
monopoly from middleware threats.
    138. The provision of Section III.A covering non-monetary 
Consideration \155\ also drew comments. Commentors suggest that the 
provision be re-written to include monetary Consideration. In fact, 
Section III.A. already covers existing and successor forms of monetary 
Consideration, as Microsoft is expressly prohibited from retaliating by 
``altering . . . commercial relations with [an] OEM . . .'' Dropping or 
changing monetary Consideration would alter commercial relations. 
Section III.A, however, does not prohibit Microsoft from competing by, 
for example, offering to pay OEMs for desktop placement. But Section 
III.A would prohibit Microsoft, in this example, from retaliating by 
altering its commercial relations with, or withholding non-monetary 
Consideration from, OEMs that choose to accept a third party's offer in 
lieu of Microsoft's.
---------------------------------------------------------------------------

    \155\ ``Consideration'' is defined in Section VI.C. Briefly, 
Consideration includes such things as preferential licensing terms, 
support, product information, certifications, and permission to 
display trademarks, icons, or logos.
---------------------------------------------------------------------------

    139. Certain commentors also argue that limiting retaliation to 
withholding ``newly introduced'' forms of non-monetary Consideration 
somehow exempts existing forms of such Consideration from the reach of 
Section III.A. This is incorrect. As noted in the CIS (at 26), this 
clause specifically applies to ``successor versions of existing forms 
of Consideration.''
    140. Finally, certain comments recommend that this Section 
expressly permit shipping a computer without a Microsoft operating 
system or no operating system at all. The United States notes, however, 
that such machines are already available in the market \156\ and sees 
no reason for the RPFJ to address the question.\157\
---------------------------------------------------------------------------

    \156\ The Internet site Yahoo! lists in its commercial directory 
a substantial number of retailers offering custom-built PCs, at 
least some of which will provide a computer without an operating 
system at a discounted price (for example, Discovery Computers). 
Many refurbished computers are offered without an operating system, 
as well. Moreover, component retailers offer replacement hard 
drives, also without an operating system.
    \157\ See also, RPFJ Sec. III.C.
---------------------------------------------------------------------------

2. Section III.A Properly Allows Microsoft To Enforce Intellectual 
Property Rights
    141. Section III.A provides that nothing in the provision prohibits 
Microsoft from enforcing its intellectual property rights where doing 
so is not inconsistent with the RPFJ. A commentor suggests that Section 
III.A should, in fact, prohibit Microsoft from bringing or threatening 
lawsuits to enforce such rights. This suggestion is meritless. The 
commentor would force Microsoft to dedicate its intellectual property, 
effectively putting all of its patented and copyrighted material into 
the public domain. Although Microsoft's competitors would appreciate an 
ability to free-ride on Microsoft's investment in research and 
development, the antitrust laws do not require such a draconian remedy 
with its attendant destruction of incentives for innovation. The RPFJ 
seeks to draw a balance between preventing Microsoft from engaging in 
anticompetitive acts to protect its operating system monopoly while 
still encouraging it to compete and to innovate. Prohibiting Microsoft 
from enforcing its intellectual property rights would deter innovation 
unduly and encourage infringement without barring conduct found by the 
District Court and Court of Appeals to violate the antitrust laws.
3. Section III.A Protects OEMs From Arbitrary Termination of Their 
Licenses
    142. Commentors are simply incorrect in their assertions that the 
terms of the RPFJ permit arbitrary termination of Covered OEMs' Windows 
licenses.\158\ The RPFJ states expressly that Microsoft may not 
terminate a Covered OEM's license without first providing a written 
notice and opportunity to cure. It is only if the OEM has failed to 
cure the violation after the two letters that Microsoft then may 
terminate the OEM's license. If the OEM cures the violation, Microsoft 
cannot terminate for that violation. Microsoft cannot reasonably be 
barred from ever terminating an OEM's license, because there may be 
legitimate reasons for doing so (e.g., an OEM's failure to pay).
---------------------------------------------------------------------------

    \158\ ``Covered OEM'' is defined in Section VI.D.
---------------------------------------------------------------------------

    143. Section III.A.3 also protects OEMs from losing their Windows 
license in retaliation for exercising any option provided for in the 
RPFJ. Pursuant to those provisions, for example, Microsoft may not 
terminate a Windows license because an OEM has removed end-user access 
to any Microsoft Middleware Product.
4. Requiring Proof of Knowledge Is Necessary and Can Be Met
    144. Certain commentors allege that requiring proof that Microsoft 
knew that an OEM was or was contemplating undertaking any of the 
enumerated actions before finding retaliation sets an impossible 
standard. In fact, such a requirement is reasonable because an 
inference of retaliation would be inappropriate unless Microsoft knows 
of the action that it is seeking to punish or prevent.
5. Microsoft's Permitted Use of ``Consideration'' Is Appropriate
    145. The RPFJ permits Microsoft to provide Consideration to an OEM 
with respect to a Microsoft product or service, but only where the 
level of Consideration is commensurate with the OEM's contribution to 
the development, distribution, promotion, or licensing that particular 
product or service. This portion of Section III.A is designed to 
address permissible collaborations between an OEM and Microsoft to 
promote Microsoft products and services. In exchange for the OEM's 
assistance, Microsoft may provide a different level of consideration 
commensurate with that OEM's contribution--so that, for example, an OEM 
that collaborates with Microsoft on developing a particular product 
through extensive testing, or offers advertising or other promotion, 
may be compensated

[[Page 12151]]

for its greater role through a higher level of Consideration for that 
product than one that is not developing or supporting that product. 
Similarly, this provision would permit Microsoft to provide different 
levels of Consideration to those OEMs buying larger quantities of 
product. The OEM buying one million copies of a product may be offered 
greater support than the OEM buying five copies. Microsoft may, 
however, base the level of Consideration only on the OEM's support for 
the same Microsoft product or service, and not on an OEM's agreement 
not to support or develop a competing product or to support or develop 
other Microsoft products.
6. The RPFJ Uses the Common Language Definition of ``Retaliate''
    146. Commentors also complain that the RPFJ fails to define 
``retaliate.'' In fact, no separate definition for the term is needed. 
The RPFJ prohibits Microsoft from retaliating by altering commercial 
relations with, or withholding newly-introduced forms of non-Monetary 
Consideration from, an OEM. In this context, ``retaliate'' does not 
require further elaboration.

C. Uniform Terms (RPFJ Sec. III.B)

    147. To ensure that the twenty Covered OEMs will be free from the 
threat of Microsoft retaliation or coercion, Section III.B requires 
that Microsoft's Windows Operating System Product licenses with those 
OEMs contain uniform terms and conditions, including uniform royalties. 
These royalties must be established by Microsoft and published on a 
schedule that is available to Covered OEMs and the Plaintiffs.
    148. 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. Section III.B is 
intended to eliminate any opportunity for Microsoft to set or modify a 
particular OEM's royalty, or its other license terms or conditions, in 
order to induce that OEM not to promote non-Microsoft software or to 
retaliate against that OEM for promoting competing software.\159\ By 
removing any mechanism for Microsoft to use such leverage, this 
provision will further permit OEMs to make their own independent 
choices without fear of retribution.
---------------------------------------------------------------------------

    \159\ Economides 12 (``this restriction can help avoid possible 
retaliation of Microsoft, so in the present context, it may be in 
the public interest.'')
---------------------------------------------------------------------------

 1. Top Twenty OEMs
    149. Section III.B is limited to the twenty OEMs with the highest 
worldwide volume of licenses of Windows Operating System Products. Some 
commentors criticize this limitation, arguing that it leaves Microsoft 
free to retaliate against smaller OEMs, including regional ``white 
box'' OEMs.\160\ The top twenty OEMs, however, together account for a 
substantial percentage, in excess of 75 percent in fiscal 2001, of all 
Windows licenses. Consequently, providing those key OEMs with the added 
guarantees of freedom to distribute and promote particular types of 
software that could erode Microsoft's monopoly--the purpose of Section 
III.B--is of extreme competitive significance. In any event, all OEMs 
are protected from retaliation by Section III.A of the RPFJ. Section 
III.B is intended to provide an additional layer of protection for 
these twenty OEMs that are likely to be of great significance.
---------------------------------------------------------------------------

    \160\ Kegel 9; Schulze 2; Francis 1.
---------------------------------------------------------------------------

    150. At least one commentor would go much further and seek to 
require Microsoft to offer uniform terms not only to the top twenty 
OEMs, but also to all of the hundreds of OEMs, whatever their size, and 
even further to ``all third party licensees.'' \161\ There is no 
rational basis for treating every licensee of Windows, from the largest 
OEM to the smallest corporation, equally with respect to their Windows 
royalties and all the terms and conditions of their licenses. Certainly 
the intent to prevent Microsoft from discriminating or retaliating in 
response to competitive activities cannot begin to justify such a broad 
provision. In fact, such a requirement would be enormously inefficient 
and disruptive and would ignore vast differences between differently 
situated types or groups of licensees.
---------------------------------------------------------------------------

    \161\ SBC 136.
---------------------------------------------------------------------------

    151. In any event, neither the antitrust laws generally, nor the 
Court of Appeals' decision specifically, require that even a monopolist 
like Microsoft treat all third parties equally. In fact, in many 
instances ``unequal'' treatment (e.g., collaboration between two 
companies that does not include other firms) evidences legitimate 
competition. Thus, Section III.B was crafted carefully to provide extra 
protection against improper rewards or retaliation involving the most 
significant OEMs, without precluding other conduct that could result in 
potentially procompetitive benefits.
2. MDAs Or Other Discounts
    152. A number of commentors argue that Section III.B should forbid 
all market development allowances (``MDAs'') or other discounts.\162\ 
This approach would be unnecessarily overbroad and would discourage 
efficient behavior that has little or no potential to be used by 
Microsoft for anticompetitive purposes. There are a range of business 
activities involving Microsoft and OEMs, having nothing to do with 
operating system or middleware competition, where MDAs or other 
discounts would be procompetitive.
---------------------------------------------------------------------------

    \162\ SBC 101, 136; Herrmann 1; Timlin 3; Mitchell 2; Weiller 2; 
Clapes 5.
---------------------------------------------------------------------------

    153. At the same time, Section III.B carefully guards against 
Microsoft misusing MDAs 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 
RPFJ.\163\ To avoid the risk of Microsoft misusing MDAs or other 
discounts to reward or retaliate against OEMs for competitive 
middleware activities, Section III.B provides that, 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, and those criteria must be applied uniformly to the relevant 
OEMs.
---------------------------------------------------------------------------

    \163\ For example, several commentors raise the specter of 
Microsoft offering OEMs MDA discounts on Windows licenses based on 
the number of copies of Office shipped by the OEMs. Kegel 9; CFA 12. 
But such discounts would be barred by the final paragraph of Section 
III.A, which forbids Microsoft from paying consideration with 
respect to one product based on an OEM's distribution of a different 
Microsoft product. Section III.B.3 would then preclude an MDA for 
such a purpose, since it would be ``otherwise inconsistent with any 
portion of this Final Judgment.'' Similarly, the AOL comment 
erroneously asserts that the MDA provision would allow OEMs that 
promote Microsoft products to receive MDA discounts that are denied 
to OEMs that deal with Microsoft's rivals. AOL 35-36.
---------------------------------------------------------------------------

    154. The RPFJ does prohibit Microsoft from using MDAs or other 
discounts if they are inconsistent with any other provision in the 
RPFJ. This would include, for example, retaliation against computer 
manufacturers for using non-Microsoft middleware that is implemented 
through incentive payments for faster ``boot up.''
3. OEMs Should Be Able To Negotiate
    155. Several commentors argue that there should be a limited 
exception to the requirement of uniform license

[[Page 12152]]

terms and conditions in Section III.B to permit OEMs to continue to 
negotiate with Microsoft concerning exceptions to certain intellectual 
property ``non assertion covenants'' or ``non assertion of patents'' 
provisions in their licenses with Microsoft.\164\ In these covenants, 
which have been part of Windows license agreements with OEMs for years 
but which historically have been the subject of intense negotiation 
between Microsoft and OEMs, the OEMs agree not to assert certain patent 
claims against Microsoft.\165\
---------------------------------------------------------------------------

    \164\ Sony 2, 4. See also Litigating States' Motion for Limited 
Participation in Light of the Deposition of Mr. Richard Fade, filed 
February 19, 2002, at 6-7, 19 (``Litigating States' Motion''). In 
their Motion, the Litigating States seek an order that would permit 
them to participate in this Tunney Act proceeding for the limited 
purpose of submitting portions of the transcript of a Microsoft 
employee, Richard Fade, purportedly relating to the issues of 
Section III.B, the non assertion of patent provisions, and Section 
III.I.5. The United States' Response to the Litigating States' 
Motion did not object to participation in this one instance colely 
for the narrow purpose identified--adding the proffered information 
to the Litigating States' public comment--but did object to any 
broader or continued participation. Microsoft filed its Response 
(``Microsoft Response'') on February 22, 2002, in which it did not 
oppose the participation and submission, and to which it attached a 
declaration of Richard Fade (``Fade Decl.''). Because the Court has 
not yet ruled on the Motion, the United States will proceed to 
respond here to the substance of the information proffered in the 
Litigating States' Motion.
    \165\ Sony 2; Litigating States' Motion 6-7; Microsoft Response 
4-5; Fade Decl. Paras. 11-16.
---------------------------------------------------------------------------

    156. According to these commentors, the uniform licensing terms 
provision of Section III.B of the RPFJ appears to be preventing 
Microsoft from negotiating with OEMs about the latest non assertion 
provisions.\166\ One of the commentors, Sony, urges a modification or 
clarification of the RPFJ that would permit it and other OEMs to 
negotiate with Microsoft for more favorable non assertion provisions 
than those contained in Microsoft's uniform terms and conditions, with 
any new terms obtained then required to be offered to all Covered OEMs 
on a non-discriminatory basis; individual OEMs could choose to accept 
or decline.\167\
---------------------------------------------------------------------------

    \166\ Sony 4; Litigating States' Motion 7.
    \167\ Sony 4.
---------------------------------------------------------------------------

    157. The United States believes that such a modification is 
unnecessary. Currently, nothing in the RPFJ prevents Microsoft from 
negotiating with Covered OEMs prior to establishing its uniform terms 
and conditions. The RPFJ does not in any way require that Microsoft 
must unilaterally set those terms, without any advance negotiation with 
or input from the OEMs. Similarly, nothing in the RPFJ prevents 
Microsoft from agreeing with an OEM to provisions that depart from the 
uniform terms and conditions, so long as any term or condition 
resulting from that agreement then becomes the uniform term or 
condition, is included on the required schedule, and is offered on a 
non-discriminatory basis to all Covered OEMs. And certainly nothing in 
the RPFJ specifies what terms or conditions ultimately will become the 
uniform terms and conditions. Those terms and conditions may be set at 
a variety of levels determined either by Microsoft itself or through 
advance discussion and negotiation with the OEMs; the RPFJ specifies 
neither the process nor the resulting level.
    158. The Litigating States also assert that Microsoft's view is 
that it is authorized to insist on uniform, and uniformly onerous, non 
assertion provisions by the terms of Section III.I.5. To the extent 
that anyone at Microsoft (or elsewhere) ever believed or conveyed to 
any OEM that Section III.I.5 of the RPFJ authorizes Microsoft to insist 
on broad patent non-assertion provisions, that belief was inaccurate. 
The cross-license provision in III.I.5 was extremely narrow and applied 
only in a particular, limited type of situation. In any event, in part 
in response to these comments, and to avoid any possibility that 
Section III.I.5 could be misinterpreted in a way that discourages any 
third party from taking advantage of options or alternatives offered 
under the RPFJ, the United States and Microsoft have agreed to delete 
Section III.I.5 from the SRPFJ. See Section VII(C)(3) below.
4. Volume Discounts
    159. One commentor claims that the RPFJ should permit Microsoft to 
utilize volume discounts only if they are based on an independent 
determination of the actual volume of shipments, in order to avoid 
Microsoft manipulation of such discounts.\168\ But such a regulatory 
mechanism is not necessary under the RPFJ. It requires that any volume 
discounts must be ``reasonable'' and based on the ``actual volume'' of 
Windows licenses. The RPFJ's enforcement mechanism will ensure that 
Microsoft does not misuse the calculation of such discounts.
---------------------------------------------------------------------------

    \168\ SBC 102, 136.
---------------------------------------------------------------------------

5. Termination--Cause, Materiality, And Notice
    160. Some commentors criticize Section III.B for not requiring 
Microsoft to demonstrate ``good cause'' before terminating a Covered 
OEM's license, and for not requiring even more notices and 
opportunities to cure before termination.\169\ The commentors argue 
that Microsoft could abuse the notice provision and then terminate a 
disfavored OEM without any opportunity to cure.
---------------------------------------------------------------------------

    \169\ SBC 102-03; Drew 1.
---------------------------------------------------------------------------

    161. First, any abuse of the opportunity to cure or termination 
provisions by Microsoft--e.g., through sham notices--would be a serious 
breach of its obligations under the RPFJ. Second, if the process is not 
misused, two previous notices and opportunities to cure during a single 
license term should provide ample protection against retaliation for 
OEMs that are dealing with Microsoft in good faith and ample protection 
for Microsoft against OEMs that fail to comply with their contractual 
obligations. Finally, a requirement that any termination be for ``good 
cause'' is unnecessary and overly regulatory; once again, any sham 
termination by Microsoft for anticompetitive purposes would constitute 
a serious breach of the RPFJ.
6. Servers Or Office
    162. Section III.B requires that Microsoft employ uniform license 
agreements and uniform terms and conditions for the top twenty OEMs 
only with regard to its licensing of Windows Operating System Products. 
The provision is limited to Windows licenses because the relevant 
market in which Microsoft was found to have a monopoly consists of PC 
operating systems, and because the various illegal actions in which 
Microsoft engaged were undertaken to protect that monopoly, not other 
products.
    163. Some commentors argue that Microsoft can evade the 
restrictions of Section III.B simply by shifting its retaliatory price 
discrimination to other key Microsoft products such as Office or server 
operating systems.\170\ To the extent the commentors intend to assert 
that this limitation in Section III.B leaves Microsoft free to use 
discriminatory licensing terms or conditions for Office or other 
important Microsoft products in order to reward or punish OEMs for 
their actions regarding Microsoft and non-Microsoft Middleware, that 
assertion is wrong. Although Section III.B is limited to Windows 
Operating System licenses, the general anti-retaliation provisions of 
Section III.A are not so limited. See Section IV(B) above. Any attempt 
by Microsoft to alter the terms of any (not just the top twenty) OEM's 
license for Office or any other product (or any other commercial 
relationship with that OEM) because that OEM is working with rival 
Platform Software or any product or service that distributes or 
promotes non-

[[Page 12153]]

Microsoft middleware will be prohibited by Sec. III.A.
---------------------------------------------------------------------------

    \170\ CCIA 87-88; Turk.
---------------------------------------------------------------------------

7. Key License Terms
    164. One commentor argues that the RPFJ should require Microsoft to 
provide OEMs and other licensees with equal access to ``licensing 
terms, discounts, technical, marketing and sales support, product and 
technical information, information about future plans, developer tools 
or support, hardware certification and permission to display trademarks 
or logos.'' \171\ Otherwise, the commentor claims, Microsoft can keep 
such information secret and take advantage of licensees' ignorance 
about what terms are available.\172\ With respect to the top twenty 
Covered OEMs, however, Microsoft already is required by Section III.B 
to offer all license terms and conditions on a uniform and non-
discriminatory basis.
---------------------------------------------------------------------------

    \171\ SBC 101-02, 136-37 (describing Litigating States' 
Sec. 2(b)).
    \172\ SBC 136-37.
---------------------------------------------------------------------------

8. Prohibition On Enforcing Agreements Inconsistent With The RPFJ
    165. One commentor urges that Microsoft should be forbidden from 
enforcing any contract term or agreement that is inconsistent with the 
decree.\173\ But such a provision is both unwarranted and unnecessary. 
To the extent that a contract term or agreement seeks to bar someone 
from doing something that is required or permitted under the RPFJ, or 
requires someone to do something that Microsoft is forbidden from 
offering, the RPFJ already would prevent such action. In certain key 
areas, the RPFJ does include a provision prohibiting Microsoft from 
retaliating against an OEM for exercising any of its options or 
alternatives under the RPFJ (Section III.A.3) or from basing MDAs on 
any requirements that are inconsistent with the RPFJ (Section 
III.B.3.c). In the latter case, the provision is necessary to make 
clear that, by affirmatively authorizing Microsoft to do something 
(offer MDAs or other discounts), the RPFJ is not authorizing Microsoft 
to base those discounts on inappropriate criteria.
---------------------------------------------------------------------------

    \173\ SBC 136-37.
---------------------------------------------------------------------------

D. Freedom Of OEMs To Configure Desktop (RPFJ Sec. III.C)

    166. Section III.C of the RPFJ prohibits Microsoft from restricting 
by agreement any OEM licensee from exercising certain options and 
alternatives. A few comments argue that Microsoft should be prohibited 
from restricting OEMs by ``other means'' as well as by agreements.\174\ 
The United States believes that the limitation to agreements is 
appropriate in this section.\175\ The most obvious and effective means 
for Microsoft to restrict an OEM's conduct is by agreement, as 
reflected in the record in this case. In addition, as explained in the 
CIS, the RPFJ uses the term ``agreement'' broadly to include any 
contract, requirement, or understanding.\176\ Use of other means by 
Microsoft to influence, limit, or reward the options of OEMs is 
appropriately covered in other provisions, such as Sections III.A, 
III.B, and III.G. Technical means of limiting the options of OEMs are 
addressed by Section III.H.
---------------------------------------------------------------------------

    \174\ Pantin 8; Maddux para. 5.
    \175\ Levy 1 (Section III.C adequately prohibits Microsoft from 
preventing OEMs and consumers form installing rival operating 
systems or removing Microsoft middleware products and installing 
rival middleware).
    \176\ CIS at 29.
---------------------------------------------------------------------------

    167. Looking at the products covered by this section, some comments 
argue that the provision should extend to any application, not just 
middleware, or at least to Microsoft Office.\177\ The United States 
believes that the decree correctly focus on middleware, because that 
was the focus of Plaintiffs' case and of the courts' holdings. Section 
III.C provides broad protection for non-Microsoft Middleware as it is 
configured for use with Windows. Because this section focuses on OEM 
flexibility in configuring Windows Operating System Products, it would 
be illogical to consider products, such as Office, that are not part of 
the Windows Operating System Product.
---------------------------------------------------------------------------

    \177\ CFA 95; Nader/Love 2; Pantin III.13; Novell 8.
---------------------------------------------------------------------------

    168. It is important to remember that this section pertains to OEM 
configurations, and not to what users or Non-Microsoft Middleware 
itself can initiate if selected by a user. These provisions, in 
essence, control how the configuration will appear the first time the 
user boots the computer. After that first time, the user may take many 
actions, such as clicking on icons, rearranging the desktop, or making 
other program choices, that drastically alter the configuration of the 
computer. A user launching a program by clicking on an icon may change 
many of the configuration options of the computer, including whether 
the program will subsequently launch automatically or be displayed in a 
certain size or be the default application. Thus, Section III.C governs 
only OEM configuration, but not any subsequent configurations based on 
user choices.
1. Section III.C.1
    169. Several comments suggest that, under Section III.C.1, OEMs 
should be given greater flexibility in configuring Windows, extending 
to such things as taskbars, toolbars, links, and default pages and 
similar end user features in Internet Explorer; features of Windows XP 
such as the My Photos, My Music, and similar operating system folders; 
and elimination or alteration of the Start Menu.\178\
---------------------------------------------------------------------------

    \178\ SIIA 22-23, Pantin 9.
---------------------------------------------------------------------------

    170. Subsection III.C.1 strikes an appropriate balance between the 
interests of Microsoft and OEMs in order to allow promotion and 
installation of Non-Microsoft Middleware. In fact, the provision covers 
some of the features requested by commentors, such as quick launch bars 
and the Start Menu. As discussed in the CIS (at 30), ``a list of icons, 
shortcuts or menu entries'' includes a wide variety of access points in 
Windows Operating System Products, including the system tray, ``right-
click'' lists, ``open with'' lists, lists that appear based on an 
action or event, such as connecting hardware or inserting an audio CD, 
and even lists within folders such as MyMusic or MyPhotos. This 
flexibility must be balanced against Microsoft's interest in presenting 
a user interface on its Windows products that has been well tested and 
is simple and intuitive for users. Windows is, after all, Microsoft's 
product. The United States believes that the provision allows for many 
opportunities for promotion and installation of Non-Microsoft 
Middleware without going so far as to allow OEMs to make drastic 
changes to Microsoft's user interface. Cf. Microsoft, 253 F.3d at 63 
(Microsoft's restrictions on OEM reconfiguration of user interface did 
not violate Section 2).
    171. Another commentor argues that the RPFJ merely codifies 
Microsoft's existing practices regarding flexibility of configuration 
and serves almost no remedial purpose.\179\ To the contrary, Section 
III.C gives OEMs much greater flexibility than they have ever had. Even 
as late as summer 2001, Microsoft still was restricting the placement 
of icons in Windows. The flexibility OEMs receive under Section III.C, 
combined with the ability to remove access to Microsoft Middleware 
Products under Section III.H, will allow OEMs to offer many different 
configurations and promote Non-Microsoft Middleware in a variety of 
ways. That Microsoft voluntarily provides certain flexibility does not 
eliminate the need for relief requiring

[[Page 12154]]

that flexibility, as the Court of Appeals' decision mandates.
---------------------------------------------------------------------------

    \179\ ProComp 10, 67.
---------------------------------------------------------------------------

    172. Commentors also note that the term ``functionality'' (see 
Section III.C.1) is not defined, that Microsoft is free to decide what 
categories qualify for display, and that Microsoft could exclude Non-
Microsoft Middleware for which no Microsoft counterpart exists or 
otherwise restrict the meaning of functionality.\180\ As explained in 
the CIS (at 30), ``functionality'' is intended to capture broad 
categories of products, and not to be used to discriminate against Non-
Microsoft Middleware. Thus, for example, Microsoft may reserve a 
particular list for multimedia players, but cannot specify either that 
the listed player be its own Windows Media Player, or that the player 
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. Microsoft cannot prescribe the functionality 
so narrowly that it becomes, in effect, discriminatory.
---------------------------------------------------------------------------

    \180\ SBC 51, 138-39; Maddux para. 6; Pantin 9-11; Litigating 
States, Ex. A 10; Elhauge 8-9; Clapes 5-6; PFF 20.
---------------------------------------------------------------------------

    173. Moreover, Microsoft cannot completely forbid the promotion or 
display of a particular Non-Microsoft Middleware Product on the ground 
that Microsoft does not have a competing product itself. To do so would 
be discriminatory; there must always be (and there always has been) a 
place for applications generally to be listed or their icons displayed. 
Without this functionality limitation, developers of Non-Microsoft 
Middleware with media player functionality could insist that it wants 
to be displayed with instant messaging services, making groupings of 
supposedly competitive products with the same or similar functionality 
meaningless and hopelessly chaotic for the user.
2. Section III.C.2
    174. A few commentors argue that, under Section III.C.2, Microsoft 
has control over what non-Microsoft products may be promoted by an OEM 
because Microsoft could define what ``impair[s] the functionality of 
the user interface.'' \181\ Section III.C.2 applies only to shortcuts, 
but it allows those shortcuts to be of any size and shape. Potentially, 
these shortcuts could be so large as to cover key portions of the 
Windows user interface (for example, the Start Menu). As the Court of 
Appeals found, Microsoft has an interest in preventing unjustified 
drastic alterations of its copyrighted work. Microsoft, 253 F.3d at 63. 
The limitation preventing shortcuts from impairing the functionality of 
the user interface was designed to respect this interest, while still 
giving OEMs considerable freedom to promote Non-Microsoft Middleware.
---------------------------------------------------------------------------

    \181\ SBC 52; CCIA 56; Maddux para. 7; Miller 2; Hofmeister 2.
---------------------------------------------------------------------------

3. Section III.C.3
    175. There are many comments related to Section III.C.3. Some 
comments argue that this subsection gives Microsoft design control 
because Microsoft could set parameters for competition and user 
interface design via the limitation on ``similar size and shape,'' 
which then leaves competing applications to conform to Microsoft's 
``look and feel.'' \182\ This is not the intent or effect of this 
provision. See CIS at 31-32. For programs that are configured by the 
OEM to launch automatically, either in place of, or in addition to, 
Microsoft Middleware Products, the restriction limits whether 
applications can launch with their full user interface, no interface, 
or appear in the system tray or similar location. Thus, this provision 
addresses Microsoft's interest in preventing unjustified drastic 
alterations to its copyrighted work, as recognized by the Court of 
Appeals. See 253 F.3d at 63.
---------------------------------------------------------------------------

    \182\ AOL 37; AOL, Klain 4; CFA 95; RealNetworks 23; Henderson 
8-9; Litigating States, Ex. A 10; ProComp 64; CCIA, Stiglitz & 
Furman 28; Maddux para. 8; Pantin 9-11; Alexander 2-3; Giannandrea 
3; Miller 2; Thiel 2; Schneider 2.
---------------------------------------------------------------------------

    176. Some commentors argue that Microsoft retains control of 
desktop innovation because it can prevent OEMs from installing or 
displaying icons or other shortcuts to Non-Microsoft software or 
services if Microsoft does not provide the same software or 
service.\183\ Others say that the middleware icon provisions of III.C.1 
and III.C.3 apply only when Microsoft has a competing product, and 
Microsoft can limit the OEMs' ability to promote competing 
programs.\184\ Still others criticize that Section III.C.3 limits 
automatic launches to the boot-up sequence or when the user connects to 
the Internet, thus limiting the options of OEMs.\185\
---------------------------------------------------------------------------

    \183\ Palm 14; AOL 37; AOL, Klain 4; CCIA 60; PFF 20; Pantin 9-
11; RealNetworks 22; SBC 140; Waldman 3, 8; CCIA 59-60; Clapes 5; 
Schneider 1.
    \184\ Litan 46, 50; CFA 95; SBC 52; Litigating States, Ex. A 10; 
ProComp 64; CCIA, Stiglitz & Furman 28; Giannandrea 3; Waldman 3; 
Hammett 2.
    \185\ ProComp 64; Pantin 9-11; Giannandrea 3; Rovero 3.
---------------------------------------------------------------------------

    177. The majority of these comments are misplaced. Section III.C.1 
does not prevent OEMs from installing or promoting Non-Microsoft 
Middleware, regardless of whether Microsoft has a competing product. At 
a minimum, Section III.C.2 allows for any Non-Microsoft Middleware to 
be installed and displayed on the desktop with a shortcut, completely 
independent of the existence or characteristics of any Microsoft 
product. The only issue is where else in the Windows interface the Non-
Microsoft Middleware will be promoted. As discussed above (see Section 
IV(D)(1)), Microsoft has a valid interest in presenting an orderly user 
interface such that, for example, lists of what are supposed to be word 
processors do not clutter lists of media players. If the Windows 
interface has a space for listing, for example, Internet applications, 
then any Internet application can go there regardless of whether 
Microsoft has a competing application. If the Windows interface has no 
listing for a particular new category of application, then there will 
be, and always has been, a general place where applications can be 
listed, such as the desktop.
    178. It is correct that, under Section III.C.3, Non-Microsoft 
Middleware cannot be configured to launch automatically unless a 
Microsoft Middleware Product would have otherwise launched. However, 
this governs only the original OEM configuration. If the user clicks on 
an icon or otherwise runs the Non-Microsoft Middleware, that 
application can itself set up to launch automatically on subsequent 
boot sequences, or at any number of other times, including but not 
limited to connections to the Internet. Section III.C.3's approach is a 
reasonable compromise with Microsoft's interest in having the computer 
boot up quickly the first time it is turned on, a characteristic that 
users value.
    179. A few commentors believes it is inappropriate that Microsoft 
be allowed to decide what forms the user interface, e.g., a desktop 
with icons, may take.\186\ The United States disagrees. Microsoft has a 
valid interest in developing its products, which some users actually 
prefer on the merits, and in preventing unjustified drastic alterations 
to its copyrighted work. The purpose of the remedy is not to strip 
Microsoft of the ability to design operating systems or compete on the 
merits.
---------------------------------------------------------------------------

    \186\ SBC 52, 140; Godshall 1; Schneider 1-2.
---------------------------------------------------------------------------

4. Section III.C.4
    180. Some commentors argue that Section III.C.4 does not prohibit 
Microsoft from deleting or interfering with competing boot loaders, 
does not allow OEMs to ship machines without any operating system, and 
otherwise

[[Page 12155]]

does not assist the OEMs' ability to promote non-Microsoft operating 
systems.\187\ The United States partially agrees and partially 
disagrees with these comments. Section III.C.4 provides for the option 
of launching other operating systems and prohibits Microsoft from 
attempting to delete or interfere with competing boot loaders that 
accomplish this task. This subsection does not enable OEMs to sell 
machines without an operating system, as that would not promote Non-
Microsoft Middleware. However, Microsoft would run afoul of Section 
III.A if it attempted to restrict OEMs from shipping PCs with rival 
operating systems.
---------------------------------------------------------------------------

    \187\ KDE 14; Pantin 11-14; Harris 5, CFA 89; CompTIA 5 
(supports); Akin 2; Hafermalz 1; Young 1.
---------------------------------------------------------------------------

5. Section III.C.5
    181. Some comments criticize Section III.C.5 for providing 
promotional flexibility only for IAP offerings, and even then only for 
an OEM's ``own'' IAP offer but not for other products.\188\ At least 
one commentor notes that the Windows XP initial boot sequence offers a 
wide range of Microsoft products and services, including Passport, 
Hotmail, Instant Messenger, and Internet telephony.\189\ Some 
commentors predict that Microsoft will use the ``reasonable technical 
specifications'' to unreasonably exclude competitors.\190\
---------------------------------------------------------------------------

    \188\ AOL 37-38, Klain 4; CCIA, Stiglitz & Furman 27.
    \189\ SBC 53; Akin 2.
    \190\ Maddux para. 9; SBC 52, 141; NetAction 10, 14; Schneider 
2.
---------------------------------------------------------------------------

    182. Section III.C.5 permits OEMs to create and display a 
customized offer for the user to choose an IAP during the initial boot 
sequence. A user's IAP can be an important source of choices about a 
wide variety of Non-Microsoft Middleware. It is the OEM's ``own'' IAP 
in the sense that the OEM selects it, not necessarily that the OEM is 
itself an IAP. Microsoft is not permitted unreasonably to exclude 
competitors via the technical specifications for IAP offers. Microsoft 
previously and understandably has given such reasonable technical 
specifications to OEMs, and the United States does not expect Microsoft 
to deviate from its prior standards as to what is reasonable. After 
all, Microsoft has an interest in offering OEMs an operating system 
that works, and absent reasonable technical standards, performance 
might be degraded.
    183. At least one commentor argues that there should be a provision 
allowing OEMs to replace the Windows desktop, and sees no explanation 
in the CIS as to why this provision, which the United States advocated 
before the District Court and on appeal, has been removed.\191\ The 
simple answer to this question is that the Court of Appeals reversed 
the finding of liability on this point (see Microsoft, 253 F.3d at 63), 
and to provide for such a remedy would be inappropriate in this case.
---------------------------------------------------------------------------

    \191\ SBC 53, 138.
---------------------------------------------------------------------------

6. Comparison To Litigating States' Proposal
    184. Several commentors argue that the Litigating States' Provision 
2.c (``OEM and Third-Party Licensee Flexibility in Product 
Configuration'') should replace RPFJ Section III.C. \192\ The United 
States believes that Provision 2.c is overbroad and largely unrelated 
to middleware competition that could threaten Microsoft's desktop 
operating system monopoly. Additionally, the Litigating States' 
Proposal appears to ignore the Court of Appeals' decision that 
Microsoft is entitled to prevent an unjustified drastic alteration of 
its copyrighted work, and to prohibit OEMs from substituting a 
different user interface automatically upon completion of the initial 
boot sequence. Microsoft, 253 F.3d at 63. Regardless of how broadly one 
reads this portion of the Court of Appeals decision, Provision 2.c 
would appear to allow an OEM to make the very ``drastic alteration[s] 
[to] Microsoft's copyrighted work'' that the Court of Appeals found 
Microsoft lawfully could prohibit. See id.
---------------------------------------------------------------------------

    \192\ SBC 137.
    \193\ Litigating States' Provision 4 additionally requires that 
Microsoft disclose all the necessary APIs, Communications Protcols 
and Technical Information to accomplish such modifications.
---------------------------------------------------------------------------

    185. Provision 2.c essentially provides that Microsoft cannot 
restrict by contract, technical, or any other means a licensee from 
modifying any aspect of a Windows Operating System Product.\193\ The 
breadth of this provision appears to require that Microsoft allow, and 
provide the information to accomplish, any modification to any portion 
of a Windows Operating System Product, no matter how unrelated to 
middleware. For example, this provision appears to allow licensees to 
change the manner in which Windows implements disk compression, the 
TCP/IP protocol, the calculator program, and the Windows Help system. 
These modifications apparently could be at any level of granularity, 
including very small segments of code.
    186. Although Provision 2.c also identifies specific types of 
modifications--e.g., the boot sequence, desktop, or start page--these 
types of modifications are not limiting because the provision clearly 
allows for modification of any ``other aspect of a Windows Operating 
System Product (including any aspect of any Middleware in that 
product).'' Provision 2.c also provides five examples (Paras. 2.c.i-v), 
but these are given ``[b]y way of example, and not limitation.'' This 
Proposal thus appears to allow any and all modifications.
    187. These types of broad modifications are not necessary to allow 
for vigorous competition in the middleware market. Indeed, it appears 
that the vast majority of these modifications have very little, if 
anything, to do with middleware and therefore are beyond the scope of 
the liability findings in this case.

E. Microsoft's Obligations To Provide Add/Remove Functionality And 
Automatic Invocations (RPFJ Sec. III.H)

1. Obligation To Provide Add/Remove Functionality
    188. Some commentors argue that Section III.H.1 allows Microsoft to 
force Non-Microsoft Middleware Products into an Add/Remove 
utility.\194\ The United States believes that one of the primary goals 
of the RPFJ is to enable users to make choices on the merits about 
Microsoft and Non-Microsoft Middleware Products. In the current Add/
Remove utilities available in Windows Operating System Products, 
Microsoft Middleware Products are often not present at all, or are 
presented as Windows components in a separate window. Non-Microsoft 
Middleware Products, which currently routinely add themselves into the 
Add/Remove utility upon installation, are in a different Add/Remove 
window. Without the RPFJ, there is no easy way for the user to realize 
that something labeled as a Windows system component can be replaced 
with a Non-Microsoft Middleware Product. This provision will alter 
Microsoft's current practice of creating an artificial distinction 
between these Non-Microsoft Middleware Products and Microsoft 
Middleware Products.
---------------------------------------------------------------------------

    \194\ Palm 15; AOL, Klain 6; SBC 58; Thomas 6-7.
---------------------------------------------------------------------------

    189. Other commentors point out that exclusivity cannot be provided 
to Non-Microsoft Middleware Products, that Microsoft does not have to 
compensate an OEM for the presence of its icons on the desktop, and 
that every computer shipped represents an expense to the non-Microsoft 
software and income via the Windows license to Microsoft.\195\ It

[[Page 12156]]

is incorrect that exclusivity, at least as to icons and other visible 
means of end-user access, cannot be provided to Non-Microsoft 
Middleware Products. Non-Microsoft Middleware Products can have 
exclusive agreements with OEMs covering all the most significant means 
of promoting their products--through desktop icons, the Start Menu, and 
being set as the defaults. The only exception to this exclusivity of 
visible means of end-user access would be a listing of the non-
Microsoft Middleware Products in the Add/Remove utility, which has 
never been Microsoft's means of promoting usage.
---------------------------------------------------------------------------

    \195\ SIIA 24; ProComp 62; Schneider 2.
---------------------------------------------------------------------------

    190. Furthermore, should Microsoft wish to promote its Microsoft 
Middleware Products, it is constrained by other provisions in the 
decree, particularly provisions regarding exclusive or fixed percentage 
agreements with OEMs. See discussion of Section III.G. As an example, 
Microsoft could not reach an agreement with an OEM that required the 
OEM to set the Microsoft product as the default on 100 percent of the 
OEM's machines. Non-Microsoft Middleware Products do not face this 
constraint. Additionally, because OEMs are free to remove Microsoft 
icons and free to negotiate exclusivity agreements with competitors, 
Microsoft will have to compensate OEMs for any promotional agreements 
regarding its icons, in addition to conforming its agreements with the 
other provisions of the RPFJ.
    191. A few commentors raise concerns that ``particular types of 
functionality'' and ``non-discriminatory'' are not defined and could be 
used by Microsoft to unreasonably exclude competitors.\196\ 
Functionality is intended only to capture broad categories of products 
and not to be used to discriminate against Non-Microsoft Middleware 
Products. Thus, for example, Microsoft may reserve a particular list 
for multimedia players, but cannot specify either that the listed 
player be its own Windows Media Player, or that the player be capable 
of supporting a particular proprietary Microsoft data format. Such a 
non-generic specification, which would have the effect of restricting 
the display of competing Non-Microsoft Middleware Products, would not 
be non-discriminatory and therefore would be prohibited under Section 
III.H.1.
---------------------------------------------------------------------------

    \196\ CFA 98; Maddux para. 23; Clapes 9.
---------------------------------------------------------------------------

    192. Commentors also suggest that the portion of Section III.H.1 
that requires Microsoft to offer ``an unbiased choice with respect to 
enabling or removing access'' would nevertheless permit Microsoft to 
include derogatory comments about competing products when offering such 
a choice. \197\ This is incorrect. The concept of non-discriminatory 
includes the concept of non-derogatory; Microsoft cannot present a 
choice that is derogatory toward the Non-Microsoft Middleware Products 
without also by definition discriminating against that Product.
---------------------------------------------------------------------------

    \197\ Maddux para. 24.
---------------------------------------------------------------------------

2. Obligation To Provide Automatic Invocations and Exceptions
a. Obligations To Provide Automatic Invocations
    193. Section III.H.2 addresses situations where Microsoft must 
create the ability to designate programs for automatic invocation, 
commonly referred to as default settings. Many commentors point out 
that there will be few situations where Microsoft is obligated to 
provide a default setting. They say that Microsoft easily will be able 
to evade this provision,\198\ simply by embedding its Microsoft 
Middleware Products in other portions of the Windows Operating System 
Product or other Microsoft Middleware Products. Similarly, some 
commentors suggest that Microsoft could engineer its middleware to 
launch without using all of the ``Top-Level Window'' components or with 
making the slightest variation on the user interface, and not have to 
create any defaults. Commentors further argue that the existence of 
defaults should not depend on the existence or behavior of Microsoft's 
Middleware Products.
---------------------------------------------------------------------------

    \198\ AOL 49; AOL, Klain 6; Litigating States, Ex. A 10; Pantin 
III.24; Realnetworks 14, 17, 23; CCIA 55; KDE 14-15.
---------------------------------------------------------------------------

    194. Additionally, some commentors point out that OEMs will be 
required to support the Microsoft Middleware Products regardless of 
whether they have end-user access removed, because Microsoft is allowed 
to hard-wire their products in some cases.\199\ More specifically, 
these commentors argue that this situation will create an 
insurmountable disparity between the Microsoft and Non-Microsoft 
Middleware Products, because the Microsoft product will always be 
available and will always launch in some situations, whether the end 
user has selected them or not or is even aware that the product is 
installed.
---------------------------------------------------------------------------

    \199\ Litan 45; ProComp 57-58; CCIA 55; AAI 15; Litigating 
States 10.
---------------------------------------------------------------------------

    195. The Court of Appeals' decision must be the starting point for 
any discussion of default settings and of the ability of Microsoft to 
override user choices. There were no instances in which the Court of 
Appeals found that Microsoft's overriding of user choice was unlawful. 
Microsoft, 253 F.3d at 67. Thus, the Court of Appeals' decision does 
not require that Microsoft respect user's default choices in all 
circumstances. The issue of whether Microsoft simply could have no 
default settings at all was, however, not before the Court and 
accordingly the Court did not address it.
    196. Section III.H.2 of the RPFJ nevertheless requires Microsoft to 
implement and respect default settings in some circumstances. These 
circumstances are limited to situations where the Microsoft Middleware 
Product would launch 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. These limitations are tied to the Court 
of Appeals' opinion, which supported Microsoft's position that it did 
not have to respect default settings where Windows functionality 
enabled users to move seamlessly from one function to another in the 
same window. Microsoft, 253 F.3d at 67.
    197. Moreover, these limitations are 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 when just a portion of the product's 
underlying functionality is 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 is using a specific 
Microsoft Middleware Product.
    198. One of the most important functions of this Section III.H.2 is 
to provide certainty and a bright line regarding when Microsoft is 
obligated to provide and respect a default setting. Previously, 
Microsoft was under no obligation to provide for automatic invocations 
of competing products in any circumstances; Microsoft at its option 
provided for automatic invocations in some circumstances and not in 
others. Although commentors allege that there are numerous cases where 
Microsoft will not have to provide a default setting, the RPFJ does 
provide a clear line and a requirement, that did not exist before, that 
in some cases defaults must exist and must be respected.
    199. Several commentors allege that Non-Microsoft Middleware 
Products are subject to a requirement that the end-user confirm his/her 
choice, but the Microsoft Middleware Product is not,

[[Page 12157]]

making it effectively harder for users to choose Non-Microsoft 
Middleware Products.\200\ This is incorrect. Section III.H.1 clearly 
states that Microsoft must give end users ``a separate and unbiased 
choice'' with respect to altering default invocations in Section 
III.H.2. Section III.H.2 of the RPFJ provides that Microsoft shall 
``[a]llow . . . 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).'' The 
parenthetical ``or vice versa'' applies to the entire phrase, meaning 
any mechanism which requires confirmation when switching in one 
direction will also require it in the other direction.
---------------------------------------------------------------------------

    \200\ AOL, Klain 6; CFA 98-99 (``consumer must choose the Non-
Microsoft product twice to make it the preferred option''); 
RealNetworks 18; Miller 3; Clapes 9-10.
---------------------------------------------------------------------------

    200. To respond to the concerns raised by commentors and to clarify 
that Microsoft must be unbiased with respect to Microsoft and Non-
Microsoft products under Section III.H.2, this provision was revised to 
expressly state that such mechanisms and confirmation messages must be 
unbiased. The revised language of Section III.H.2 in the SRPFJ 
provides:

    Allow end users (via an unbiased 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 in an unbiased manner) to designate a Non-
Microsoft Middleware Product to be invoked in place of that 
Microsoft Middleware Product (or vice versa) . . . [Emphasis added]

This modification makes clear the parties' intention that the mechanism 
available to end users, as well as any confirmation message to the end 
user, must be unbiased with respect to Microsoft and non-Microsoft 
products.
    201. This modification also addresses any concern that the phrase 
``at Microsoft's option'' could be read to allow Microsoft to take 
biased action against competing products. Further, it addresses 
concerns that Microsoft's presentation of the confirmation message 
could include derogatory comments about competing products.\201\
---------------------------------------------------------------------------

    \201\ Maddux para. 25; Pantin III.24.
---------------------------------------------------------------------------

b. Exceptions to the Obligation To Provide Automatic Invocations
    202. In addition, the SRPFJ's two exceptions to Section III.H.2, 
which were previously listed after Section III.H.3 and numbered ``1'' 
and ``2,'' but which by their plain language unmistakably modified 
Section III.H.2 (``Notwithstanding the foregoing, Section III.H.2 . . 
.''), have been moved to Section III.H.2 for clarification and have 
been renumbered (a) and (b).
    203. Exception (a) allows a Windows Operating System Product to 
invoke a Microsoft Middleware Product when it would be invoked solely 
for use with a server maintained by Microsoft outside the context of 
general web browsing. Commentors allege that Microsoft can use the 
exception to communicate directly with its own competing middleware in 
the form of web based services such as Passport, MSN, .Net and Hotmail 
and to override the explicit choices made by consumers and OEMs.\202\ 
At least one commentor misreads this exception to infer that any web 
server running Microsoft software is covered.\203\
---------------------------------------------------------------------------

    \202\ RealNetworks 17-18; CCIA 56; Maddux para. 27; Giannandrea 
2; Gifford 4.
    \203\ SBC 58; Harris 7, 8.
---------------------------------------------------------------------------

    204. Turning again to the Court of Appeals decision, this exception 
stems from the holding that the Windows Help system was allowed to 
override a user's browser choice. Microsoft, 253 F.3d at 67. The 
current Windows Help system, as well as other parts of the Windows 
interface, rely on interoperating with servers maintained by Microsoft. 
The ``maintained by Microsoft'' language in exception (a) is 
specifically designed to catch servers actually under Microsoft's 
control, and not to include servers that are merely running a Microsoft 
product, such as Internet Information Server (IIS). Microsoft is only 
allowed to use this exception outside the context of general web 
browsing, such as the Windows Help system or similar systems, not in 
situations where a user has knowingly launched a browser to view web 
pages. This exception is similar to the limitations in the main 
paragraph of Section III.H.2 that limit automatic invocation to those 
situations where a user has launched, in essence, the ``full product.''
    205. Exception (b) allows a Windows Operating System Product to 
invoke a Microsoft Middleware Product when a 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. Several commentors argue that Microsoft will have exclusive 
control over when it must respect defaults through manipulation of the 
``reasonable technical requirement'' clause.\204\ Concern also is 
raised that Microsoft is not required to document the ``reasonable 
technical requirement'' in advance in MSDN.\205\ Several commentors 
predict extreme and drastic results from the example of ActiveX.\206\
---------------------------------------------------------------------------

    \204\ NetAction 14; Maddux para. 27; Gifford 4, Giebel 1; Miller 
3; Akin 3; Hammett 2; Youngman 4.
    \205\ Pantin III.26.
    \206\ SBC 59; CCIA 56; Schneider 2.
---------------------------------------------------------------------------

    206. Again, this exception appears in the RPFJ because the Court of 
Appeals held that Microsoft was allowed to override a user's choice 
when it had ``valid technical reasons.'' Microsoft, 253 F.3d at 67. The 
Court of Appeals pointed to three specific examples where features of a 
Windows Operating System Product depended on functionality not 
implemented by Navigator, and Microsoft was permitted to override 
Navigator in those cases. The Court of Appeals did not find any 
violation associated with these actions, including no violation 
regarding whether information was disclosed to Navigator to allow it to 
implement the functionality. Given this holding, the inclusion of an 
exception that permits Microsoft to override a user's choice when it 
has ``valid technical reasons'' was appropriate.
3. Microsoft's Ability To Change Configurations
    207. Many commentors have significant concerns about Microsoft's 
ability to offer to alter a user's or OEM's configuration, as described 
in Section III.H.3.\207\ Some commentors argue that Microsoft should 
not be able to ``encourage'' users to switch back to Microsoft 
Middleware that has been replaced by a third-party application. 
Concerns also are raised that Microsoft's presentation of the choice 
could include derogatory comments about competing products, and that 
the RPFJ contains no requirement that the request to the user be 
objective or non-discriminatory, or that the function not delete non-
Microsoft code or change user defaults. Commentors express the view 
that a significant number of users likely would switch just to get rid 
of the annoying messages. Others suggest that the fact that Microsoft 
is permitted to seek confirmation from the end user for an automatic 
alteration of the OEM configuration after 14 days significantly 
devalues the desktop. At least one commentor argues that OEMs do the 
``initial boot'' before shipping a PC and hence the 14-day period could 
have

[[Page 12158]]

largely expired by the time the user boots the PC for the first time.
---------------------------------------------------------------------------

    \207\ Litan 45; RealNetworks 16; Henderson 9; CCIA 57; CCIA, 
Stiglitz & Furman28; KDE 16; AAI 17-18; Maddux para. 26; AOL, Klain 
6; CFA 99; SBC 56; Litigating States, Ex. A 10; ProComp 63; SILA 18; 
Pantin III.25; Gifford 4; Giannandrea 3.
---------------------------------------------------------------------------

    208. In response to some of the concerns raised regarding Section 
III.H.3, the RPFJ has been modified. The following additional sentence 
now appears in SRPFJ Section III.H.3: ``Any such automatic alteration 
and confirmation shall be unbiased with respect to Microsoft Middleware 
Products and Non-Microsoft Middleware.'' This sentence clarifies the 
parties' intention in drafting the RPFJ that Microsoft may not alter a 
configuration based on whether the products are Microsoft or Non-
Microsoft products. Nor may Microsoft present a biased confirmation 
message, for instance a message that is derogatory with respect to Non-
Microsoft products. Similarly, automatic alterations may not be based 
on a trigger or rule that is biased against Non-Microsoft Middleware or 
in favor of Microsoft Middleware Products.
    209. Several commentors were confused regarding the ``Clean Desktop 
Wizard,'' referenced in the CIS (at 48), and its relation to Section 
III.H.3. The ``Clean Desktop Wizard'' is a utility in Windows XP that 
offers users the ability to move unused or infrequently-used desktop 
icons into a folder on the desktop. The ``Clean Desktop Wizard'' is the 
only function in Windows XP that performs an automatic alteration of a 
configuration of icons, shortcuts or menu entries. Furthermore, Section 
III.H.3 forbids Microsoft from altering how a Windows Operating System 
Product performs automatic alterations except in a new version of a 
Windows Operating System Product. Thus, the ``Clean Desktop Wizard'' is 
the only functionality that currently falls under Section III.H.3, and 
it must remain the only such functionality until a new version of a 
Windows Operating System Product. The ``Clean Desktop Wizard'' only 
affects icons on the desktop, is unbiased with respect to Microsoft and 
Non-Microsoft icons, and is unbiased with regard to the messages 
presented to the user. It takes no action without confirmation from the 
user, and it can be turned completely off by the user so that it never 
runs again.
    210. Microsoft designed this utility because it believed some users 
prefer a less cluttered desktop and would appreciate a utility that 
would monitor which icons have been recently used, and offer to move 
the unused icons into a folder. The United States agrees that some 
users would appreciate this utility. The United States also believes, 
however, that some users would not. To offer choices to users and to 
remove the potential for significant anticompetitive effects, Section 
III.H.3 was designed always to require confirmation from the user, and 
to be unbiased with regard to Microsoft and Non-Microsoft products. The 
United States does not agree with the commentors who argue that 
Microsoft should be prohibited from ever offering this kind of utility 
as part of its operating system. \208\
---------------------------------------------------------------------------

    \208\ SBC 57.
---------------------------------------------------------------------------

    211. A number of comments criticize the 14-day delay.\209\ The 14-
day delay, after a new personal computer is booted up before any 
automatic alternation may occur, was determined to be a reasonable 
compromise between the need to use desktop icons to promote Non-
Microsoft Middleware, and the needs of users who would prefer to be 
presented with the choice of moving unused icons to a folder. A 
significant factor in this analysis is that there are many ways of 
promoting Non-Microsoft Middleware, of which the desktop is only one. 
Non-Microsoft Middleware may be installed in the Start Menu, for 
instance, or in the quick launch bar or system tray. It may also be set 
as a default and automatically invoked in certain instances. It may be 
promoted in the initial boot sequence or set to launch automatically on 
connection or disconnection to the Internet. And, of course, should the 
user click on the desktop icon, the ``Clean Desktop Wizard'' would not 
consider it an unused icon and it would not be affected. Or, should the 
user respond that it does not want the ``Clean Desktop Wizard'' to move 
unused icons into a folder, they will not be moved. Finally, even if 
the user responds affirmatively to the ``Clean Desktop Wizard'' 's 
prompt, the icons merely will be moved into a folder, not removed.
---------------------------------------------------------------------------

    \209\ Drew 1; Thiel 2; Miller 3.
---------------------------------------------------------------------------

    212. One commentor argues that Microsoft frequently could create 
``new versions'' of its Windows Operating System Products for the sole 
purpose of creating new mechanisms to remove competing icons.\210\ The 
United States finds it unlikely that Microsoft would go to the lengths 
required to release a new version of its operating system just to 
remove icons, given that any such mechanism must be unbiased with 
regard to Microsoft and Non-Microsoft products. Historically, Microsoft 
has released versions of its operating systems on the order of years 
apart, and at much longer intervals than its releases of middleware.
---------------------------------------------------------------------------

    \210\ AAI 18.
---------------------------------------------------------------------------

4. Timing Issues
    213. Some commentors argue that the 12-month delay before Microsoft 
has to implement Section III.H simply allows Microsoft more time to 
cement its control over the operating system.\211\ Some commentors 
compare the 12-month delay to the less than 2 months it took Microsoft 
to remove the icons for Internet Explorer after the Court of Appeals' 
decision.\212\
---------------------------------------------------------------------------

    \211\ Litan 47; CCIA, Stiglitz & Furman 28; Maddux para. 21 
(suggests 3 months); Giannandrea 1-2.
    \212\ ProComp 65; CCIA, Stiglitz & Furman 28.
---------------------------------------------------------------------------

    214. Section III.H takes effect with the earlier of the release of 
Service Pack 1 for Windows XP, currently scheduled for August 2002, or 
November 6, 2002. The reason for this delay was to allow Microsoft 
sufficient time to modify its Windows Operating System Products to be 
in compliance with the specific provisions of Section III.H. Section 
III.H requires Microsoft to make numerous changes to Windows 2000 and 
Windows XP. For instance, a mechanism must be created that allows end 
users and OEMs to enable and remove end-user access to Microsoft and 
Non-Microsoft Middleware Products that is non-discriminatory with 
regard to those products and that presents a separate and unbiased 
choice. As noted above, the current Add/Remove utility in Windows XP is 
biased: it lists the Microsoft Middleware Products in a separate window 
labeled as system components. Moreover, the current Add/Remove utility 
includes only a subset of the Microsoft Middleware Products and does 
not remove all of the required means of end-user access, but only some 
limited subset of icons.
    215. Additionally, in accordance with Section III.H.2, Microsoft 
must evaluate every invocation of a Microsoft Middleware Product and 
determine if it falls under Section III.H.2, whether it falls under 
exception (a) or (b), and whether there is already a default setting. 
If there is not a default setting, or if in some cases the Windows 
Operating System Product does not respect the default, then the Windows 
Operating System Product must be altered.
    216. Commentors who point to the relatively small amount of time 
between the Court of Appeals' decision and Microsoft's limited 
allowance of flexibility as evidence that the delay in Section III.H is 
excessive are comparing very different situations. Microsoft made an 
extremely limited offer to OEMs to alter end-user access to Internet 
Explorer in the summer of 2001. Similarly, Microsoft's addition of 
Internet Explorer to the Add/Remove utility was not complete and did 
not remove many of the means of end-user access. To comply with the 
RPFJ, both

[[Page 12159]]

in terms of the required means of end-user access and the number of 
Microsoft Middleware Products at issue, requires considerably more 
effort. In addition, Microsoft's offer in the summer of 2001 did not 
contain any changes regarding automatic invocations, which can require 
considerably more work than the creation of a revised Add/Remove 
utility.
    217. Another commentor argues that Microsoft has no incentive to 
offer the Windows XP Service Pack until December 2002, that the 12-
month delay renders the provision meaningless for a fifth of the 
lifespan of the decree, and that the provision is therefore meaningless 
as a vehicle for restoring competition. \213\ The same commentor argues 
that, in contrast, the interim conduct provisions in the IFJ were 
superior because they required the removal of end-user access within 
six months of the entry of the Final Judgment. \214\
---------------------------------------------------------------------------

    \213\ SBC 60.
    \214\ SBC 61-62.
---------------------------------------------------------------------------

    218. Many aspects of this comment are erroneous. First, the 
deadline for compliance is November 6, 2002, not December. Moreover, 
Microsoft has a strong incentive to release Service Pack 1 for Windows 
XP, because it is well-known in the industry that the first Service 
Pack to an operating system release fixes many of the bugs in the 
original release. More specifically, many corporations do not consider 
upgrading until the first Service Pack is released. Windows XP, based 
on the NT code base and being the upgrade to Windows 2000, is aimed 
directly at corporations as well as consumers, unlike releases such as 
Windows Millennium and other operating systems based on the ``9x'' 
code. In order to serve the corporate audience at which Windows XP is 
at least partially directed, release of the first Service Pack is 
critical. Thus, the United States remains convinced that Microsoft has 
a strong incentive to release the first Service Pack for XP as quickly 
as possible. The United States is aware, however, that the Service Pack 
has slipped from a planned late spring release to an August 2002 
release.
    219. Additionally, it is important to realize that the 12-month 
period started on November 6, 2001, and the five-year life span of the 
decree begins when the decree is entered, which will be at some point 
after March 6, 2002. Thus, even if the Court enters the decree on March 
6, 2002, the maximum amount of time the delay can ``cut into the life 
of the decree'' is eight months, not twelve. If the Court waits to 
enter the decree, the overlap decreases. For example, should the Court 
enter the decree on May 6, 2002, then the provision will become 
effective no later than six months after the entry of the decree 
(precisely the same time period contained in the IFJ).
    220. The possibility that the provision will become effective six 
months after the decree is entered is identical to the timing in the 
IFJ, which required that the removal of end-user access would occur six 
months after entry. Moreover, the IFJ had no provisions at all 
regarding the creation and respect for default settings. Thus, the IFJ 
would have possibly required less with the same amount of delay.
    221. Finally, to argue that the timing of the Litigating States' 
proposals is superior is to ignore the reality of the litigation 
schedule. Even assuming the shorter of the two proposed litigation 
schedules, the Litigating States' trial will not end before June 2002. 
Assuming that the Court issues its ruling immediately, which is highly 
unlikely given the complexities of the case, the earliest the 
Litigating States' provision on removing end-user access would be 
applicable is December 2002. To argue that the RPFJ is ``meaningless as 
a vehicle for restoring competition'' because of the timing of Section 
III.H when, in fact, the RPFJ will with absolute certainty be in effect 
before the Litigating States' remedy, is to argue that there is no 
possibility of an effective remedy. That argument simply is wrong.
    222. Other commentors allege that the requirement that the 
Microsoft Middleware Products must exist seven months before the last 
beta test version of a Windows Operating System Product is a loophole 
easily exploited by Microsoft. \215\ These commentors suggest that 
specific products, such as Windows Media Player 8, were not in 
existence at the requisite time and therefore are not subject to 
Section III.H. At least one commentor proposes that the whole timing 
paragraph be deleted. \216\
---------------------------------------------------------------------------

    \215\ RealNetworks 16-17; Henderson 6; CCIA 56; PFF 21; Harris 
7-8; Schulze 2.
    \216\ Pantin III.27.
---------------------------------------------------------------------------

    223. The timing paragraph is necessary to give Microsoft sufficient 
time to design, implement and test the Windows Operating System 
Product, particularly the requirement for automatic invocations, in 
order to comply with the decree. Without the timing requirement, 
Microsoft conceivably could be required to redesign its products 
constantly. Moreover, it is important to understand how the requirement 
for automatic invocations will work in practice. Seven months before 
the last beta test release of a Windows Operating System Product, in 
every place where a Microsoft Middleware Product is invoked so as to 
require a default setting under Section III.H.2, the Windows Operating 
System Product will be modified so as to create and respect the default 
setting. However, once that setting is created, for instance for a 
default browser or a default media player, any competing product may 
register itself for the default. Moreover, if any version of a 
Microsoft Middleware Product can be invoked, then the setting must be 
created and respected. To be specific, if seven months prior to the 
last beta test release of Windows XP, Windows Media Player 8 does not 
exist, but Windows Media Player 7 exists, and the Windows Operating 
System Product can invoke version 7 as well as version 8, then the 
default must be created. Thus as a practical matter, when a default 
setting is created for media player, it is created for the whole 
category of media players, not just specific versions.
    224. One commentor maintains that Section III.H.3 requires vendors 
of competing middleware to meet ``reasonable technical requirements'' 
seven months prior to new releases of Windows, yet it does not require 
Microsoft to disclose those requirements in advance. \217\ This comment 
incorrectly commingles the seven-month timing requirement with 
exception (b) to Section III.H.2. The seven-month timing requirement 
relates solely to the issue of which Microsoft Middleware Products 
exist at a certain time; it does not have anything to do with whether 
any Non-Microsoft Middleware Products meet certain technical 
requirements. The seven-month timing requirement determines when a 
default setting is required to exist; exception (b) concerns the 
limited circumstances where, given that the default setting exists, the 
Windows Operating System Product may nevertheless ignore a designated 
Non-Microsoft Middleware Product.
---------------------------------------------------------------------------

    \217\ Kegell 5.
---------------------------------------------------------------------------

F. Commingling of Operating System Code and Middleware Code

    225. Sections III.C and III.H of the RPFJ remedy Microsoft's 
anticompetitive commingling of browser and Windows operating system 
code by requiring Microsoft to redesign its Windows Operating System 
Products to permit OEMs and end users effectively to remove access to 
Microsoft Middleware Products (Section III.H.1) and to allow competing 
middleware to be featured in its place (Section III.C).

[[Page 12160]]

Section III.H also requires Microsoft to create a mechanism that 
permits rival middleware products to take on a default status that 
will, if the consumer chooses, override middleware functions Microsoft 
has included in the operating system in many cases (Section III.H.2).
    226. A number of commentors assert that, in spite of these 
provisions, the RPFJ is deficient because it does not contain an 
express prohibition on Microsoft ``commingling'' the code of Middleware 
Products in the same files as the code for the operating system. \218\ 
They note that the Court of Appeals upheld the District Court's 
liability determinations regarding both Microsoft's elimination of the 
Add/Remove capability for its browser and its commingling of browser 
code and operating system code. But the Court of Appeals did not hold 
that commingling of code alone, without regard to any anticompetitive 
effects it might have in a particular case, is anticompetitive or 
illegal. In fact, the United States challenged, and the Court 
condemned, Microsoft's practice of commingling operating system and 
Internet Explorer browser code for a specific reason: because the 
commingling in that instance had the purpose and effect of preventing 
OEMs and end users from removing access to the browser from Windows.
---------------------------------------------------------------------------

    \218\ AA1 13-14; AOL 2-3, 17-24; CCIA 45-46; Sen. Kohl 4; Litan 
42-45; ProComp 31-33; RealNetworks 20-21; SBC 46; TRAC 9.
---------------------------------------------------------------------------

    227. Some comments suggest that the lack of a ban on commingling in 
the RPFJ retreats from the position on commingling that the United 
States took in the prior remedy proceeding and that the District Court 
adopted in the IFJ. These commentors assert that the IFJ actually 
prohibited Microsoft from commingling code for middleware with code for 
the operating system. \219\ In fact, however, the IFJ's anti-binding 
provision, Section 3.g, only required that Microsoft make available a 
version of Windows in which ``all means of end-user access'' to 
Microsoft Middleware Products could be removed by OEMs or end users. 
IFJ Sec. 3.g.i (emphasis added). \220\
---------------------------------------------------------------------------

    \219\ AOL 17, 20; SBC 45.
    \220\ Some commentors suggest the reason the IFJ did not require 
actual removal of middleware code from Windows was because the IFJ's 
conduct restrictions were intended to be merely transitional, until 
the breakup of Microsoft could be effectuated. As a result, the 
argument appears to go, the anti-binding provision did not need to 
be as extensive or invasive as it would have been in the absence of 
a structural remedy. But the commentors cite no support in the 
Plaintiff's prior remedy submissions or the IFJ itself for this 
claim. In fact, the need to remedy Microdoft's integration of 
middleware in Windows in a non-removable way was just as strong 
during the interim conduct remedy period of the IFJ as it is under 
the RPFJ.
---------------------------------------------------------------------------

    228. The United States has, throughout the remedy phases of this 
case (including before the District Court in June 2000), stated 
consistently that it did not seek to require Microsoft to remove 
commingled code from Windows. The United States' remedy briefs in the 
June, 2000 proceeding made clear our view that the competitive problems 
created by Microsoft's bundling of middleware would be addressed 
adequately by ensuring the ability to remove end-user access, and not 
the ability actually to remove code:

    Microsoft suggests that Section 3.g.'s requirement of removal of 
``end user access'' dramatically increases the scope of what is a 
``Middleware Product.'' But only if a product first meets the 
definition of ``Middleware Product'' is Microsoft required to 
provide the means of removing access to it. . . . Similarly, 
Microsoft's statement that features like the user interface, HTML 
Help, and Windows Update would be ``precluded'' because they ``are 
dependent on Internet Explorer'' is erroneous. Section 3.g. requires 
that OEMs and end users be able to remove access only to the 
middleware product--in this case the browser--not to APIs or code. 
See Felten Declaration Paras.  92, 94; Findings Paras.  183-
185.''\221\

    \221\ Professor Felten stated in part in the cited remedy 
declaration:
    To comply with the product Binding provision, Microsoft's future 
Windows Operating System Products must allow OEMs and end users 
ready means for removing End-User Access to any Middleware Product. 
I will use the term `Unbinding' to refer to the development of the 
means of removing End-User Access to a Bound product. Declaration of 
Edward Felten (``Felten Decl.'') para.92 (filed April 28, 
2000)(emphasis added).

Plaintiffs' Reply Memorandum In Support of Proposed Final Judgment at 
62 (filed May 17, 2000) (emphasis added).\222\
---------------------------------------------------------------------------

    \222\ Various commentors also seek to draw contrasts between the 
RPFJ and the so-called ``Mediator's Draft #18'' from the Spring 2000 
mediation process with Judge Posner. See e.g., AOL`` 17 & n.14. Such 
attempts at comparison or contrast are fundamentally flawed and 
therefore of no value in assessing the RPFJ. First, that mediation 
process was and remains confidential; there has been no 
authentication of any of the documents now available publicly that 
purport to represent mediation drafts. Second, the draft in question 
is itself styled as a ``Mediator's Draft;'' there is no basis on 
which to conclude, other than unsubstantiated newspaper articles 
cited in the comments, that it reflects an actual proposal approved 
or submitted by any party or that any party ever was willing to 
agree to it. Third, purported settlement positions from early 2000 
indicate nothing about the adequacy of the RPFJ today. The 
litigation was at a fundamentally different stage. The District 
Court had issued extensive Findings of Fact that highly favored the 
United States' presentation of evidence, but the District Court had 
not yet issued its Conclusions of Law, let alone had the Court of 
Appeals reviewed and modified the District Court's liability 
determination.
---------------------------------------------------------------------------

    229. The reason for the United States' consistent position is that, 
under the facts proven at trial in this case, the competitive 
significance of Microsoft's commingling is the exclusion of competing 
middleware products caused by the visible presence and usage of 
Microsoft's Middleware Product, not by the mere presence of the 
underlying code. The Court of Appeals concluded that Microsoft's 
commingling had an anticompetitive effect and constituted exclusionary 
conduct because commingling ``deters OEMs from pre-installing rival 
browsers, thereby reducing the rivals' usage share and, hence, 
developers' interest in rivals' APIs as an alternative to the API set 
exposed by Microsoft's operating system.'' Microsoft, 253 F.3d at 66. 
The Court of Appeals relied upon and upheld the District Court's 
findings, which reflect a concern primarily with the confusion and 
exclusion caused by the visible presence of Microsoft's middleware and 
rival middleware.\223\ For example, in describing Microsoft's initial 
commingling in Windows 95, the District Court found:

    \223\ See, e.g., Findings of Fact, para.159 (``the inability to 
remove Internet Explorer made OEMs less disposed to pre-install 
Navigator . . . Pre-installing more than one product in a given 
category . . . can significantly increase an OEM's support costs, 
for the redundancy can lead to confusion among novice users. In 
addition, pre-installing a second product in a given software 
category can increase an OEM's product testing costs.'').
---------------------------------------------------------------------------

    Although users were not able to remove all of the routines that 
provided Web browsing from OSR 2 and successive versions of Windows 
95, Microsoft still provided them with the ability to uninstall 
Internet Explorer by using the ``Add/Remove'' panel, which was 
accessible from the Windows 95 desktop. The Add/Remove function did 
not delete all of the files that contain browsing specific code, nor 
did it remove browsing-specific code that is used by other programs. 
The Add/Remove function did, however, remove the functionalities 
that were provided to the user by Internet Explorer, including the 
means of launching the Web browser. Accordingly, from the user's 
perspective, uninstalling Internet Explorer in this way was 
equivalent to removing the Internet Explorer program from Windows 
95.

    Findings of Fact, para. 159 (emphasis added). The District Court 
went on to find that, even with commingling of code, ``[i]f OEMs 
removed the most visible means of invoking Internet Explorer, and 
preinstalled Navigator with facile methods of access, Microsoft's 
purpose in forcing OEMs to take Internet Explorer--capturing browser 
usage share from Netscape--would be subverted.'' Id. para. 203.

[[Page 12161]]

    230. In spite of this clear basis for the District Court's and 
Court of Appeals' conclusions, some commentors assert that the mere 
fact of commingling itself deters OEMs from installing rival 
middleware.\224\ Other commentors ignore the basis of the courts' 
commingling analyses and argue that the competitively significant 
component of Microsoft's integration is the resulting presence of 
middleware APIs on every PC on which Windows is installed, whether or 
not end-user access to the middleware product has been removed and, 
from the user's standpoint, that product is no longer present.\225\ 
They argue that Microsoft's ability to obtain, through integration of 
middleware into Windows, ubiquitous distribution of its APIs without 
regard to the presence or absence of access to the product, will be 
competitively determinative, and that no rival middleware producer can 
overcome Microsoft's advantage and persuade developers to write to its 
products.\226\ Usage is only a means to an end, they argue, with the 
end being the widespread presence of APIs on PCs.
---------------------------------------------------------------------------

    \224\ AOL 22-23; Litan 45.
    \225\ Litan 44; RealNetworks 20-21.
    \226\ AAI 14-O15; AOL 21-22; CCIA 49-51; Litan 44; ProComp 61-
62.
---------------------------------------------------------------------------

    231. These theories of competitive harm advanced by the commentors 
are not based on the facts proven by plaintiffs at trial, reflected in 
the District Court's findings, and upheld by the Court of Appeals. The 
basis for commingling liability, and remedy, in this case is the 
presence, from the user's perspective, of the product, and consequent 
confusion and other deterrents to installation of additional, rival 
middleware products; the mere presence of APIs is not enough. Indeed, 
although Microsoft argued vigorously in its defense during the 
liability phase that removing end-user access amounted to no more than 
``hiding'' the middleware, an act of no competitive significance, that 
argument was never accepted.
    232. Thus, a ban on commingling without regard to its competitive 
significance, as many commentors appear to seek, would impose a wholly 
unnecessary and artificial constraint on software design that could 
have adverse implications for consumers.\227\ Moreover, changes to the 
operating system that would be required to implement such a blanket 
prohibition likely would have adverse effects not only upon Microsoft 
and its customers but also upon third parties that already have 
designed software to rely on the present operating system code. A flat 
prohibition on commingling in this particular case, without due regard 
to the competitive impact of that commingling, therefore likely would 
be harmful, not helpful.
---------------------------------------------------------------------------

    \227\ Some comments correctly note that a flat ban on 
commingling might prevent Microsoft from adding new, innovative 
features to Windows, a result that would not be in the public 
interest. Economides 9; Johnson 3-4.
---------------------------------------------------------------------------

    233. Some commentors point out that, even if end-user access to a 
Microsoft Middleware Product has been removed by an OEM or end user 
pursuant to Section III.H.1, that product may still launch in certain 
default situations addressed by Section III.H.2 of the RPFJ, and 
therefore unacceptable end-user confusion will persist even after the 
access-removal remedy.\228\ But this argument overlooks the Court of 
Appeals' decision, which held that certain instances of Microsoft's 
``hard-wiring'' its browser so that it would launch in particular 
situations even where the user had designated another browser as the 
default were not unjustifiably anticompetitive. Microsoft, 253 F.3d at 
67.
---------------------------------------------------------------------------

    \228\ AAI 15-16.
---------------------------------------------------------------------------

    234. A number of commentors argue that, even with the ability to 
remove access to Microsoft Middleware, commingling Middleware code with 
Windows in a way that is non-removable actually diminishes the value 
and worsens the performance of Microsoft's products, by causing 
decreased reliability or increased susceptibility to security 
risks.\229\ As one commentor correctly notes, however, this impact of 
commingling on the quality of Microsoft's products was not an apparent 
basis for the Court of Appeals' sustaining the liability determination 
for this conduct.\230\ Rather, the exclusionary character of 
commingling in a non-removable fashion formed the basis for the court's 
ruling. Microsoft, 253 F.3d at 66.\231\
---------------------------------------------------------------------------

    \229\ CCC 22; Elhauge 1-2; Sen. Kohl 4.
    \230\ Elhauge 6.
    \231\ Moreover, as Professor Felten testified in his prior 
remedy declaration, requiring that end users and OEMs be able to 
remove end-user access to Microsoft Middleware Products would itself 
result in improvements in the efficiency and reliability of Window. 
Felten Decl. para. 97 (``Section 3.g would require Microsoft to undo 
the illegal product Binding in which it has already engaged, and to 
refrain from further Binding of Middleware Products to Operating 
Systems. This will lead to improvements in the efficiency and 
reliability of Windows.'').
---------------------------------------------------------------------------

    235. In arguing for complete removal of middleware code from the 
operating system, some commentors seek to extend the findings on 
commingling to a more direct attack upon Microsoft's practice of 
providing middleware functions in the Windows operating system. That 
practice was the subject of the tying claim and was part of the 
attempted monopolization claim, neither of which was sustained by the 
Court of Appeals. Requiring Microsoft completely to disintegrate 
middleware functions from the operating system might have been a more 
appropriate remedy for those claims, had they been sustained, than for 
the more limited claim of commingling of the browser and operating 
system code. In that sense, these commentors seek relief that exceeds 
the bounds of the monopoly maintenance finding that is the sole basis 
for relief at this stage of the case. Consistent with its position 
throughout the remedy phase of this litigation, the United States' 
concern with commingling is appropriately and fully addressed by the 
remedies proposed in the RPFJ.
    236. Finally, at least one commentor complains that the RPFJ is 
deficient because it does not require Microsoft to license to OEMs 
versions of Windows from which the means of end-user access have been 
removed at lower royalty rates than the version of Windows that 
includes full access to Microsoft Middleware Products.\232\ There is no 
basis for such a provision under the Court of Appeals' ruling in this 
particular case. First, the Court of Appeals indicated that the 
question of whether Microsoft price bundled, that is, charged more for 
Windows and IE together than it would have charged for Windows alone, 
has not yet been answered.\233\ Second, the Court of Appeals noted that 
it had ``no warrant to condemn Microsoft for offering either IE or the 
IEAK [Internet Explorer Administration Kit] free of charge or even at a 
negative price.'' \234\
---------------------------------------------------------------------------

    \232\ SBC 48-49. SBC notes that IFJ Sec. 3.g.ii contained a such 
a provision. Id.
    \233\ 253 F.3d at 96.
    \234\ Id. at 68.
---------------------------------------------------------------------------

V. Retaliation Against ISVs or IHVs (RPFJ Sec. III.F)

    237. Section III.F of the RPFJ prohibits Microsoft from retaliating 
against an ISV or IHV, or entering into agreements that condition the 
grant of consideration to an ISV, based on the firm's refraining from 
developing or other involvement with software that competes with 
Microsoft Platform Software or software that runs on such a competing 
platform. The provision provides limited exceptions.

A. Comments on Section III.F.1

    238. Section III.F.1 prohibits Microsoft from retaliating against 
any ISV or IHV because of its development, usage, distribution, 
promotion, or

[[Page 12162]]

support of any software that competes with a Windows Operating System 
Product or a Microsoft Middleware Product or software that runs on any 
such competitive software.
    239. Some commentors question the appropriateness of any anti-
retaliation provision. One expresses skepticism that any injunctive 
provision can effectively constrain Microsoft's behavior and recommends 
the imposition instead of a structural remedy.\235\ The United States 
believes that an injunction against retaliation effectively can deter 
Microsoft from anticompetitive behavior of the kinds found illegal by 
the Court of Appeals. The United States continues to believe that its 
decision not to seek structural relief in the current proceeding is 
appropriate in light of that appellate ruling.\236\ Injunctive relief 
cannot turn back the clock, but it can meet the relevant remedial goal 
of restoring competitive conditions in the market.\237\
---------------------------------------------------------------------------

    \235\ Relpromax 17-18; Economides 12 (disagrees with this 
concern).
    \236\ ACT 25, 29 (Section III.F adequately forbids retaliation 
against ISV's and IHVs).
    \237\ Sun 15-16.
---------------------------------------------------------------------------

    240. One commentor objects to the language used in Section III.F.1. 
It contends that ``retaliate'' is left undefined and that the RPFJ 
addresses only retaliation that occurs ``because of'' a firm's acts 
with competing software, leaving Microsoft free to argue in the future 
that some given act does not qualify as retaliation and was not caused 
by the other firm's acts.\238\ But retaliation is not an unfamiliar, 
ambiguous, or technical term. It carries the clear meaning of taking 
adverse actions that the commentor recommends. Moreover, the 
commentor's preferred alternative to ``because of''--``based directly 
or indirectly,'' the language used in IFJ Sec. 3(d) and in the 
Litigating States' Proposal Sec. 8--puts the same, appropriate, 
obligation to show that some adverse action by Microsoft toward an ISV 
or IHV was spurred by the ISV's or IHV's prior behavior. Indeed, 
without an obligation to show such adverse action, retaliation could be 
improperly read to cover withholding any benefit in response to an 
undesired action. For example, if Microsoft decided for valid business 
reasons that it no longer wanted to engage in a particular transaction, 
it could be accused of retaliating.
---------------------------------------------------------------------------

    \238\ SBC 96-97; CCIA 87 (addressing only specific type of 
retaliation, e.g., Microsoft's threat to discontinue porting Office 
to Mac OS unless Apple stopped supporting Netscape).
---------------------------------------------------------------------------

    241. Commentors suggest several increases to the breadth of Section 
III.F.1's prohibition against retaliation. First, commentors contend 
that the ban should cover threats of retaliation by Microsoft rather 
than only acts of retaliation.\239\ But because the RPFJ prohibits 
retaliation itself, any threat of retaliation is necessarily empty--
and, if anything, likely to encourage reporting of perceived and 
ambiguous ``threats.'' The United States therefore believes that 
prohibiting threats is unnecessary. In a related vein, one commentor 
contends that the ban should cover ``coercion short of an agreement,'' 
apparently meaning instances in which firms undertake voluntary actions 
to prevent Microsoft from becoming displeased.\240\ Such a provision 
would be inappropriately vague, making the legality of Microsoft's 
actions dependent in part on the perceptions of the ``coerced'' ISV or 
IHV.
---------------------------------------------------------------------------

    \239\ Palm 14; ProComp 34.
    \240\ ProComp 34.
---------------------------------------------------------------------------

    242. Second, a commentor suggests that Section III.F.1 should 
prohibit Microsoft from threatening or bringing suit for infringement 
of Microsoft's intellectual property portfolio.\241\ The United States 
disagrees. The purpose of the RPFJ is to allow competitors freedom to 
develop and market their own software to challenge Windows, not to 
allow them to appropriate Microsoft's intellectual property.\242\
---------------------------------------------------------------------------

    \241\ Red Hat 7-8, 10-13; see also the discussion of the 
concerns of the open source community, below.
    \242\ On a side note, the commentor is mistaken in asserting 
that Section III.F.3 expressly permits Microsoft to sue for 
infringement if an ISV or IHV takes any of the actions protected 
from retaliation under Section III.F.1. Red Hat 7. Section III.F.3 
simply says that Microsoft may enforce agreements or intellectual 
property rights so long as by doing so it does not violate any 
provision in the RPFJ.
---------------------------------------------------------------------------

    243. Third, several commentors suggest Section III.F.1 should ban 
retaliation against firms other than ISVs and IHVs; Litigating States' 
Proposal Sec. 8, for instance, additionally would bar acts of 
retaliation against IAPs, ICPs, OEMs, or Third-Party Licensees.\243\ 
Such additions are unnecessary. The RPFJ already does ban retaliation 
by Microsoft against OEMs, in Section III.A. And Section III.G bans the 
kinds of pressure that Microsoft actually used against IAPs and ICPs in 
the past, and would be most likely to use again in the future absent 
the RPFJ. In covering ICPs, the RPFJ in fact goes beyond the Court of 
Appeals' ruling, which found that ``the District Court's findings [with 
respect to the deals with ICPs] do not support liability.'' Microsoft, 
253 F.3d at 71. The District Court did make factual findings about what 
Microsoft did to the ICPs, and nothing that the District Court or the 
Court of Appeals said about the lack of competitive effect of those 
actions negates the truth of their factual findings on them.
---------------------------------------------------------------------------

    \243\ Litigating States, Ex. A 13-14; SBC 95-96; Pantin 14-15.
---------------------------------------------------------------------------

    244. Fourth, commentors suggest the prohibition should ban 
retaliation related to a broader class of software than that 
contemplated in Section III.F.1.\244\ They argue that Microsoft should 
be prohibited from retaliating against ISVs' and IHVs' actions with 
regard to any products or services that compete with any Microsoft 
products or services. This expansion is unnecessary to achieve the goal 
of the RPFJ, which is to ensure that firms can freely choose to promote 
the popularization of operating systems or middleware that might 
ultimately threaten Microsoft's operating system monopoly by lowering 
the applications barrier to entry. The RPFJ does so by protecting ISVs' 
and IHVs' right to distribute or otherwise promote ``any software that 
competes with Microsoft Platform Software or any software that runs on 
any software that competes with Microsoft Platform Software.'' ISVs' 
and IHVs' activities with respect to Windows applications or Microsoft 
hardware, to take two examples raised by the commentors, are unlikely 
to affect the barrier to entry that protects Windows and so are outside 
the appropriate scope of the RPFJ.
---------------------------------------------------------------------------

    \244\ SBC 97; Pantin III.17; CCIA 86; PFF 18-19; Akin 3.
---------------------------------------------------------------------------

    245. Fifth, a commentor suggests that the RPFJ should prohibit 
Microsoft from retaliating against firms that make a good faith 
complaint against Microsoft for violating the RPFJ but whose complaint 
is ultimately either not brought forward to the court for action or is 
ruled by the court not to be a violation.\245\ The RPFJ does, in fact, 
give firms such protection: Section III.A.3 (OEMs) and Section 
III.F.1.b (ISVs and IHVs) explicitly prohibit Microsoft from 
retaliating against firms for ``exercising any of the options of 
alternatives provided for under this Final Judgment,'' including the 
right of complaint guaranteed by Section IV.D.1.
---------------------------------------------------------------------------

    \245\ Harris 6.
---------------------------------------------------------------------------

    246. Finally, several commentors suggest that Section III.F.1 
should explicitly prohibit Microsoft from retaliating against firms 
that have participated or cooperated with the Government in this 
litigation.\246\ For a discussion of the merits of including a 
provision that prohibits retaliation for participation in this 
litigation, see Section XI(G) below.
---------------------------------------------------------------------------

    \246\ SBC 99; Litigating States, Ex. A 16.

---------------------------------------------------------------------------

[[Page 12163]]

B. Comments On Section III.F.2

    247. Section III.F.2 prohibits agreements relating to Windows 
Operating System Products that condition the grant of Consideration (a 
defined term in the RPFJ that encompasses both monetary and nonmonetary 
benefits) on an ISV's refraining from developing, using, distributing, 
or promoting the same kinds of software addressed in Section III.F.1--
software that competes with a Windows Operating System Product or a 
Microsoft Middleware Product or software that runs on any such 
competitive software. A limited exception permits Microsoft to enter 
such agreements if they 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.''
    248. Several commentors argue that the language of this exception 
is vague and subject to abuse by Microsoft, allowing it to prevent ISVs 
from entering partnership and other agreements with rival firms.\247\ 
Microsoft, however, may only enter agreements that limit the ISV's 
activities with rival software to the extent that those limitations are 
reasonably related to a bona fide contractual relationship between 
Microsoft and the ISV. It is important to protect ISVs' opportunity to 
engage in legitimate, procompetitive arrangements with Microsoft. For 
example, Microsoft could enter into an agreement that provides an ISV 
with funds for the promotion of Microsoft software and prohibits the 
ISV from spending those funds to promote rival software. In contrast, 
contrary to the concerns of one commentor, Microsoft could not enter 
into an agreement that provides an ISV with assistance in promoting a 
Microsoft product on condition that the ISV not also distribute, use, 
or promote a rival product, because such a limitation would not be 
reasonably related to the ISV's obligation to promote the Microsoft 
product.\248\
---------------------------------------------------------------------------

    \247\ SBC 98; CFA 97; Maddux para. 1; Pantin III.17; CCIA 82; 
Akin 3.
    \248\ AAI 26-27, 35-36.
---------------------------------------------------------------------------

    249. One commentor argues that the language of the exception in 
Section III.F.2 is no more precise than a simple statement of the 
antitrust rule of reason, and, because it offers no guidance to the 
Court about how to distinguish between a ``bona fide contractual 
obligation'' and an anticompetitive exclusionary requirement, may 
establish a rule even more permissive than the rule of reason.\249\ 
There is a necessary trade-off in an injunctive provision, and in 
exemptions from such a provision, between specificity and generality. 
The more specific the provision about the behavior that is permitted or 
prohibited, the greater the opportunity for the affected firm to tailor 
anticompetitive activities to avoid court supervision. The exemption in 
Section III.F.2, with its reliance on general but established legal 
terms such as ``reasonable,'' ``reasonably necessary,'' and ``bona 
fide,'' allows the United States and the court to consider the 
substance and not the mere form of Microsoft's future agreements with 
ISVs. Absent this limited exception, Section III.F.2 would prohibit 
otherwise lawful collaborations, with no legal basis in the findings of 
this case.
---------------------------------------------------------------------------

    \249\ Litan 47-48; see generally CCIA 88; Elhauge 12.
---------------------------------------------------------------------------

    250. One commentor objects that Section III.F.2, which begins with 
the words ``Microsoft shall not enter into any agreement,'' 
grandfathers any existing agreements that would otherwise be 
impermissible.\250\ It is correct that Section III.F.2 only applies to 
agreements signed after the date of entry of the RPFJ. This limitation 
should have little impact, however, because Microsoft must regularly 
rewrite its agreements with ISVs in order to encourage them to write to 
and redistribute Microsoft's newest APIs and technologies.
---------------------------------------------------------------------------

    \250\ Harris 6.
---------------------------------------------------------------------------

    251. Finally, at least one commentor expresses concern that Section 
III.G does not contain language similar to Provision 3.h (``Agreements 
Limiting Competition'') of the IFJ, and so would permit Microsoft to 
seek to enter market allocation agreements like those it proposed to 
Netscape and Intel.\251\ The commentor's concern is addressed not in 
Section III.G, but here in Section III.F.2, which does in fact 
substantially prohibit agreements that limit competition. Under its 
terms, Microsoft may 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 various forms of 
involvement with software that runs on, or itself is, software that 
competes with Microsoft Platform Software. To the extent that any 
agreements that limit competition are not covered by Section III.F.2, 
they can of course be addressed by other means: Microsoft could be 
prosecuted, at minimum under Sherman Act Sec. 1, for any market 
allocation agreement that it reached with a competitor or competitors.
---------------------------------------------------------------------------

    \251\ SBC 98-99.
---------------------------------------------------------------------------

C. Comments On Section III.F.3

    252. Section III.F.3 simply states that nothing in Section III.F 
shall prohibit Microsoft from enforcing any property right or any 
provision of an agreement with an ISV or IHV that is not inconsistent 
with the RPFJ.
    253. Several commentors apparently misread Section III.F.3 as 
introducing a loophole or somehow granting Microsoft rights and powers 
that it does not now have.\252\ Section III.F.3 merely states with 
clarity the intended limits of the remainder of Section III.F.
---------------------------------------------------------------------------

    \252\ SBC 98; also see the discussion in Section III.F.1, supra.
---------------------------------------------------------------------------

VI. Exclusionary Agreements (RPFJ Sec. III.G)

    254. Commentors raise a variety of concerns about Section III.G, 
which prohibits Microsoft from entering into a variety of exclusionary 
agreements. The objections generally fall into two categories: concerns 
about omissions from Section III.G, and concerns about Section III.G's 
exceptions.

A. Omissions

    255. At least one commentor expresses concern that Section III.G 
does not contain language similar to Section 3.h (``Agreements Limiting 
Competition'') of the Initial Final Judgment, and so would permit 
Microsoft to seek to enter market allocation agreements like those 
Microsoft proposed to Netscape and Intel.\253\ Although Section III.G 
does not cover such agreements, Section III.F.2 does.
---------------------------------------------------------------------------

    \253\ SBC 98-99.
---------------------------------------------------------------------------

    256. Some commentors object that the RPFJ does not contain a 
provision prohibiting Microsoft from granting consideration to a third 
party for agreeing not to use or distribute non-Microsoft products or 
services, a provision that the United States argued for in the earlier 
remedy proceeding and which was included in the IFJ (Sec. 3.e.i).\254\ 
In a similar vein, one of the same commentors objects that RPFJ Section 
III.G.2, which prohibits Microsoft from granting placement in Windows 
to an IAP or ICP on condition that it refrain from distributing certain 
competing software, reflects phrasing supported by Microsoft and 
opposed by the United States in the previous proceeding.\255\ Since the 
time of the June 2000 IFJ, of course, the Court of Appeals has ruled on 
liability--

[[Page 12164]]

narrowing the District Court's ruling and vacating the IFJ itself. The 
language of RPFJ Section III.G does prohibit the kinds of agreements--
e.g., between Microsoft and IAPs--that the Court of Appeals found to be 
unlawful.\256\
---------------------------------------------------------------------------

    \254\ SBC 105-06; 152; RealNetworks 30-31; Harris 7; Clapes 7.
    \255\ SBC 106-07, 153.
    \256\ One commentor's concern appears to reflect a 
misunderstanding of the purpose of Section III.G.2. Observing that 
the provision prohibits Microsoft from granting placement to an IAP 
or ICP on the condition that the IAP or ICP refrain from activities 
with any software ``that competes with'' Microsoft Middleware, the 
commentor questions whether the provision would have protected 
Netscape's Navigator during the period before Microsoft introduced 
Internet Explorer. See PFF 19-20. By implication, the commentor 
questions whether Section III.G.2 adequately will protect future 
nascent middleware. But Section III.G.2. prohibits certain 
conditioned contracts; if Navigator did not compete with IE because 
IE did not exist, then Microsoft would have no reason to give an IAP 
benefits on the condition that the IAP not use Navigator. And that 
is what the historical record shows: Microsoft did not impose the 
unlawful IAP contracts in the early, pre-IE days of Navigator, but 
rather started to impose them in late 1996 at a time when Microsoft 
was trying to build IE's usage share. See Findings of Fact, 
Paras. 256-62. The current wording of Section III.G.2 adequately 
prohibits Microsoft from taking action against threatening products.
---------------------------------------------------------------------------

    257. Several commentors contend that, unlike the Litigating States' 
Proposal (Sec. 6), RPFJ Section III.G covers Microsoft's contracts with 
only named categories of trading partners and may omit others who are 
important, e.g., large corporate end-user purchasers.\257\ Section 
III.G.1 does, however, cover contracts between Microsoft and any IAP, 
ICP, ISV, IHV, or OEM. Section III.G.1 thus achieves its desired goal 
of ensuring that Microsoft cannot use exclusive agreements to tie up 
key channels of distribution for competing middleware and operating 
systems--indeed all channels of distribution that were discussed at 
trial.\258\ End users, including corporate end users, will be able 
freely to choose the software products they wish to use.
---------------------------------------------------------------------------

    \257\ SBC 104-05, 151-52; CCIA 59 n.12.
    \258\ Economides 11.
---------------------------------------------------------------------------

B. Exemptions

    258. Commentors raise several issues regarding two exemptions in 
Section III.G. The first concerns the ``commercially practicable'' 
exemption to Section III.G.1; the second concerns the joint venture 
exception that applies to all of Section III.G.
    259. Section III.G.1 does not apply to agreements if Microsoft 
obtains in good faith a representation from the contracting third party 
that it is ``commercially practicable'' for it to provide equal or 
greater distribution for competing non-Microsoft software, whether or 
not it actually distributes that non-Microsoft software.\259\
---------------------------------------------------------------------------

    \259\ SBC 107; Litigating States, Ex. A 12 (point 14).
---------------------------------------------------------------------------

    260. At least one commentor misreads the language of Section 
III.G.1, asserting that the provision permits Microsoft to demand 
distribution of its own software at what Microsoft deems to be a 
commercially practicable level.\260\ The representation of ``commercial 
practicability'' by a third party contained in Section III.G.1 does 
not, however, refer to its distribution of Microsoft software, but of 
non-Microsoft software.
---------------------------------------------------------------------------

    \260\ CFA 97.
---------------------------------------------------------------------------

    261. Nor does Section III.G.1 give Microsoft an affirmative right 
to demand that third parties carry its products, as another commentor 
claims.\261\ The provision merely describes the terms that Microsoft is 
permitted to offer to a third party. Moreover, the provision does not 
give Microsoft any power to affect the circumstances that determine the 
acceptable terms: Microsoft cannot force or require a third party to 
make a representation about the commercial practicalities that it 
faces.
---------------------------------------------------------------------------

    \261\ SBC 152.
---------------------------------------------------------------------------

    262. Some commentors contend that third parties are likely to make 
empty representations to Microsoft in exchange for preferential 
treatment. That is, a third party like an OEM is more likely to say 
that it could carry competing products than actually carry those 
products, because it would not want to distribute two similar products 
on a particular computer that it sells.\262\ But this criticism misses 
the fact that the OEM may well choose to offer the non-Microsoft 
product on, for example, 50% of its product line, and the Microsoft 
product on the other 50%, thus allowing the consumer to choose freely 
among differentiated computer/software bundles. The United States 
believes that, contrary to the concern raised by at least one 
commentor, this provision will prevent Microsoft from guaranteeing that 
rival technology will not become broadly available.\263\ Further, the 
``good faith'' requirement ensures both that Microsoft cannot make a 
representation of commercial practicability a standard part of its 
license agreements and that Microsoft could not rely on this exemption 
where it knows that a representation of commercial practicability is 
not legitimate.
---------------------------------------------------------------------------

    \262\ AAI 26; Harris 7.
    \263\ Pantin 16.
---------------------------------------------------------------------------

    263. A number of commentors contend that Microsoft will be able to 
obtain representations of commercial practicability from third parties 
simply by paying them sufficiently.\264\ Section III.G.1, however, 
makes it logically impossible for Microsoft to seek--much less get--any 
form of exclusive distribution, promotion, use, or support on all of a 
third party's products, no matter how much Microsoft is willing to pay. 
Microsoft cannot, for instance, pay an ICP to make its content 
available in a format readable only by Windows Media Player, because it 
is logically impossible for that ICP to represent that it could also 
simultaneously make that content available only in a format readable 
only by some non-Microsoft media software.
---------------------------------------------------------------------------

    \264\ CCIA 89.
---------------------------------------------------------------------------

    264. Commentors also raise issues about Section III.G's exemption 
for certain joint venture and joint development or services 
arrangements, under which a third party can be prohibited from 
competing with the object of the joint arrangement for a reasonable 
period of time.
    265. One commentor in this group complains that the standard 
enunciated in Section III.G for an agreement to qualify for this 
exemption is nothing more than a restatement of the traditional 
antitrust rule of reason.\265\ This contention, however, overlooks the 
exemption's careful limitations. The exemption applies only to bona 
fide joint ventures and to other joint agreements for certain specific 
productive activities, and only those in which both Microsoft and the 
other party contribute significant resources. Further, these commentors 
overlook that nothing in the Court of Appeals' decision warrants 
denying Microsoft the ability to enter into joint arrangements, which 
may have procompetitive benefits for the market.
---------------------------------------------------------------------------

    \265\ Litan 48.
---------------------------------------------------------------------------

    266. The requirement that a joint development or services agreement 
must create either a new product, service, or technology, or a material 
value-add to one that already exists addresses the concerns raised by 
several commentors that Microsoft could use Section III.G to block 
competition with joint activities that create nothing more than routine 
alterations to Microsoft or non-Microsoft products.\266\
---------------------------------------------------------------------------

    \266\ CCIA 88-89; AOL 36; AOL, Klain 5.
---------------------------------------------------------------------------

    267. Some commentors question whether Microsoft could manipulate 
its interpretation of, for instance, ``significant developer or other 
resources'' in order to invoke the exemption to cover activities that 
are not truly joint.\267\ What constitutes a ``significant'' resource 
is not spelled out in the RPFJ because it is a familiar term and 
concept in antitrust enforcement. For example, the Antitrust Guidelines

[[Page 12165]]

for Collaborations Among Competitors issued jointly by the Federal 
Trade Commission and Department of Justice in April 2000 describe the 
contribution of ``significant capital, technology, or other 
complementary assets'' as a hallmark of efficiency-enhancing 
collaborations between firms. (FTC/DOJ Antitrust Guidelines for 
Collaborations Among Competitors, 8).
---------------------------------------------------------------------------

    \267\ CFA 98; Litigating States, Ex. A 12 (point 14); 
RealNetworks 30-31.
---------------------------------------------------------------------------

    268. The United States, of course, retains power to evaluate and 
seek enforcement of the RPFJ against sham joint arrangements. Microsoft 
cannot, as some commentors suggest, take the identical distribution 
agreements found unlawful at trial and exempt them from Section III.G 
merely by characterizing the agreements as ``joint'' activities.\268\ 
As the Court of Appeals found (Microsoft, 253 F.3d at 72), Microsoft's 
exclusionary agreements with ISVs, to take just one example, had no 
procompetitive justification; they cannot be considered legitimate 
joint activities to produce new or improved products, technologies, or 
services, and so would not be exempted from Section III.G.
---------------------------------------------------------------------------

    \268\ ProComp 67-88; SBC 53; Maddux, Point 20; Harris 6.
---------------------------------------------------------------------------

    269. Another commentor notes \269\ that the United States objected 
in June 2000 to Microsoft's proposal for a joint-venture exception to 
Section 3.h of the Initial Final Judgment(``Ban on Agreements Limiting 
Competition''). The exception in RPFJ Section III.G, however, is 
narrower than the broad exception Microsoft proposed, and it is 
tailored to permit only joint activities that are genuinely 
procompetitive, those that are not mere shams for market allocation 
agreements but require firms legitimately to share significant 
resources to create new or improved opportunities for consumers. A non-
compete clause with a legitimate joint venture is not, contrary to one 
commentor's view, necessarily inappropriate merely because Microsoft is 
one of the parties to the joint venture.\270\ Both the United States 
and the courts consistently have noted that such procompetitive joint 
ventures do exist and that Microsoft should be permitted to engage in 
them, see, e.g., IFJ Sec. 3.a.ii (exception for ``bona fide joint 
development efforts'').
---------------------------------------------------------------------------

    \269\ SBC 107.
    \270\ Pantin 17.
---------------------------------------------------------------------------

    270. Finally, some commentors raise similar concerns about whether 
Microsoft could abuse the exception in Section III.G for agreements 
``in which Microsoft licenses intellectual property in from a third 
party.'' \271\ The exception permits Microsoft, in licensing new 
technology from an ISV for incorporation into a Microsoft product, to 
ensure that the ISV will not also license the same technology to a 
competitor who hopes to ``free ride'' on Microsoft's popularization of 
the technology. It therefore provides Microsoft with appropriate 
incentives to invest in such popularization. If Microsoft entered into 
an agreement with an ISV, or other third party, in which the licensing-
in of such intellectual property is nothing more than a pretext for 
otherwise impermissible exclusionary terms, the United States would 
review the legitimacy of such an agreement under Section III.G.
---------------------------------------------------------------------------

    \271\ SBC 153; RealNetworks 31; Pantin 17-18; Giannandrea 5; 
Harris 6.
---------------------------------------------------------------------------

VII. Disclosure Provisions (RPFJ Secs. III.D, III.E)

A. Disclosure of APIs (RPFJ Sec. III.D)

    271. Many commentors raise issues concerning the disclosure of APIs 
in RPFJ Section III.D. The issues will be discussed in the following 
categories: First, issues concerning the products between which the 
APIs are disclosed will be discussed. Next, API issues, focusing on the 
substance of the disclosure, and the definitions of ``API'' and 
``Documentation,'' will be discussed. Third, timing issues, including 
analysis of the definition of ``Timely Manner,'' will be addressed.
1. Product Issues
    272. Section III.D calls for certain disclosures between Microsoft 
Middleware and a Windows Operating System Product. Many commentors 
argue that the definitions of Microsoft Middleware and Windows 
Operating System Product can be evaded easily; that products other than 
Microsoft Middleware should be included; or that products other than 
Windows Operating System Product should be included. Each of these will 
be addressed in turn. For a discussion of Microsoft Middleware itself, 
see Section III(B) above.
c. Microsoft's Ability To Manipulate the Definitions To Avoid 
Disclosure
    273. Several commentors state that the API disclosure provisions 
are completely within Microsoft's control and that Microsoft can evade 
the provisions simply by labeling Microsoft Middleware as part of a 
Windows Operating System Product.\272\ Some misunderstand the 
interaction between the Windows Operating System Product and Microsoft 
Middleware definitions, arguing, for example, that interfaces between 
Internet Explorer and a Windows Operating System Product are not 
covered if Microsoft chooses to label Internet Explorer as part of 
Windows. This is incorrect. These comments fail to realize that a 
product can be both included in a Windows Operating System Product and 
still have code that qualifies as Microsoft Middleware. It does not 
matter if Microsoft labels Internet Explorer as part of Windows; what 
matters is that there is a separate distribution of Internet Explorer, 
and that the interfaces between this separate distribution and a 
Windows Operating System Product must be disclosed. For example, 
Internet Explorer 6.0 is distributed separately and included in Windows 
XP. Under the RPFJ, the code that is distributed separately is 
Microsoft Middleware regardless of whether Microsoft also calls 
Internet Explorer a part of Windows. Concerns that Microsoft can 
relabel code as being part of Windows and thus evade the disclosure 
provisions are unfounded; it is the separate distribution that matters, 
not the Windows label.
---------------------------------------------------------------------------

    \272\ Litan 51; NetAction 12; ProComp 42-43; CFA 96; 
RealNetworks 11; CCIA, Stiglitz & Furman 30; CCIA 63.
---------------------------------------------------------------------------

    274. Another commentor argues that Microsoft can evade disclosure 
by removing the APIs from a Windows Operating System Product.\273\ This 
is illogical. If the APIs are not in Windows, then they cannot be used 
by any software, whether that software be Microsoft Middleware or 
competing products. At a basic level, it is important to remember that 
Microsoft chooses which APIs to develop and make part of Windows in the 
first instance. Microsoft controls which software products it develops 
and which it does not, and Section III.D is about disclosure of certain 
APIs within those products.
---------------------------------------------------------------------------

    \273\ AAI 20.
---------------------------------------------------------------------------

b. Products Other Than Microsoft Middleware
    275. Some commentors argue that Section III.D should require 
Microsoft to disclose interfaces between Windows Operating System 
Products and products other than Microsoft Middleware.\274\ Some argue 
that all Microsoft applications that run on Windows, for instance, 
Office, should

[[Page 12166]]

be covered.\275\ Others argue that software that never has been 
distributed separately should be covered. Still others phrase the 
argument in terms of disclosing ``all Windows APIs.'' \276\ Others find 
the limitation to Microsoft Middleware to be appropriate.\277\
---------------------------------------------------------------------------

    \274\ Alexander 3, 4; Carroll 4; Johnson 5; Gifford 5, 9; Litan 
51; Kegel 18; Pantin 12; PFF 20; ProComp 38; CCIA 62.
    \275\ KDE 13.
    \276\ AAI 19; CCIA 62; CCIA, Stiglitz & Furman 29; SIIA 31-32.
    \277\ Economides 11.
---------------------------------------------------------------------------

    276. Disclosure of the interfaces between all Microsoft 
applications that run on Windows Operating System Products is 
considerably broader than the violations found by the Court of Appeals 
would justify, for several reasons. First, the word ``applications'' 
does not have a specific meaning, and could refer to almost any 
software code. The term is not limited to software of any particular 
size or purpose and could be interpreted to include the smallest pieces 
of software. Nor does the term have any relation to whether the 
software exposes any APIs or could ever be used as Platform Software 
itself. Thus, for instance, a clock, a solitaire program, and 
Microsoft's Flight Simulator and Age of Empires games all would be 
included. The cost to Microsoft of hardening and documenting the 
interfaces between all these pieces of software would be substantial, 
and the United States does not see how it would increase materially the 
ability of competing middleware to threaten Microsoft's operating 
system monopoly.
    277. As phrased by one commentor, the goal is to ``allow 
competitive products to interoperate with Microsoft software on an 
equal basis as Microsoft's own products.'' \278\ The United States 
views Non-Microsoft Middleware as competing for usage with Microsoft 
Middleware, and thus this provision seeks to ensure that Non-Microsoft 
Middleware will not be disadvantaged. The United States believes that 
the most competitively significant APIs are those used by the competing 
products, not those used by completely different types of software, 
such as games.
---------------------------------------------------------------------------

    \278\ ProComp, Arrow A-29.
---------------------------------------------------------------------------

    278. Moreover, as some commentors recognize, Microsoft already 
discloses thousands of APIs and has a strong incentive to disclose 
APIs.\279\ Microsoft's disclosure of APIs is what allows applications 
to be written to the Windows platform, and creates and sustains the 
applications barrier to entry. Section III.D is designed to require 
disclosure of APIs in those cases where Microsoft may have a strategic 
interest in withholding APIs that outweighs Microsoft's natural 
incentive to disclose them--namely, where Microsoft's own middleware is 
competing with rival middleware that threatens the applications barrier 
to entry.
---------------------------------------------------------------------------

    \279\ CCIA 60-61.
---------------------------------------------------------------------------

    279. Commentors who posit that ``Windows APIs'' should be disclosed 
fail to recognize the need for a clear line between which facets of 
Windows are disclosed and which are not. Windows, like most software, 
is comprised of modular blocks of code that ``interface'' to one 
another. Disclosing every interface in Windows is to disclose most of 
the source code. ``Windows APIs'' is simply not a defined set of APIs 
that appropriately can be subject to disclosure.
    280. Some commentors argue that limiting disclosure to APIs used by 
Microsoft Middleware forces other applications merely to follow in the 
footsteps of Microsoft products and discourages new products.\280\ To 
the contrary, there is no requirement that any Non-Microsoft Middleware 
use the same APIs as the Microsoft Middleware; nor is there any 
indication that the only way to accomplish a particular function will 
be to use the Microsoft Middleware APIs. For instance, early web 
browsers such as Mosaic in 1994 clearly did not have to use the same 
APIs as Internet Explorer, because Internet Explorer did not exist. Yet 
Mosaic was developed and gained widespread popularity, all by using the 
thousands of Windows APIs that were already published.
---------------------------------------------------------------------------

    \280\ CCIA 62; ProComp 38; CFA 96.
---------------------------------------------------------------------------

c. Products Other Than Windows Operating System Products
    281. Some commentors argue that Section III.D should require 
Microsoft to disclose the interfaces between Microsoft Middleware and 
products other than Windows Operating System Products.\281\ 
Specifically, some opine that interfaces to other devices, such as 
handhelds or set-top boxes, should be covered. These comments are 
addressed under Section III.E.
---------------------------------------------------------------------------

    \281\ Litigating States, Ex. A 8; Palm 6-7; Pantin 12-13; 
ProComp 39; AOL 39-40; CCIA, Stiglitz & Furman 43.
---------------------------------------------------------------------------

    282. Other commentors argue that the disclosure should be to the 
benefit of competing operating system vendors.\282\ For instance, some 
commentors argue that the disclosure should be for any purpose, and not 
just ``for the sole purpose of interoperating with a Windows Operating 
System Product.'' \283\ Some focus on the potential use of these APIs 
by other operating system developers. Several commentors go farther and 
propose that Microsoft be required to define the APIs that a competing 
operating system must provide to run Windows applications, or to 
implement a ``Windows Application Environment'' on other operating 
systems.\284\
---------------------------------------------------------------------------

    \282\ Giannandrea 2; Moglen 3-4.
    \283\ Moglen 2; Kegel 8; Maddux para. 11; ProComp 39.
    \284\ CCC 11; Kegel 14-18.
---------------------------------------------------------------------------

    283. The violations proven and upheld in this case focused on 
middleware as the mechanism that threatened to lower the applications 
barrier to entry and therefore make other operating systems better 
substitutes for Windows. The intent of Section III.D is to ensure that 
future middleware threats will have the information about Windows they 
need in order not to be disadvantaged relative to Microsoft's own 
middleware. That is, the disclosure is not intended to permit 
misappropriation of Microsoft's intellectual property for other uses. 
Rather, the focus of the remedy, as of the Court of Appeals' ruling, 
remains restoring the competitive conditions to permit nascent threats 
to emerge.
2. API Issues
a. Definition of ``API''
    284. Several commentors criticize the definition of ``API.'' 
Significantly, one commentor points out that the definition only 
includes Microsoft APIs, rendering the other definitions that use the 
term API potentially meaningless.\285\ Specifically, the definitions of 
Non-Microsoft Middleware, Non-Microsoft Middleware Product and 
Operating System arguably fail to function as intended if the 
definition of ``APIs'' is limited to Microsoft APIs. This definition, 
as originally drafted, was intended to apply to Section III.D, and the 
definition of API has been modified in the SRPFJ to reflect the 
intention of the parties in drafting this definition. The RPFJ's 
definition of API has thus been inserted directly in Section III.D. A 
generic definition of API that is not tied to Microsoft products has 
been inserted as definition VI.A in the SRPFJ. The meaning of API in 
the definitions of Non-Microsoft Middleware, Non-Microsoft Middleware 
Product and Operating System is now defined according to this generic 
definition, thereby resolving any concerns about their reliance on an 
API definition that is specifically tied to Microsoft products. In the 
SRPFJ, the revised sections are as follows (new language underlined):
---------------------------------------------------------------------------

    \285\ AAI 34.

    Section III.D. Starting at the earlier of the release of Service 
Pack 1 for Windows XP or 12 months after the submission of this 
Final

[[Page 12167]]

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 Middleware to interoperate 
with a Windows Operating System Product. For purposes of this 
Section III.D., the term 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. 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 ver sion of a 
Windows Operating System Product, the obligations imposed by this 
---------------------------------------------------------------------------
Section III.D shall occur in a Timely Manner.

    Section VI.A. ``API'' means application programming interface, 
including any interface that Microsoft is obligated to disclose 
pursuant to III.D.
    285. Commentors argue that the definition of API (now as contained 
in Section III.D) is too narrow.\286\ In particular, several argue that 
it should include file and document formats. As the CIS explained, 
``interfaces'' is used broadly to include any interface, protocol or 
other method of information exchange used when Microsoft Middleware 
calls upon a Windows Operating System Product. CIS at 33-34. One 
commentor argues that this means that APIs simply are the interfaces 
between two products.\287\ In general, this is correct `` the 
definition was designed to be read broadly to include any way in which 
Microsoft Middleware calls upon the services of a Windows Operating 
System Product. Thus, whatever Microsoft Middleware uses to request 
services from a Windows Operating System Product, whether it includes 
something that could arguably be called a ``file format'' or not, is 
the subject of disclosure. To the extent that these comments actually 
relate to whether applications such as Office should be considered 
Microsoft Middleware, those concerns are addressed above in the 
discussion of Products Other than Microsoft Middleware. See also 
Section VII(E) below.
---------------------------------------------------------------------------

    \286\ Kegel 5, 8, 12; Maddux para. 12; Litigating States, Ex. B 
31; Carroll 2, 4, 5; Johnson 2, 5-6l SBC 78; KDE 13; Pantin 30.
    \287\ ProComp 46.
---------------------------------------------------------------------------

    286. Some commentors believe that APIs should include calls from a 
Windows Operating System Product to Microsoft Middleware, instead of 
the other way around.\288\ For instance, one commentor argues that the 
``Play All'' and ``Burn CD'' interfaces in Windows XP should be 
disclosed.\289\ These concerns are more appropriately addressed under 
the default provisions in Section III.H. The disclosure provisions in 
Section III.D and the default provisions in Section III.H address 
different aspects of the relationship between Microsoft Middleware and 
a Windows Operating System Product. In simple terms, when Microsoft 
Middleware calls upon functionality in a Windows Operating System 
Product for services, that interface is subject to analysis under 
Section III.D (one can think of this as middleware ``calling down'' 
into the operating system for functionality). On the other hand, when a 
Windows Operating System Product invokes a Microsoft Middleware Product 
or a Non-Microsoft Middleware Product to perform a function, those 
invocations are analyzed under Section III.H (one can think of this as 
an operating system ``calling up'' to the middleware for 
functionality). The specific functions of ``Play All'' and ``Burn CD'' 
in Windows XP are examples of the latter, not the former. Similarly, 
issues of ``hardwiring'' are more appropriately addressed under Section 
III.H.\290\
---------------------------------------------------------------------------

    \288\ Kegel 18; SIIA 30-31.
    \289\ RealNetworks 27.
    \290\ Palm 10 (hardwiring); AOL, Klain 4 (handwiring).
---------------------------------------------------------------------------

b. Definition of ``Documentation''
    287. Some commentors note that, in contrast to the IFJ, there is no 
definition of ``technical information'' and that instead the RPFJ uses 
the term ``Documentation.'' The commentors believe that the IFJ's 
definition of technical information was superior or that Documentation 
should be broader.\291\ Despite the many comments on this issue, the 
United States believes the definitions are very similar and produce 
largely similar results. To the extent there are differences, the 
United States believes they are due largely to problems and ambiguity 
in the IFJ's technical information definition.
---------------------------------------------------------------------------

    \291\ Litigating States, Ex. A 7, 9, Ex. B 36; Pantin 12; SIIA 
29-30; SBC 79; RealNetworks 15; CCIA 70-71; PRoComp 47; AOL, Klain 
5.
---------------------------------------------------------------------------

    288. The IFJ's definition of technical information was ``all 
information regarding the identification and means of using APIs and 
Communications Interfaces that competent software developers require to 
make their products running on any computer interoperate effectively 
with Microsoft Platform Software running on a Personal Computer.'' 
There then followed a list of examples of the type of information that 
might be provided in different circumstances. Some interpret the list 
as requiring the specified information in all circumstances; for 
instance, that for every interface a reference implementation and 
algorithms must be disclosed. This was never the intent of the 
definition, as any quick review will show, because some of the listed 
items only make sense for certain types of interfaces. The ambiguity 
and lack of clarity on this point was one of the reasons the definition 
was changed.
    289. The controlling parts of the IFJ's technical information 
definition were intended to be ``all information regarding the 
identification and means of using APIs . . . that competent software 
developers require.'' The intent behind the previous definition was to 
ensure that if a competent software developer required it, it had to be 
provided, whether that be a reference implementation, an algorithm, or 
any other facet of the interface.
    290. In the RPFJ, the first sentence of the definition of 
Documentation reads ``all information regarding the identification and 
means of using APIs that a person of ordinary skill in the art requires 
to make effective use of those APIs.'' The phrase ``competent software 
developer'' from the IFJ definition has been replaced with ``a person 
of ordinary skill in the art'' because the latter is clearer and more 
easily enforced, but the general intent is the same: if the information 
is needed by a person of the requisite skill, it must be provided.
    291. The Documentation term also was defined to accommodate the 
RPFJ's separation of API disclosure and Communications Protocol 
licensing into two separate provisions and the greater specificity 
given to the API definition (now as used in Section III.D). 
Additionally, the second sentence of Documentation was added to clarify 
the level of specificity, precision and detail to be provided. However, 
the second sentence does not change the meaning of the first sentence; 
``all information . . . that a person of ordinary skill in the art 
requires to make effective use'' of the APIs must be disclosed.
    292. One commentor argues that Microsoft should not be allowed to 
disclose via MSDN because Microsoft allegedly has made its websites 
incompatible with non-Microsoft web browsers.\292\ Taking the opposite 
approach, another commentor argues that Microsoft only should be 
allowed to

[[Page 12168]]

disclose via MSDN.\293\ MSDN at present is widely used by developers 
who wish to develop for Microsoft platforms, and it is an efficient 
mechanism for distributing disclosures to developers, although other 
efficient mechanisms could also be developed.
---------------------------------------------------------------------------

    \292\ Maddux para. 13 (Microsoft should be required to publish 
on Slashdot (slashdot.org) and Freshmeat (www.freshmeat.org).
    \293\ Pantin 11-13.
---------------------------------------------------------------------------

    293. A few commentors raise concerns regarding completeness--either 
that there is no incentive for the Documentation to be complete or 
accurate, or that there is no way to tell whether it is 
sufficient.\294\ The United States believes that the enforcement 
mechanisms of the RPFJ are sufficient to address this issue. In 
particular, as discussed below, the Technical Committee will have full 
access to the source code and any other necessary information to 
resolve disputes concerning sufficiency of Documentation.
---------------------------------------------------------------------------

    \294\ Johnson 6; Novell 18.
---------------------------------------------------------------------------

    294. Finally, some commentors argue that the Litigating States' 
definition of technical information is superior. The Litigating States' 
definition contains one striking change from the IFJ definition: it 
requires information on implementing the APIs as well as on using them. 
The addition of this word appears to require Microsoft to provide 
information on how to implement functions in third-party products, such 
as how to implement the APIs, not so they can be used by the 
middleware, but so that those interfaces can be offered to others. This 
appears to be aimed at allowing competing operating system vendors to 
clone Windows APIs. The Litigating States' definition extends well 
beyond remedying the violations that the Court of Appeals sustained.
c. Source Code Access
    295. Commentors raise several issues regarding disclosure of source 
code. First, the United States does not agree that an appropriate 
remedy in this case requires Microsoft to disclose and publish all of 
its source code for Windows Operating System Products, because that 
would be a disproportionate appropriation of Microsoft's intellectual 
property.\295\ Several other commentors complain that the RPFJ provides 
no access to source code for competitors, as was previously contained 
in the interim conduct remedies in the form of a ``secure facility'' 
provision.\296\ Instead, source code access is granted to the Technical 
Committee, accomplishing the same enforcement purpose without the same 
security concerns. When technical issues, such as whether Microsoft has 
disclosed all required APIs, are brought to the attention of the 
Technical Committee it is expected that they will consult the source 
code as necessary to resolve any issues. Additionally, unlike the 
secure facility, the Technical Committee supports anonymous complaints 
and can work with an industry participant without their identity being 
disclosed to Microsoft. Under the prior provision only ``qualified 
representatives'' had access, and the process of becoming a ``qualified 
representative'' could have required disclosure of the 
representatives'' identity to Microsoft.
---------------------------------------------------------------------------

    \295\ Maddux para. 12.
    \296\ Litigating States' Proposal Sec. 4; Litan 53; CCIA 70.
---------------------------------------------------------------------------

    296. Moreover, it is important to note that the stated purpose of 
the ``secure facility'' provision was to facilitate compliance and 
monitoring. The United States believes that compliance and monitoring 
assessments are best performed by the United States, with assistance 
from the Technical Committee. To allow competitors source code access 
to facilitate compliance and monitoring is to place an inappropriate 
responsibility on competitors, who might have reasons to place their 
own interests above those of the U.S. public generally. Accordingly, 
the RPFJ calls for source code access to be available to the Technical 
Committee and the United States and puts the responsibility for 
compliance and monitoring on the United States.
    297. Additionally, the removal of the secure facility provision 
does not change the amount of required disclosure under Section III.D. 
Disclosure still must be sufficient to provide ``all the information . 
. . that a person of ordinary skill in the art requires to make 
effective use of those [disclosed] APIs.'' This can include reference 
implementations or any other disclosure required to meet the 
requirement. If the documentation provided by Microsoft is not 
sufficient, then it must be revised until it satisfies the requirement. 
The United States maintains that it, with assistance from the Technical 
Committee, remains best suited to address these issues, for instance 
through RPFJ's voluntary dispute resolution procedures.
d. Intellectual Property Issues
    298. A few commentors raise concerns that Microsoft is permitted to 
retain certain intellectual property rights over its interfaces.\297\ 
These commentors argue, for instance, that Microsoft still can patent 
or have other exclusive legal rights that prevent competing software 
developers from developing on other platforms. Another suggestion is 
that Microsoft be required to announce the subject matter of its 
patents, such that developers can tell which interfaces can be used 
without risk of patent infringement. These issues are addressed in 
Section XII(E) below.
---------------------------------------------------------------------------

    \297\ KDE 13; Waldman 5; Kegel 8.
---------------------------------------------------------------------------

3. Timing Issues
    299. Several commentors raise issues concerning the timing of the 
API disclosures. These issues can be divided into three categories: 
when the first disclosures shall occur; when disclosures will be 
triggered by a new version of Microsoft Middleware; and when 
disclosures will be triggered by a new version of a Windows Operating 
System Product.
a. First Disclosures: Windows XP Service Pack 1 or No Later Than 
November 2002
    300. The RPFJ calls for API disclosure to occur first at the 
earlier of the release of Service Pack 1 for Windows XP or 12 months 
after the submission of the RPFJ to the court, i.e., November 6, 2002. 
Currently, Service Pack 1 is scheduled to be released in August 2002. 
Several commentors argue that there is no reason for this delay, and 
that the APIs should be released immediately, or at any rate sooner 
than November 2002.\298\
---------------------------------------------------------------------------

    \298\ SBC 81; Kegel 7-8; Sen. Kohl 5; Litan 57; Maddux para. 10; 
Litigating States, Ex. A 8-9; Palm 13; ProComp 51-52; Alexander 2; 
AAI 23; CCIA 83; CCIA, Stiglitz & Furman 30; CFA 96; RealNetworks 
29-30.
---------------------------------------------------------------------------

    301. This delay was necessary to allow Microsoft time to stabilize, 
modify as needed, test and document the disclosed interfaces. This is 
not a trivial task. Interfaces that were designed to be used by only a 
certain small number of other pieces of code are not designed, tested, 
or documented to the level that Microsoft customarily provides for 
published interfaces. Interfaces must be stabilized, in that they must 
be fixed at a configuration that can be maintained. The interfaces will 
need to be modified to add error correction or other functions to 
handle unexpected behavior. The interfaces must be tested to work with 
a great many other applications and system configurations. Finally, the 
interfaces must be documented to accurately describe what the 
interfaces do and how to use them. If any of these steps are not 
performed, or not performed well, then third-party products might find 
the interfaces to be unreliable and therefore unusable.
    302. In general, there is a trade-off between immediate publication 
of interfaces and delayed publication of interfaces with a higher 
degree of

[[Page 12169]]

certainty that the interfaces will be well-tested and documented. The 
United States believes that the appropriate balance is to publish the 
interfaces with Windows XP Service Pack 1. One of the rationales for 
choosing Service Pack 1 is that a majority of corporate users, and even 
some consumers, prefer to wait to purchase until the first Service Pack 
of a new operating system is released. This is because the first 
Service Pack fixes many of the ``bugs'' or unintended behavior of a new 
operating system. In addition, many more applications are updated or 
modified to be compatible with a new operating system after its initial 
release. For corporate users, there is often a significant lag time of 
at least a year between when they begin testing and working with a new 
operating system and when it is deployed or ``rolled out'' to corporate 
users. All of these factors contributed to the decision to focus on 
Service Pack 1 as striking the correct balance for timing of the 
interface disclosure.
    303. Commentors raise concerns that the delay allows Microsoft time 
to modify the interfaces and put ``key interfaces'' into the operating 
system. Part of this concern stems from a misreading of the Windows 
Operating System Product and Microsoft Middleware definitions. This 
confusion is addressed in discussion of those definitions. See Section 
III(H) above. Because Microsoft Middleware must be distributed 
separately, by definition there will be a set of interfaces between the 
Microsoft Middleware code and the Windows Operating System Product--the 
interfaces are between the bits of code that are distributed separately 
and what comes in the box labeled Windows. It is possible that 
Microsoft could move code around between the operating system and the 
Microsoft Middleware. But it is important to keep in mind that one of 
the main reasons the code is distributed separately is to provide more 
frequent updates of the Microsoft Middleware than the operating system, 
and to distribute the Microsoft Middleware to the large installed base 
of existing Windows users. To start hiding interfaces would involve a 
large backward compatibility problem, involving changes to the 
operating system as well as Microsoft Middleware code.
    304. Finally, it is worthwhile to examine the timing of the 
expected first disclosure under the Litigating States' proposed remedy. 
The Litigating States' proposed remedy does not have any delay before 
the first disclosures, which means they could occur potentially as soon 
as a Litigating State's judgment was entered, giving Microsoft no time 
to harden, test, and document the APIs. The Litigating States' remedy 
hearing is expected to take a minimum of 12 weeks from the beginning of 
trial on March 11, 2002 through closing arguments. Even assuming the 
Court rules within 30 days, the decree would not be entered until July 
2002. Microsoft undoubtedly would argue for a stay pending appeal and 
possibly appeal all the way to the Supreme Court. In light of such 
unavoidable litigation risks and delays, the United States believes the 
certainty of disclosure occurring between August and November 2002 is 
acceptable and indeed preferable.
b. Triggered by New Version of Microsoft Middleware: Last Major Beta 
Test Release
    305. The meaning of ``new major version'' is covered above in the 
discussion of Microsoft Middleware. Section III.D calls for disclosures 
to occur no later than the last major beta test release of the new 
major version of the Microsoft Middleware. Based on data available to 
the United States, the last major beta test release for various 
Microsoft Middleware Products has occurred anywhere from two to seven 
months prior to the commercial release of the product, with the 
majority being three to four months prior. While some commentors are 
unfamiliar with the term,\299\ the phrase ``last major beta test'' has 
a specific meaning to Microsoft in terms of its testing and release 
schedule.
---------------------------------------------------------------------------

    \299\ ProComp 48.
---------------------------------------------------------------------------

    306. Commentors argue that this is insufficient notice for new 
APIs, and some argue that disclosure should be provided as soon as 
Microsoft developers receive the information.\300\ As a practical 
matter, such early disclosure is not feasible. The time when a 
Microsoft developer first receives information about a new API may be 
considerably before the API is finalized, tested and documented. Such 
information may be in the form of an informal e-mail or a hallway 
conversation. In fact, the Microsoft developer may have to make 
numerous changes to her own product as the API is changed. 
Alternatively, the Microsoft developer may be part of the testing cycle 
and may be required to work extensively with the Windows Operating 
System Product developer to write the interface. To release APIs before 
they are finalized will not be efficient. The United States believes 
that requiring the API to be fully published and documented at the last 
beta test release provides a reasonable trade-off between timely 
disclosure to ISVs and the need for Microsoft to finish the development 
of the APIs.
---------------------------------------------------------------------------

    \300\ AAI 22; Litan 50; Kegel 7-8; Pantin 12; NetAction 10, 13; 
Alexander 3; Novell 19; Maddux para. 14; SBC 81-82; CFA 96.
---------------------------------------------------------------------------

c. Triggered by New Version of Windows Operating System Product: Timely 
Manner (RPFJ Sec. VI.R)
    307. A number of commentors question Section VI.R's definition of 
``Timely Manner,'' the term that defines when Microsoft must meet its 
disclosure obligations under Section III.D. See RPFJ Sec. VI.R. In the 
RPFJ, ``Timely Manner'' is defined as ``the time that Microsoft first 
releases a beta test version of a Windows Operating System Product that 
is distributed to 150,000 or more beta testers.'' Some comments address 
the numerical threshold of ``150,000 . . . beta testers.'' Other 
comments address timing--Microsoft's ability to control when it reaches 
this threshold.
    308. Several commentors contend that 150,000 beta testers is too 
high a threshold to trigger Section III.D's disclosure requirement, 
arguing that for past Windows Operating System Products, Microsoft may 
have distributed 150,000 beta copies but probably did not ever 
distribute them to 150,000 individual beta testers. These commentors 
therefore are concerned that the threshold will never be reached, 
resulting in no required disclosure before a new Windows Operating 
System Product is released.\301\
---------------------------------------------------------------------------

    \301\ AOLl, Klain 14; AAI22; ProComp 48; SIIA 31; Litan 50; CCIA 
84; CFA 96; Giannandrea 7.
---------------------------------------------------------------------------

    309. The parties' intention in drafting this definition was not to 
distinguish between beta copies and beta testers with respect to the 
150,000 requirement. The parties originally chose the 150,000 beta 
tester distribution level based on the approximate current MSDN 
subscription base. In response to the foregoing concerns about the 
definition of Timely Manner, however, the United States has proposed, 
and Microsoft and the Settling States have agreed, to modify the 
definition in Section VI.R of the SRPFJ to read:

    ``Timely Manner'' means at the time Microsoft first releases a 
beta test version of a Windows Operating System Product that is made 
available via an MSDN subscription offering or of which 150,000 or 
more beta copies are distributed.

This modification clarifies the parties' intention that Timely Manner 
should be triggered by the distribution of 150,000 or more beta copies, 
regardless of whether those copies are distributed to individuals who 
are considered ``beta testers.'' Moreover, the inclusion of 
distribution via an MSDN subscription

[[Page 12170]]

offering as a trigger for this definition ensures that, even if the 
level of MSDN subscribers decreases substantially, it will still 
trigger Microsoft's disclosure obligations under Section III.D. 
Therefore, although this modification clarifies, and in fact may 
slightly broaden, Microsoft's disclosure obligations, it does not 
substantively differ from the RPFJ's definition of Timely Manner.
    310. A number of commentors contend that Microsoft may in the 
future choose to distribute to fewer beta testers and thereby evade its 
disclosure obligations.\302\ Microsoft, however, continues to have a 
strong incentive to beta-test extensively any forthcoming Windows 
Operating System Product to ensure favorable consumer reaction, and the 
United States believes it is not realistic to suggest that Microsoft 
will diminish its beta-testing to avoid the RPFJ's disclosure 
requirements. If Microsoft's beta-testing practices change materially 
after imposition of the RPFJ, the United States would consider whether 
the change warrants a possible contempt action.
---------------------------------------------------------------------------

    \302\ ProComp 48; Palm 13; SIIA 31; Novell 19; Relpromax 12; 
RealNetworks 12.
---------------------------------------------------------------------------

    311. Several commentors express concern that triggering disclosure 
under Section III.D pursuant to the Timely Manner definition will 
permit Microsoft's own applications and middleware developers to 
continue receiving access to APIs and related Documentation before 
third-party developers receive access, thereby giving Microsoft's 
developers a head start in writing new applications and 
middleware.\303\ Some note that the slow release of Windows 95 APIs to 
Netscape is precisely how the district court found that Microsoft 
retaliated against Netscape for refusing Microsoft's market division 
proposal in 1995.\304\ In the extreme, at least one commentor contends 
that Microsoft could delay disclosure until after the deadline for 
third-party developers to demonstrate to Microsoft that their own 
products are compatible with the operating system and so qualify for a 
logo or other certification of compatibility.\305\
---------------------------------------------------------------------------

    \303\ Henderson 6-7; Novell 19; Litan 50; Palm 13; CFA 96; CCIA 
84-85; AAI 22; Litigating States, Ex. A 7-9; Alexander 3.
    \304\ AOL, Klain 14; Litigating States, Ex. A 7-8.
    \305\ Kegel 12-13; Burke 1; Peterson 2.
---------------------------------------------------------------------------

    312. Several factors should mitigate these concerns. Microsoft 
simply cannot delay the disclosure of information to an ISV until well 
after the release of a new Windows Operating System Product, as it did 
against Netscape in 1995 (Findings of Fact, para. 91), because 
disclosure in a ``Timely Manner'' would have to occur when the Windows 
Operating System Product is released. And, as discussed above, 
Microsoft cannot put third-party developers at a substantial 
disadvantage without impairing the attractiveness of its new Operating 
System Product to consumers by reducing the range of available 
applications and middleware. Microsoft certainly has no incentive to 
send a new operating system into a market in which there are no 
applications available that are certified as compatible with it. On the 
other hand, premature disclosure of APIs--before Microsoft has had 
adequate opportunity to test and finalize an API--actually could hurt 
ISVs that wrongly rely on an interface that ultimately is not 
implemented.

B. Disclosure Of Communications Protocols (RPFJ Sec. III.E)

    313. Section III.E requires Microsoft on a continuing basis to make 
available to third parties, through licensing on reasonable and non-
discriminatory terms, the Communications Protocols that are implemented 
natively, without additional software, in a Windows Operating System 
Product and are used by a Microsoft server operating system product to 
interoperate or communicate with the Windows Operating System Product, 
without the addition of other software to the client computer. In 
general, the comments raise questions about which software products or 
features are covered by this provision, what protocols are covered, the 
meaning of ``interoperate,'' and timing issues.
1. Product Issues
    314. Several comments raise concerns about which software products 
on the client or server are covered. These comments suggest that the 
terms used in Section III.E are undefined and insufficient, and that 
the licensing should apply to a broader range of products on both the 
client and server.
a. Windows Operating System Product
    315. Many comments argue that the term ``Windows Operating System 
Product'' does not encompass Microsoft Middleware Products such as 
Internet Explorer, and thus there is no required licensing of 
Communications Protocols between IE and Microsoft server operating 
system products.\306\ This is incorrect. Section III.E encompasses 
Communications Protocols used natively by any portion of a Windows 
Operating System Product, including any software that can also be 
considered Microsoft Middleware or a Microsoft Middleware Product. As 
explained in more detail elsewhere, see Section III(H) above, software 
code can be both Microsoft Middleware and part of a Windows Operating 
System Product.
---------------------------------------------------------------------------

    \306\ AAI 36-37; SBC 72-73; Giannandrea 4; Alexander 003; Palm 
7; ProComp 54.
---------------------------------------------------------------------------

    316. Moreover, Windows Operating System Products such as Windows XP 
also contain functionality often associated with Microsoft server 
operating system products, such as Internet Information Services (IIS). 
As long as these functionalities are included natively in a Windows 
Operating System Product, any Communications Protocols used by these 
functionalities to communicate to a Microsoft server operating system 
product must be licensed. Some of these Communications Protocols will 
capture peer-to-peer communications, a concern raised by one 
commentor.\307\
---------------------------------------------------------------------------

    \307\ Alexander 003.
---------------------------------------------------------------------------

    317. Another commentor argues that licensing should be provided for 
products that are not part of a Windows Operating System Product, 
particularly Microsoft Office.\308\ Such licensing is outside the scope 
of this case and the Court of Appeals' ruling. The ability of Office, 
which is not part of the desktop PC monopoly, to communicate with 
Microsoft server products, which are also not part of the client PC 
monopoly, is not an appropriate subject for injunctive relief, given 
that Microsoft's liability was based solely on maintenance of the 
desktop PC monopoly.
---------------------------------------------------------------------------

    \308\ KDE 10-11.
---------------------------------------------------------------------------

d. Microsoft Server Operating System Product
    318. Many comments observe that the phrase ``Microsoft server 
operating system product'' is undefined, and therefore might be 
narrowly interpreted to exclude many Microsoft server products.\309\ 
The RPFJ's phrase ``Microsoft server operating system product'' was a 
change from the November 2, 2001 Proposed Final Judgment (``November 2 
PFJ''), which read ``Windows 2000 Server or products marketed as its 
successors installed on a server computer.'' The intent and effect of 
this change was to broaden the coverage of this provision. The previous 
language referred only to a specific Microsoft product, Windows 2000 
Server,\310\ and its successors. And although it was intended to 
encompass all software functionality that was shipped within the 
Windows 2000 Server product, including such software as IIS and Active 
Directory, arguably it

[[Page 12171]]

might not have extended to other products in the Windows 2000 Server 
product family, such as Windows 2000 Datacenter Server or Windows 2000 
Advanced Server. The November 2 language also appeared not to cover any 
new server products that Microsoft may develop that were not successors 
to Windows 2000 Server.
---------------------------------------------------------------------------

    \309\ ProComp 54; SIIA 34; CFA 96-97; CCIA 69-70; AAI 37.
    \310\ See http://www.microsoft.com/windows2000/server/default.asp>.
---------------------------------------------------------------------------

    319. By contrast, the RPFJ covers every Microsoft product that is 
now or in the future could be a server operating system product. It 
still includes Windows 2000 Server, but now also indisputably includes 
Windows 2000 Datacenter Server and Windows 2000 Advanced Server. 
Moreover, the decree now includes the .Net Servers,\311\ a much broader 
class of server products. By using the terms in their common and normal 
sense, rather than tying them to specific products, the phrase 
intentionally was given a broader meaning.
---------------------------------------------------------------------------

    \311\ See http://www.microsoft.com/server/>.
---------------------------------------------------------------------------

    320. Furthermore, ``Microsoft server operating system product'' 
still includes all software code that is identified as being 
incorporated within the product and/or is distributed with the product, 
whether or not its installation is optional or is subject to 
supplemental license agreements. This includes, for instance, 
functionality such as Internet Information Services (a ``web server'') 
and Active Directory (a ``directory server'').
e. Non-Microsoft Client Operating Systems
    321. Some comments argue that Section III.E should also cover 
licensing of communications protocols for use with non-Microsoft client 
operating systems, for example in enabling interoperability between a 
Microsoft server and a Linux desktop operating system.\312\ 
Interoperability and communications between a Microsoft server and non-
Microsoft client platforms, however, was an issue outside the scope of 
the litigated case. There has been no proof in this case that Microsoft 
has a monopoly in server operating system products, or that 
communications difficulties between non-Microsoft platforms and 
Microsoft servers somehow played a role in the maintenance of 
Microsoft's desktop monopoly. Thus, the RPFJ properly does not reach 
questions of interoperability between Microsoft servers and non-
Microsoft platforms.
---------------------------------------------------------------------------

    \312\ ProComp 52; Palm 5.
---------------------------------------------------------------------------

    322. Nor is it appropriate for the remedy to focus on competing 
operating systems vendors, given that the focus of the case was on 
middleware threats, not direct threats from operating system 
competitors. The licensing in Section III.E is limited to being ``for 
the sole purpose of interoperating with a Windows Operating System 
Product'' because the purpose is to enable server-based middleware 
threats to interoperate with Windows Operating System Products. Several 
commentors argue that the licensing should be unrestricted and not for 
any particular purpose, but this would not be consistent with the 
theory of the case and the rationale behind client-server 
disclosures.\313\
---------------------------------------------------------------------------

    \313\ Moglen 2-3; Kegel 15; Maddux para. 16.
---------------------------------------------------------------------------

    323. Rather, the intent of Section III.E is to ensure that ISVs and 
others will have full access to the communications protocols that a 
Microsoft Windows Operating System Products uses to interoperate or 
communicate natively with its own server operating system products. 
Much Non-Microsoft Middleware, including the Netscape browser and Java 
Virtual Machines, depend on content, data, and applications residing on 
servers and passing over networks such as the Internet or corporate 
networks. Under Section III.E, this Non-Microsoft Middleware will have 
the opportunity to interoperate with a Microsoft server operating 
system product in the same way as Microsoft Middleware.
f. Server-to-Server Communications
    324. Some commentors argue that Section III.E should be extended to 
cover communications solely between one server and another server.\314\ 
Pure server-to-server interoperability issues, however, are well beyond 
the scope of the case. As noted above, there is no record proof in this 
case that Microsoft has monopoly power in server markets. Inter-
computer communications that do not implicate Microsoft's desktop 
operating system monopoly are properly outside the scope of the RPFJ.
---------------------------------------------------------------------------

    \314\ AOL, Klain 9-10; SBC 76.
---------------------------------------------------------------------------

g. Other Devices
    325. Some commentors argue that communications between a Windows 
Operating System Product and other devices, such as handheld devices, 
should be included in Section III.E.\315\ For all of the reasons 
discussed above concerning server-to-server communications, and 
communications to non-Microsoft client operating systems, 
communications to devices such as handhelds are outside the scope of 
the case.
---------------------------------------------------------------------------

    \315\ CCIA, Stiglitz & Furman 43; Litigating States, Ex. A 8; 
SBC 77; Palm 6-7.
---------------------------------------------------------------------------

2. Communications Protocols, Disclosure And Licensing
    326. Several comments raise issues regarding ``Communications 
Protocols'' as used in Section III.E, as well as related issues 
concerning the substance of the licensing. These comments include 
questions about the definition of Communications Protocols, the 
``natively'' requirement, the meaning of ``interoperate,'' and whether 
Microsoft can evade the provision by moving Communications Protocols to 
other products. These issues concern the substance of what will be 
licensed for use by third parties, not the server and client software 
products between which the Communications Protocols operate.
a. Definition of ``Communications Protocols'' (RPFJ Sec. VI.B)
    327. Some comments criticize the definition of ``Communications 
Protocols,'' opining that it (1) does not encompass certain types of 
information transmission, (2) addresses formats but not semantics, and 
(3) fails to address more than predefined tasks, or does not adequately 
define sub-elements, such as ``formats.'' \316\ Several comments appear 
to focus on the previous definition in the November 2 PFJ, or perhaps 
even in the June 2000 IFJ, and not the RPFJ definition.\317\
---------------------------------------------------------------------------

    \316\ CCIA 69; ProComp 53; SIIA 33; AOL, Klain 9; Alexander 4; 
Giannandrea 4, 6; CCC 17-18; Maddux para. 17.
    \317\ AOL, Klain 9 (limited to Windows 2000 server, excludes the 
Internet); Maddux para. 16 (remote administration protocols 
excluded).
---------------------------------------------------------------------------

    328. The RPFJ broadly defines Communications Protocols as the set 
of rules for information exchange to accomplish predefined tasks 
between a Windows Operating System Product and a Microsoft server 
operating system product connected through any type of network, 
including but not limited to, a local area network, wide area network, 
or the Internet. The definition includes both the rules for information 
exchange and transmittal (``format, timing, sequencing and error 
control'') as well as the meaning of the information contained within 
the protocol (``semantics''). By definition, Communications Protocols 
must be predefined tasks, because if the tasks were not predefined, the 
client and server would not know how to perform them or communicate 
about them. Every protocol at any layer of the communications stack 
that is implemented natively in a Windows Operating System Product and 
that is used to interoperate with a Microsoft server operating system 
product must be made available for license by third

[[Page 12172]]

parties. This definition is sufficiently broad to capture all native 
communications from a Windows Operating System Product to a Microsoft 
server operating system product.
b. The Meaning of ``Interoperate''
    329. Several comments note that the word ``interoperate'' in 
Section III.E. is not defined and argue that this will allow Microsoft 
to evade this provision.\318\ Specifically, one commentor points to 
Microsoft's definition of ``interoperate'' proffered in the pending 
European Union investigation of Microsoft and contend that that 
definition and associated declarations are different and arguably 
narrower than the intended definition in Section III.E.\319\
---------------------------------------------------------------------------

    \318\ CCIA 69; SIIA 34; Sn 26-30; Palm 10.
    \319\ Sun 28-29.
---------------------------------------------------------------------------

    330. The United States is aware of Microsoft's submissions to the 
European Union concerning the definition of ``interoperate'' and has 
discussed this issue at length with Microsoft with respect to this 
provision. Microsoft and the United States believe they have a meeting 
of the minds regarding the meaning of ``interoperate'' in Section III.E 
and its effect in that provision. If a communications protocol is 
implemented in a Windows Operating System Product installed on a client 
computer and used to ``interoperate, or communicate, natively'' with a 
Microsoft server operating system product, then it must be disclosed. 
Nonetheless, to alleviate concerns stemming from Microsoft's 
submissions to the European Union, the United States and Microsoft have 
agreed to a limited modification in Section III.E.
    331. The United States believes that, as used in the RPFJ, Section 
III.E clearly reflects the parties' intention that this provision will 
allow for the possibility of seamless two-way interoperability between 
Windows Operating System Products and non-Microsoft servers. Although 
the United States believes the meaning of ``interoperate'' is clear, in 
response to the public comments, the United States has proposed, and 
Microsoft and the Settling States have agreed, to supplement the term 
``interoperate'' with ``or communicate,'' so that Section III.E in the 
SRPFJ now reads:

    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 inter operating or 
communicating 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, or communicate, natively (i.e., without the 
addition of software code to the client operating system product) 
with a Microsoft server operating system product. (New language 
underlined.)

By adding ``or communicate'' after ``interoperate,'' the parties have 
added further clarity to this provision. This revision clarifies the 
parties' intent in drafting Section III.E, thus removing any potential 
for confusion or ambiguity regarding the scope of this provision as it 
relates to the meaning of ``interoperate.''
    332. Section III.E 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 opportunity to interoperate 
with Windows Operating System Products as do Microsoft's server 
operating system products. This is not to say that all competing 
servers will behave exactly identically to Microsoft servers, because 
the competing implementations will differ. However, as to the 
Communications Protocols themselves, the competing servers will have 
the ability via license to appear identical to a Microsoft server 
operating system product.
c. License for Use
    333. Several commentors point out that there is no discussion of 
disclosure in Section III.E and that lack of disclosure may defeat the 
purpose of the license.\320\ Because the Communications Protocols must 
be licensed ``for use'' by third parties, the licensing necessarily 
must be accompanied by sufficient disclosure to allow licensees fully 
to utilize all the functionality of each Communications Protocol. 
Simply put, Microsoft is not permitted to design interoperability 
between its server operating system products and its Windows Operating 
System Products in a way that cannot be replicated under license by 
third parties whose products replace functionality on either the server 
or client side of the communication.\321\
---------------------------------------------------------------------------

    \320\ Litigating States, Ex. A9.
    \321\ The CIS sets forth some non-exhaustive examples where 
Communications Protocols must be made available to permit seamless 
interoperability, including the Communications Protocols used 
between Microsoft Internet Information Services web server or Active 
Directory directory server and Internet Explorer or other 
functionality in the Windows Operating System Product; between 
server networking services such as Windows server message block 
protocol/common Internet file system protocol, and the Windows 
Operating System Product; and between server-hosted code and a 
runtime environment in the Windows Operating System Product, such as 
Java virtual machines or Microsoft's common language runtime. It 
also permits interoperability between Microsoft servers and the 
digital rights management and other security mechanisms utilizing 
Microsoft's implementation of Kerberos in the Windows Operating 
System Product, subject to a narrow exception in Section III.J.1.a, 
permitting limited withholding of information necessary to protect 
particular installations (e.g., keys and tokens particular to a 
given installation). See CIS at 38-40; see also discussion of 
Section III.J.1.a, infra.
---------------------------------------------------------------------------

d. The Meaning of ``Natively''
    334. Section III.E requires Microsoft to license the Communications 
Protocols ``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.'' One commentor raises 
concerns regarding the change in the ``natively'' requirement from the 
November 2 PFJ to the November 6 RPFJ, suggesting that the RPFJ no 
longer covers Communications Protocols implemented on a server.\322\ 
This is incorrect. The parenthetical expression that begins with 
``i.e.'' is an explanation of the word ``natively,'' and nothing else.
---------------------------------------------------------------------------

    \322\ SBC 70-72.
---------------------------------------------------------------------------

    335. The November 2 PFJ stated ``used to interoperate natively 
(i.e., without the addition of software code to the client or server 
operating system products).'' The parenthetical expression explained 
that the word ``natively'' meant the software that is included with the 
Windows Operating System Product and the Microsoft server operating 
system product without the addition of any other products or software 
code.
    336. In the November 6 RPFJ, the phrase was changed expressly to 
remove the requirement for ``native'' operation on the server. This was 
done by removing the words ``or server.'' The RPFJ reads ``i.e., 
without the addition of software code to the client operating system 
product.'' This change means that the native requirement is only on the 
Windows Operating System Product on the client. In other words, 
``natively'' now simply means all software code implemented in a 
Windows Operating System Product on the client. For the server side, it 
no longer matters if software code is added from some other product. 
When combined with the change to the broader ``Microsoft server

[[Page 12173]]

operating system product,'' discussed above, the net result is a 
significant expansion of the disclosure and licensing obligation from 
the November 2 PFJ to the RPFJ.
    337. Currently, the only way Microsoft can avoid licensing under 
this provision is to implement new protocols (i.e., not in use on 
November 6, 2001), and then not implement those new protocols in any 
Windows Operating System Product. These new protocols would have to be 
distributed with other products or reach the desktop in some fashion 
other than by inclusion in a Windows Operating System Product. Because 
these Communications Protocols would in effect be completely separate 
from the desktop operating system monopoly, they are correctly not 
encompassed within Section III.E, despite several comments to the 
contrary.\323\
---------------------------------------------------------------------------

    \323\ ProComp 52-53; Harris 6.
---------------------------------------------------------------------------

e. Licensing On ``Reasonable And Non-Discriminatory Terms''
    338. Section III.E allows Microsoft to license its Communications 
Protocols on reasonable and non-discriminatory terms consistent with 
Section III.I. Several commentors argue that Microsoft should not be 
able to charge a royalty for its Communications Protocols.\324\ 
Allowing Microsoft to charge a royalty is appropriate. Historically, 
Microsoft has been less willing to disclose Communications Protocols 
than APIs, and when it does license Communications Protocols, it 
charges a royalty or otherwise receives Consideration. It has designed 
and developed its Communications Protocols with the expectation that 
they would not be given away.
---------------------------------------------------------------------------

    \324\ Thomas 4-5; Waldman 5; Maddux para. 16.
---------------------------------------------------------------------------

3. Timing Issues
    339. Comments raise two basic issues with respect to the effective 
date for implementation of the requirements of Section III.E. A few 
comments misread Section III.E as excluding Windows 2000 and Windows 
XP, on the erroneous assumption that only server operating system 
products or communications protocols that come into existence after 
November 6, 2001 are covered.\325\ To the contrary, Section III.E 
covers in part ``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. . . 
.'' In other words, Communications Protocols implemented in any Windows 
Operating System Product as of November 6, 2001 are expressly covered--
including Windows 2000, Windows XP Home, and Windows XP Professional. 
This language simply ensures that if Microsoft for whatever reason 
changed the Communications Protocols between the time the RPFJ was 
submitted to the Court and the effective date of this Section III.E 
nine months later, the changed Communications Protocols would not be 
outside the scope of the provision. Thus, all Communications Protocols 
in existence on November 6, 2001 must still be covered on August 6, 
2002, the latest date on which they must be available for use by third 
parties, regardless of whether Microsoft has changed them in the 
interim.
---------------------------------------------------------------------------

    \325\ ProComp 55; Giannandrea 1; SIIA 35.
---------------------------------------------------------------------------

    340. Several comments also raise concerns about the initial nine-
month delay before the Communications Protocols are licensed.\326\ The 
purpose of this delay is to allow Microsoft to identify the 
Communications Protocols and define a licensing program so that they 
can be made available for use by third parties. Unlike its APIs for its 
Windows Operating System Products, for which Microsoft has always had 
an extensive disclosure program via the MSDN, Microsoft historically 
has licensed or disclosed relatively few of its Communications 
Protocols. And unlike the APIs that must be disclosed if they are used 
by Microsoft Middleware, which is a relatively finite set of products, 
Communications Protocols must effectively be available for license by 
third parties if they are implemented natively in a Windows Operating 
System Product and they are used to interoperate or communicate with 
any Microsoft server operating system product, including cases where 
extra software code is added to the server operating system product. 
This opens up what is potentially a very broad universe of new 
disclosure and licensing obligations for Microsoft. Microsoft needs 
time to set up programs to meet these obligations.
---------------------------------------------------------------------------

    \326\ Palm 13; Litan 57; Litigating States, Ex. A 8-9; 
RealNetworks 29; Maddux para. 15; CCIA 83-84; Sun 36.
---------------------------------------------------------------------------

    341. One commentor points out that the time to negotiate the 
required license may provide even further delays.\327\ Although this 
might be true in some cases, the effect is lessened here because of the 
requirement that Microsoft license on reasonable and non-discriminatory 
terms. The license provision is reasonable because Microsoft's 
protocols are protected intellectual property.
---------------------------------------------------------------------------

    \327\ Sun 36-37.
---------------------------------------------------------------------------

    342. Still others argue that the nine-month delay cuts heavily into 
the five-year term of the RPFJ.\328\ This criticism is largely 
incorrect in that the nine months began running as of November 6, 2001, 
meaning that the disclosure and licensing must occur by not later than 
August 6, 2002. Thus, licensing is in fact likely to begin shortly 
after the decree's 5-year term begins to run upon entry by the Court.
---------------------------------------------------------------------------

    \328\ CCIA 83-84.
---------------------------------------------------------------------------

    343. Lastly, at least one commentor points out that there is no 
timing requirement after the initial licensing begins, and argues that 
Microsoft is under no obligation to offer Communications Protocols for 
license in a prompt manner.\329\ To the contrary, the lack of a 
specific timing trigger requires Microsoft to make continuing and 
rolling offers to license as new Communications Protocols are 
implemented in Windows Operating System Products. In many other 
provisions of the RPFJ there are a variety of specialized triggers; the 
absence of one here is not accidental.
---------------------------------------------------------------------------

    \329\ Litan 53.
---------------------------------------------------------------------------

C. Compulsory Licensing (RPFJ Sec. III.I)

    344. Section III.I requires Microsoft to offer necessary licenses 
for the intellectual property that Microsoft is required to disclose or 
make available under the RPFJ.\330\ The goal of this Section is to 
ensure that Microsoft cannot use its intellectual property rights to 
undermine the competitive value of its obligations in Sections III.D 
and III.E, while at the same time to permit Microsoft to take 
legitimate steps to prevent unauthorized use of its intellectual 
property.
---------------------------------------------------------------------------

    \330\ See e.g., RPFJ Secs. III.D and III.E.
---------------------------------------------------------------------------

    345. Several comments address Section III.I. One group of 
commentors suggests that permitting Microsoft to charge a 
``reasonable'' royalty for licenses to its intellectual property is 
inappropriate.\331\ Another group of commentors takes issue with 
Section III.I.3's restrictions on sublicenses.\332\ Many commentors 
raise concerns relating to Section III.I.5 and Microsoft's ability to 
require a cross-license of certain intellectual property rights 
pursuant to that subsection.\333\ Several

[[Page 12174]]

commentors also argue, to varying degrees, that the scope of 
Microsoft's intellectual property rights should be limited.\334\
---------------------------------------------------------------------------

    \331\ SBC 85-86; Litigating States, Ex. A 15; CCIA 81; Sun 35; 
Giannandrea 5; Moglen 2; Waldman 4.
    \332\ AOL, Klain 7; CCIA 81; Moglen 2; Giannandrea 5; Harris 8.
    \333\ Henderson 8; SBC 87-88; CFA 88; ProComp 51; AOL, Ex, B. at 
7; SIIA 36-37; Litigating States 15; AAI 28-29; CCIA 81-82; Sun 38; 
RealNetworks 29; Giannandrea 5; Alexander 3; Harris 8; Maddux para. 
10.
    \334\ Kegel 8; Maddux para. 9.
---------------------------------------------------------------------------

1. Reasonable And Non-Discriminatory Royalty
    346. Subsection III.I.1 requires that any licenses granted pursuant 
to this Section be made on reasonable and non-discriminatory terms, and 
then permits Microsoft to charge a reasonable royalty in connection 
with licenses it grants pursuant to Section III.I. One commentor 
contends that Microsoft should not be permitted to charge any royalty 
at all, and that permitting it to do so in effect rewards Microsoft for 
maintaining illegally its operating system monopoly.\335\
---------------------------------------------------------------------------

    \335\ Sun 35-36.
---------------------------------------------------------------------------

    347. One commentor asserts that royalty-bearing licenses are 
anticompetitive in the context of this remedy because such licenses 
give Microsoft the opportunity to use a ``royalty charge'' to control 
crucial technical information. This commentor \336\ notes that in June 
2000, when litigating the IFJ, the United States rejected Microsoft's 
contention that it should be permitted to charge a reasonable royalty 
for the APIs, Communications Interfaces, and Technical Information (as 
such terms were defined in the IFJ).\337\ See Summary Response to 
Microsoft's Comments on the Proposed Final Judgment at 14 (June 5, 
2000). Under the RPFJ, disclosure of APIs in the manner that Microsoft 
typically does it (e.g., through MSDN and not via a license) would not 
implicate Section III.I and would occur at no cost.\338\
---------------------------------------------------------------------------

    \336\ SBC 85-86.
    \337\ SBC 86.
    \338\ The other allegedly inconsistent prior statements cited by 
this commentor (SBC 86) do not withstand scrutiny. These statements 
concerning royalty-free licenses all were made in the narrow context 
of providing divested entities access to necessary technical 
information. See United States Reply Memo at 27-29 (discussing 
Western Electric for the proposition that was precedent to support 
the United States' divestiture request; relying on AT&T as an 
example of a prior structural remedy in a monopolization case that 
did not involve mergers); United States v. Western Elec. Co., 569 F. 
Supp. 1057, 1118 (D.D.C. 1983), aff'd sub nom. California v. United 
States, 464 U.S. 1013 (1983) (discussion of royalty-free licenses 
centered around effectuating the divestiture of the Regional Bell 
Operating Companies and ensuring that the divestitures did not 
result in ``balkanized regional networks'' and ``fragmentation'' to 
the ``detriment of all users''); United States v. General Electric, 
115 F. Supp. 835, 844 (D. N.J. 1953) (``General Electric's attempt 
to maintain control over the lamp industry has been largely by way 
of extending its basic patents on lamps and lamp parts. To compel 
the completely free use of these patents is not to impose upon 
General Electric and other defendants penalties for misuse of 
patents and violation of the antitrust laws, but rather to check the 
intrusion of advantages thereby gained into the mechanics of 
competition in the lamp industry.''). Here, the United States does 
not believe that the circumstances support royalty-free licensing. 
Compulsory licensing, but with a reasonable royalty, will be 
sufficient to achieve the remedial goal of ensuring access to 
necessary information for interoperability.
---------------------------------------------------------------------------

    348. The United States does not believe that the scaled-back 
liability that the Court of Appeals upheld justifies requiring 
Microsoft to give away its valuable intellectual property. To the 
extent that Section III.I.1 of the RPFJ permits Microsoft to charge a 
reasonable royalty for intellectual property rights provided under 
other provisions of the RPFJ, the United States believes that the terms 
of the RPFJ strike the appropriate balance between mandating that 
Microsoft provide certain licenses and not frustrate the 
interoperability provisions of the RPFJ, while still permitting 
Microsoft to charge a reasonable and nondiscriminatory royalty for 
access to its intellectual property.
2. Restriction On Sublicenses
    349. Several commentors suggest that the restrictions on 
sublicenses contained in Section III.I.3 are inappropriate.\339\ These 
comments suggest that the restriction on sublicenses may have the 
effect of inhibiting the ability of ISVs, IHVs, IAPs, ICPs, or OEMs to 
partner with other entities. In particular, two commentors suggest that 
the restriction on sublicenses could in practice preclude a licensee of 
Microsoft's technology under the RPFJ from reselling or distributing 
the products that it develops using Microsoft's licensed 
technology.\340\ Another commentor suggests that not allowing 
sublicenses under certain circumstances (e.g., where the licensee is 
involved in an acquisition) is a form of discrimination.\341\
---------------------------------------------------------------------------

    \339\ AOL, Klain 7; CCIA; Moglen 2; Ginnandrea 5; Harris 8; 
Pantin 22.
    \340\ Giannandrea 5; Harris 8.
    \341\ Pantin 22.
---------------------------------------------------------------------------

    350. These comments misconstrue the purpose and effect of the 
restriction on sublicenses contained in Section III.I.3. First, 
entities to which a licensee of Microsoft's technology under the RPFJ 
wishes to sell or distribute products using that licensed technology 
would not need a sublicense to Microsoft's intellectual property. 
Similarly, the United States does not believe that a sublicense would 
be required in the circumstances of an acquisition and, even if one 
were, that Microsoft would be likely to preclude sublicensing in such 
circumstances.
    351. In general, the United States recognizes that Microsoft has a 
legitimate interest in limiting its intellectual property licensing to 
those licenses that are properly related to the terms of the RPFJ. 
Subsection III.I.3 is designed to address this issue by permitting 
Microsoft to preclude the assignment, transfer or sublicensing of 
rights granted by Microsoft pursuant to Section III.I, provided that 
Microsoft's preclusion is reasonable and non-discriminatory as required 
by subsection III.I.1. This provision does not permit Microsoft to 
restrict the right to sublicense where doing so would be unreasonable, 
discriminatory, or otherwise would be inconsistent with the terms of 
the RPFJ. See Section III.I.4.
3. Cross-Licenses
    352. A number of commentors suggest that Section III.I.5 of the 
RPFJ, which permitted Microsoft to require cross-licenses from persons 
or entities who wished to take advantage of the disclosure provisions 
of the RPFJ if such licenses were necessary for Microsoft to provide 
the disclosures, was inappropriate.\342\ The United States and 
Microsoft have agreed to delete this subsection from the RPFJ. See U.S. 
Memorandum at 10-11; SRPFJ Sec. III.I.5. The purpose of Section III.I.5 
was to enable Microsoft to fully comply with the terms of the RPFJ 
without creating infringement liability based on actions taken in order 
to comply with those terms.
---------------------------------------------------------------------------

    \342\ Henderson 8; SBC 87-88; CFA 88; ProComp 51; AOL Ex. B at 
7; SIIA 36-37; Litigating States 15; AAI 28-29; CCIA 81; Sun 38; 
RealNetworks 29; Giannandrea 5; Alexander 3; Harris 8; Maddux para. 
10.
---------------------------------------------------------------------------

4. Scope of Intellectual Property Rights
    353. Several commentors make suggestions concerning Section III.I 
that generally relate to the scope of Microsoft's intellectual property 
rights. One commentor suggests that Microsoft should be required ``to 
clearly announce which of its many software patents protect the Windows 
APIs . . ..;'' \343\ Another commentor objects to the portion of 
Section III.I.2 that clarifies the scope of any license granted under 
Section III.I and expressly provides that ``the scope of any such 
license . . . shall not confer any rights to any Microsoft intellectual 
property rights infringed by'' the licensee's technology.\344\ This 
commentor suggests that Microsoft should be precluded from bringing 
infringement suits against an entity that

[[Page 12175]]

licenses Microsoft intellectual property under the RPFJ, even when that 
licensee infringes other Microsoft intellectual property to which the 
entity does not have a license.\345\ Finally, one commentor expresses 
skepticism that Microsoft actually would license the intellectual 
property that is required for interoperation and suggests that 
Microsoft should be required to license all of its intellectual 
property rights.\346\
---------------------------------------------------------------------------

    \343\ Kegel (unpaginated).
    \344\ Red Hat 11-12.
    \345\ Id.
    \346\ Maddux para. 9.
---------------------------------------------------------------------------

    354. The United States believes that preventing Microsoft from 
protecting its intellectual property is unwarranted and inappropriate. 
Allowing competitors to expropriate Microsoft's intellectual property 
in order to compete with Microsoft would deter Microsoft from investing 
in innovation and simultaneously deter rival developers from coming up 
with different, new, potentially better technologies to build into 
their own products. Nothing in the solutions suggested by these 
commentors would benefit consumers.
5. Comparison to Litigating States' Proposal
    355. Provision 15 of the Litigating States' Proposal is a corollary 
to--and substantially the same as--Section III.I of the SRPFJ. The 
major differences between them are (a) Provision 15 provides for a 
royalty-free license, while the RPFJ permits Microsoft to charge a 
reasonable and non-discriminatory royalty; and (b) Provision 15(b) 
provides that licenses granted pursuant to it ``shall not be 
conditional on the use of any Microsoft software, API, Communications 
Interface, Technical Information or service.'' \347\
---------------------------------------------------------------------------

    \347\ Litigating States' Proposal Sec. 15(b).
---------------------------------------------------------------------------

    356. As set forth above, the United States believes that it would 
be inappropriate and unwarranted to require Microsoft to license its 
intellectual property at no cost. In addition, the United States and 
Microsoft have agreed to delete the cross-license provision of Section 
III.I. Finally, the Litigating States' Provision 15(b) appears to be an 
attempt to preclude Microsoft from using the granting of licenses 
pursuant to the November 2, 2001 Proposed Final Judgment as leverage to 
induce certain types of entities to use other Microsoft software. 
Section III.G of the RPFJ similarly prohibits this type of conduct by 
Microsoft.

D. Security Carve-Outs (RPFJ Sec. III.J)

    357. Many commentors argue that the security provisions in RPFJ 
Section III.J are inappropriate or overbroad. Section III.J has two 
subsections. The first defines situations in which Microsoft has no 
obligation under the RPFJ to make disclosures that are otherwise 
required by the RPFJ. The second permits Microsoft to withhold 
security-related information from certain persons or entities.
1. Limitation on Obligations to Document, Disclose or License
    358. Section III.J.1 identifies two situations in which Microsoft 
is not obligated to document, disclose or license certain materials to 
third parties. The first situation is where the disclosure 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. These 
situations include but are not limited to the disclosure of keys, 
authorization tokens or enforcement criteria.
    359. Many commentors complain that this provision is too broad and 
will allow Microsoft to withhold security-related APIs and 
Communications Protocols.\348\ Commentors argue that such APIs and 
Communications Protocols are critically important to many middleware 
applications and that this provision amounts to exempting from coverage 
by the RPFJ software and services that are the future of computing. 
Other commentors point out that the CIS language is significantly more 
defined and specific than the RPFJ. Still other commentors point to 
specific protocols that the CIS says will be provided, such as Secure 
Audio Path and Kerberos, and argue that notwithstanding the CIS, 
Section III.J.1 actually exempts those protocols. Still others point 
out that ``layers of protocols'' is significantly broader than the 
user-specific data described in the CIS.
---------------------------------------------------------------------------

    \348\ AAI 22; AOL 40-41; AOL, Klain 7-8, 10; Catavault 12-13; 
CCIA 16, 72-77; CCIA, Stiglitz & Furman 30; CFA 99; Elhauge 12; Red 
Hat 25-28; SBC 88-89; SIIA 35-36; Sun 32-33; Alexander 3; 
Giannandrea 4; Gifford 5; Harris 8-9; Johnson 8; Moglen 4-5; Waldman 
6; KDE 14; Litan 52; Litigating States, Ex. A 16, Ex. C 18; Nader/
Love 2-5; Maddux para. 30; NetAction 11; Novell 20-21; ProComp 49-
50, 55.
---------------------------------------------------------------------------

    360. Secure software systems can be designed in many different 
ways, and at any given time, is often some critical information can 
compromise that security. For instance, secure software often uses the 
term ``keys'' to refer to specific data that is used to authenticate or 
authorize a user to perform certain functions. Often the keys, or other 
user-specific data, must be kept secure because, if unauthorized people 
have them, they can be used to compromise the security of the system. 
These software keys can be thought of as being similar in some ways to 
regular keys: having the key to the front door compromises the house's 
security, and keeping control of the keys is critical to keeping the 
house secure.
    361. Sometimes software systems are built not around keys but 
around keeping actual parts of the system hidden or unknown. Continuing 
with the house analogy, this is similar to keeping the existence of the 
door a secret, but once you know where the door is and what it does, 
you do not need a key. Sometimes such systems are referred to, 
unfavorably, as employing ``security through obscurity.'' Many software 
systems employ combinations of these security techniques.
    362. The intent of Section III.J.1 is to allow Microsoft to keep 
secret those pieces of security-related systems the disclosure of which 
would compromise particular installations or groups of installations. 
The phrase ``particular installations'' is designed to indicate end-
user installations or a specific, narrowly-prescribed subset of 
installations. It does not mean, for instance, all the installations 
that use Windows Media Player, nor does it mean all the installations 
that use Windows Media Player in conjunction with the Secure Audio Path 
functionality. Moreover, the disclosure actually must compromise the 
security of the particular installation. The disclosure cannot be 
withheld simply because Microsoft prefers that others not have it, or 
because it is valuable. Thus, for instance, if Microsoft previously has 
withheld an algorithm or format used in its Communications Protocols 
for business reasons, but the security of the system actually is 
dependent on other features such as keys, then Microsoft has no 
authority to withhold the disclosure or format.
    363. Some commentors suggest that the CIS differs from the language 
of the RPFJ. The United States believes that the CIS reflects the 
parties' agreement as to the meaning of the RPFJ, including Section 
III.J.1. Moreover, the United States agrees with the many commentors 
who note that security-related features will be critically important to 
Non-Microsoft Middleware, and that overbroad withholding of security-
related information could limit drastically the ability of such 
products to pose threats to the operating system monopoly. Section 
III.J.1, however, is not overly broad.
    364. The second situation under Section III.J.1 in which Microsoft 
is not

[[Page 12176]]

obligated to document, disclose or license is when Microsoft is so 
directed by a governmental agency of competent jurisdiction. One 
commentor argues that this provision appears to be a ``big brother type 
deal between government and Microsoft to suppress information from the 
public.'' \349\ Another commentor notes that this restriction is 
written more broadly than the CIS's ``lawful orders'' language.\350\ 
This section is appropriate and important for public security purposes, 
and limited to cases in which a government agency of competent 
jurisdiction directs Microsoft not to document, disclose or license 
specified information.
---------------------------------------------------------------------------

    \349\ Alexander 3.
    \350\ Harris 9.
---------------------------------------------------------------------------

2. Conditioning Licenses on Certain Requirements
    365. Section III.J.2 allows Microsoft to condition the license of 
security-related APIs, Documentation or Communications Protocols on 
four requirements. These four requirements for the licensee are: (a) No 
history of software counterfeiting or piracy or willful violations of 
intellectual property rights; (b) a reasonable business need for the 
information for a planned or shipping product; (c) meets reasonable and 
objective standards for the authenticity and viability of its business; 
and (d) programs verified by a third party to ensure compliance with 
Microsoft specifications for use of the information.
    366. Many commentors argue that the provisions of Section III.J.2 
can be used by Microsoft to withhold unfairly information from 
competing companies, and in particular from open source 
developers.\351\ One commentor, in contrast, finds that Microsoft's 
legitimate security concerns, which the commentor argues are shared by 
all of its major business rivals, are addressed appropriately under 
Section III.J.2, and therefore the restrictions of Section III.J.1 are 
unnecessary.\352\
---------------------------------------------------------------------------

    \351\ AAI 23; CCIA 77-81; CFA 100; Henderson 7-8; Red Hat 28-29; 
SBC 88-91; SIIA 36; Alexander 3; Giannandrea 4-5; Carrol 2; Harris 
9; Moglen 4-5; Waldman 6; KDE 12; Sen. Kohl 3; Litan 52; Litigating 
States, Ex. A 16-17; Nader/Love 2-5; Maddux para. 31; Pantin III.33-
34; ProComp 50-51.
    \352\ AOL 41-42
---------------------------------------------------------------------------

    367. As was explained in the CIS, the requirements of this 
subsection cannot be used as a pretext for denying disclosure and 
licensing, but instead are limited to the narrowest scope of what is 
reasonable and necessary. These requirements focus on screening out 
only individuals or firms that should not have access to or use the 
specified security-related information because they have a history of 
engaging in unlawful conduct related to computer software, 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 mechanism to which they relate.
    368. With regard to requirement (a) concerning software piracy, 
some commentors argue that it unjustly could exclude any company that 
ever has been sued for patent infringement and lost. The requirement 
was not intended to extend this far, because legitimate businesses do 
lose patent lawsuits on occasion. Rather, application of this 
requirement is to be guided by the phrase ``history of software 
counterfeiting or piracy'' and will not be interpreted to extend to 
otherwise reputable companies that are involved in intellectual 
property disputes.
    369. Many commentors focus on requirements (b) and (c) and argue 
that they improperly will exclude the entire open source movement and 
require start-up companies to submit their business plans to Microsoft. 
First, it is appropriate to note that the ``open source movement'' is 
not composed of a single type of organization or software developer. 
Rather, large companies such as IBM are strong supporters of products 
such as Linux and of other open source solutions. Smaller companies 
such as Red Hat are also reputable firms focused on the open source 
movement. The United States expects that such firms will have little 
trouble satisfying requirements (b) and (c). That is not to say that 
all open source organizations, or individual developers, will be able 
to pass these requirements. The United States believes that Microsoft 
has a legitimate interest in protecting the security of its systems and 
that requirements (b) and (c), properly interpreted, are a reasonable 
balancing of Microsoft's interests and the needs of competition.
    370. Finally, requirement (d) allows Microsoft to condition the 
granting of a license on the submission of any computer program using 
the licensed API, Documentation or Communications Protocol to third-
party verification. Some commentors incorrectly have read this 
requirement to mandate the submission of the computer program to 
Microsoft. To the contrary, this requirement is structured specifically 
so that Microsoft will not be able to gain access to another's 
intellectual property. Rather, an independent third party will test and 
verify the computer program against specifications provided by 
Microsoft. These specifications must relate to the proper operation and 
integrity of the systems under test, and cannot relate to any other 
business-related factors. Finally, some commentors argue that it is 
inappropriate for this testing to be at the licensee's expense rather 
than at Microsoft's expense. The United States understands that with 
other third-party testing programs in the software industry, the cost 
usually is borne by the organization submitting the program. The United 
States sees no reason to deviate from that practice.

E. Disclosure of File Formats

    371. Many commentors argue that Microsoft should be required to 
disclose file formats.\353\ Some of these commentors make the request 
generally, while others make reference to specific file formats such as 
those for Microsoft Office programs (e.g., Word, Excel, Outlook).\354\ 
A file format, generally speaking, is the structure of a file, showing 
how the file organizes and stores data. File formats can be either 
proprietary or open. File formats are sometimes associated with three-
letter file extensions at the end of a file name; for instance, 
``file.wpd'' is usually a file in Word Perfect format, while 
``file.doc'' is usually a file in Microsoft Word format.
---------------------------------------------------------------------------

    \353\ Kegel 8; Naver/Love 1; Pantin 12; SBC 79; CCC 21; Johnson 
2; Alexander 5; Carroll 4; Maddux para. 14.
    \354\ CCC 17; SIIA 38, 39.
---------------------------------------------------------------------------

    372. File formats are covered to a limited extent under Sections 
III.D and III.E, which deal with disclosure and licensing. Section 
III.D calls for the disclosure of APIs that Microsoft Middleware uses 
to call on a Windows Operating System Product, while Section III.E 
calls for the licensing of certain Communications Protocols implemented 
in a Windows Operating System Product and used to communicate natively 
with a Microsoft server operating system product. To the extent either 
the APIs or Communications Protocols encompass ``file formats,'' then 
those structures are covered.
    373. However, the major comments concerning file formats request 
disclosure of the file formats of Microsoft products such as Office. 
Office does not meet the definition of Microsoft Middleware, and so it 
does not fall under Section III.D. Nor is Office implemented natively 
in a Windows Operating System Product, so it does not fall under 
Section III.E. Thus, the file formats for Office will not be disclosed 
or licensed pursuant to the RPFJ.
    374. Commentors argue that the file formats for Office should be 
disclosed

[[Page 12177]]

because Office is a significant part of the applications barrier to 
entry that protects the Windows monopoly. Disclosure of the file 
formats would allow other office productivity applications, such as 
word processors, to exchange files with Office. Allowing the exchange 
of files would allow consumers to change word processors, and 
potentially change operating systems, without concern that they could 
not exchange files with the dominant applications in Office.
    375. The scope of the case as decided by the Court of Appeals does 
not extend to non-middleware or to Office or other applications that 
are not distributed with Windows. Whatever impact generally the 
disclosure of file formats might have on the applications barrier to 
entry that protects Windows, such disclosure was not among the conduct 
charged as illegal by the plaintiffs or upheld by the Court of Appeals, 
nor is it of the same type or class as Microsoft's attack on 
potentially threatening middleware. Thus, it would be inappropriate for 
file formats for Office to be part of the remedy.

VIII. Enforcement

    376. Numerous comments criticize various aspects of the compliance 
and enforcement procedures set forth in Section IV of the RPFJ. Many of 
these comments take issue with the composition and duties of the 
Technical Committee (``TC'') (RPFJ Sec. IV.B) and the supplemental 
dispute resolution provisions (RPFJ Sec. IV.D), some suggesting that 
the enforcement scheme should be based on an entirely different, more 
draconian, model. In several cases, these comments misunderstand the 
purposes underlying the RPFJ's supplemental enforcement mechanisms. In 
others, they imply that the RPFJ somehow dilutes the United States' and 
the Court's traditional judgment construction and enforcement powers, 
or that Microsoft arguably has an undue amount of control over the 
process.\355\ These allegations are meritless.
---------------------------------------------------------------------------

    \355\ CCIA 89-92; AOL 50-53; ProComp 75-77; Litan 54-55; 
RealNetworks 31-32; Red Hat 30-31; Nader 5; Waldman 5, Sen. Kohl 5; 
SBC 111-13, 157-58.
---------------------------------------------------------------------------

    377. The additional monitoring and dispute resolution mechanisms of 
the RPFJ are intended to enhance the likelihood of efficient resolution 
of compliance issues that may arise, without undue delay or the 
necessity of extensive prosecutorial or judicial involvement. They in 
no way prohibit or impede traditional judicial construction or 
enforcement of the RPFJ. With the limited exception of giving Microsoft 
a reasonable opportunity first to cure violations of Sections III.C, 
III.D, III.E, and III.H (see RPFJ Sec. IV.A.4)--which is intended to 
encourage the voluntary remediation of alleged violations by 
Microsoft--the United States retains the full ability, in appropriate 
instances, immediately and directly to request that the Court bring to 
bear its full arsenal of enforcement and declaratory construction 
powers on any alleged violations or interpretative disputes.

A. The Enforcement Powers of Plaintiffs and the Court

    378. Section IV.A grants the United States (and the Settling States 
collectively) all of the investigatory and enforcement powers 
customarily found in antitrust final judgments in cases brought by the 
United States in recent decades. See, e.g., AT&T, 552 F. Supp. at 230-
31 (``Visitorial Provisions''). The RPFJ grants Plaintiffs the power to 
inspect Microsoft documents and computer source code, to interview or 
depose Microsoft employees, and to require the production of written 
reports, in the form of interrogatory responses or otherwise. See RPFJ 
Sec. IV.A.2. Plaintiffs may seek any appropriate orders relating to the 
enforcement of the RPFJ, including the ability to file petitions for 
orders to show cause why Microsoft should not be held in criminal or 
civil contempt, petitions for injunctive relief to restrain or prevent 
violations, motions for declaratory judgment to clarify or interpret 
particular provisions, and motions to modify the RPFJ. See RPFJ 
Sec. IV.A.4.
    379. Likewise, the Court retains full jurisdiction to issue orders 
necessary to construe, carry out, modify, and enforce the RPFJ, and to 
punish violations thereof. See RPFJ Secs. IV.A.4, VII. The Court's 
inherent powers include the power to construe or modify the decree, to 
compel Microsoft's compliance or remedy noncompliance through civil 
contempt, and to punish willful non-compliance through criminal 
contempt. See McComb v. Jacksonville Paper Co., 336 U.S. 187, 191-95 
(1949); 18 U.S.C. 401(3). Nothing in the RPFJ diminishes any of these 
rights and powers.
    380. Some comments criticize the provision in Section IV.A.4 that 
allows Microsoft a reasonable opportunity to cure alleged violations of 
Sections III.C, D, E, and H before Plaintiffs may seek an enforcement 
order, as simply giving Microsoft a mechanism for delay.\356\ To the 
contrary, the limited opportunity to cure is intended to encourage 
rapid, consensual resolution of issues arising under some of the 
provisions governing Microsoft's relations with third parties, without 
the necessity of prosecutorial or judicial intervention. Section IV.A.4 
expressly prohibits Microsoft from using its efforts to cure as a 
defense to enforcement actions designed to punish violations (such as 
willful violations subject to criminal contempt \357\), or systematic 
violations that may require additional prospective RPFJ modifications 
in order to prevent recurrences.
---------------------------------------------------------------------------

    \356\ AAI 42; Maddux para. 35.
    \357\ The RPFJ's discussions of additional factors such as 
``systematic'' or ``knowing'' violations are not intended to change 
the scienter or other elements that must be shown in actions to 
enforce the RPFJ through contempt charges. See, e.g., United States 
v. NYNEX Corp., 8 F.3d 52, 54-55 (D.C. Cir. 1993) (setting forth the 
elements of contempt, applied to antitrust decree). In particular, 
it is clear that a party to a decree may be found guilty of criminal 
contempt if its contumacious behavior was ``willful.'' Willful 
intent for purposes of contempt may be shown by proof that a 
defendant ``acted with deliberate or reckless disregard of [its] 
obligation under the'' order. United States v. Young, 107 F.3d 903, 
909 (D.C. Cir. 1997); see also United States v. Greyhound Corp., 508 
F.2d 529, 532 (7th Cir. 1974) (in context of antitrust decree, 
holding that willful element can be proven by evidence of either 
deliberate or reckless conduct).
---------------------------------------------------------------------------

B. The Technical Committee

    381. In addition to all traditional decree enforcement rights and 
powers, the RPFJ adds a number of additional mechanisms to assist in 
achieving and maintaining compliance short of formal litigation. These 
additional mechanisms provide unprecedented enhancement to the United 
States' traditional enforcement powers. The most important of these 
mechanisms is the Technical Committee (TC). The TC, which remains under 
the control of the United States, itself has broad information-
gathering powers to monitor Microsoft's compliance, evaluate third-
party complaints, and propose ways to cure violations. The TC's ongoing 
monitoring duties will help ensure that Microsoft remains compliant 
with its obligations under the RPFJ, and that if it fails to comply, 
violations promptly will be detected and brought to Plaintiffs' 
attention. The TC, however, is not a law enforcement body. Rather, 
traditional prosecutorial powers remain with the United States and 
plaintiff States, while traditional compulsory, remedial, and 
enforcement powers remain with the Court.
1. Technical Committee Powers
    382. Because several comments criticize the powers of the TC as

[[Page 12178]]

inadequate,\358\ a detailed explanation of the TC's powers is in order. 
The TC has a number of purposes.
---------------------------------------------------------------------------

    \358\ CCIA 89-92; AOL 50-52; ProComp 75-77; Litan 54-55; 
RealNetworks 32; Palm 15-16; Red Hat 30-31; Nader/Love 5; Waldman 5; 
Sen. Kohl 5; TRAC 9-10; Drew 1; Young 3; Clabaugh 1; Schulken 2.
---------------------------------------------------------------------------

    383. First, the TC provides in-depth, ongoing monitoring of 
Microsoft's activities as they relate to compliance with the RPFJ. This 
will permit rapid detection and reporting of potential violations to 
the United States and the plaintiff States, after which Plaintiffs can, 
in the exercise of their prosecutorial discretion, bring such 
enforcement action as is appropriate to the situation. As part of this 
function, the TC has broad powers to obtain information from Microsoft. 
The TC may require Microsoft to make available records and documents, 
and to provide physical access to Microsoft facilities, systems and 
equipment. Microsoft must also make its personnel available for 
interviews on essentially the same terms as they are available to the 
United States and plaintiff States in their enforcement investigations 
and actions.\359\ The TC even has the right to unfettered access to 
Microsoft's software source code, subject only to standard 
confidentiality protections. See RPFJ Sec. IV.A.8.
---------------------------------------------------------------------------

    \359\ One comment erroneously implies that permitting Microsoft 
to have counsel present when its employees are questioned by the TC 
somehow would allow Microsoft to thwart the discovery of violations. 
See Nader/Love 5. To the contrary, this right is also present in 
conjunction with informal interviews or ``on the record'' 
depositions by Plaintiffs; is a standard part of all such provisions 
in antitrust consent decrees in recent years; protects against 
impermissible ex parte contacts; and protects Microsoft's legitimate 
privileges and basic principles of due process.
---------------------------------------------------------------------------

    384. The TC has the authority to receive and evaluate complaints 
from third parties, from Microsoft's Compliance Officer, and from 
Plaintiffs. RPFJ Secs. IV.A.8.d; D.4.a, b. The TC may keep the identity 
of complainants anonymous, and Microsoft will not have the right under 
the RPFJ to obtain the identity of the complainant. This should 
encourage information flow to the TC, even from those who might fear 
Microsoft retaliation. RPFJ Sec. IV.D.4.e. Further, the TC has an 
obligation to report to Plaintiffs, both at regular intervals and 
immediately upon discovery of an apparent violation. RPFJ 
Secs. IV.A.8.e, f. Finally, the TC has the right to report back to 
third parties who have made complaints or inquiries as to how they 
might be resolved with Microsoft, subject only to the TC's overall 
confidentiality obligations. See RPFJ Secs. IV.8.f, 8.c, 9, 10.\360\
---------------------------------------------------------------------------

    \360\ As some comments point out, the TC cannot share 
confidential Microsoft information with third parties. E.g., Gifford 
5; Gianndrea 6. This will prevent third parties from using the TC as 
a way to in essence improperly expand Microsoft's disclosure 
obligations under the RPFJ. For example, the TC will have access to 
all of Microsoft's source code, including source code for software 
products not directly at issue in the case, and will be able to 
evaluate all APIs, even those not necessarily related to middleware. 
If the TC was free to disclose such items to third parties, it would 
in essence permit the wholesale looting of Microsoft's intellectual 
property, thus changing the fundamental nature of the carefully 
limited, negotiated settlement that led to the submission of the 
RPFJ to the Court.
---------------------------------------------------------------------------

    385. Some comments criticize the restriction on direct use of the 
TC's reports and conclusions in enforcement actions.\361\ This direct 
use restriction has two purposes: First, by ensuring that Microsoft's 
and third parties' communications will not be used directly against 
Microsoft, the TC will benefit from heightened candor and information 
disclosure by Microsoft employees and others. Second, and equally 
important, the TC cannot be expected to develop evidence for use in 
adversary proceedings with the necessary level of rigor that law 
enforcement or legally trained personnel could muster. Those 
criticizing the restriction on direct use of the TC's output overlook 
the fact that Plaintiffs remain free to make full derivative use of all 
the TC's work in enforcement--such as pursuing leads to build solid 
enforcement actions based on admissible evidence. In this sense, the 
TC's work will prove invaluable.
---------------------------------------------------------------------------

    \361\ CCIA 91; AOL 51; Litan 55; ProComp 76; Harris 10; Gifford 
5; Alexander 4; Waldman 5; Clapes 19; Godshall 2; Hammett 1.
---------------------------------------------------------------------------

    386. A second purpose of the TC is to facilitate the resolution of 
potentially complex and technologically nuanced disputes between 
Microsoft and others over the practical workings of the RPFJ. The TC is 
not intended to have independent enforcement authority; that authority 
remains with Plaintiffs and the Court. See CIS at 55.\362\ Rather, the 
TC has a ``dispute resolution'' role, intended to facilitate the rapid, 
consensual resolution of issues where possible. As noted above, the TC 
complements, but does not supplant, Plaintiffs' and the Court's 
traditional methods and powers of decree enforcement. It is thus 
intended to provide an additional mechanism for the efficient voluntary 
resolution of what otherwise could be time-consuming, costly, and 
frustrating disputes to all concerned. Viewed in this light, rather 
than as being a surrogate prosecutor or judge, both the TC's procedures 
and substantive powers make eminent sense.
---------------------------------------------------------------------------

    \362\ As one commenter supporting the RPFJ noted in observing 
that the TC will ``also have the authrity [sic] to resolve disputes 
about Microsoft's compliance,'' ``this panel should not be used as a 
regulatory body.'' Economides 11.
---------------------------------------------------------------------------

    387. Some comments question why the TC is not given an explicit 
mandate to also have business or legal expertise to facilitate the 
review of Microsoft's non-technical business or legal decisions.\363\ 
The RPFJ sets forth a baseline of technical expertise because it is 
essential that the TC have ``experts in software design and 
programming,'' to do its job. RPFJ Sec. IV.B.2. Nothing in the RPFJ, 
however, limits the expertise of TC members, staff, and consultants to 
only these areas. In short, the TC can and should have available to it 
expertise broader than purely technical matters and will be expected to 
address and report on business and other issues that come to its 
attention in connection with its monitoring of Microsoft's compliance 
with the RPFJ. Furthermore, the United States, the plaintiff States, 
and the Court routinely confront complex economic and business strategy 
issues, and clearly have the capability to address such issues as they 
affect enforcement matters.
---------------------------------------------------------------------------

    \363\ CCIA 90; Red Hat 30.
---------------------------------------------------------------------------

2. Composition and Control of the Technical Committee
    388. Some comments take issue with the manner in which the TC will 
be constituted, object to Microsoft playing any role in selecting its 
members, and generally imply that the TC will lack independence.\364\ 
Many of these comments fail to appreciate that Plaintiffs, not 
Microsoft, control the TC.
---------------------------------------------------------------------------

    \364\ Nader/Love 5; Litan 55; AOL 51; Alexander 4; Gifford 6; 
Young 3; Morrissey 2; Clabaugh 1; Cheetham 1; Spotswood 1; Akin 4; 
Godshall 1-2.
---------------------------------------------------------------------------

    389. The TC is composed of three members who are to be ``experts in 
software design and programming.'' RPFJ Sec. IV.B.2. Plaintiffs and 
Microsoft will each nominate one member, who must meet strict conflict-
of-interest standards, to ensure that they perform their duties in a 
``fair and unbiased manner'' (RPFJ Sec. IV.B.2), and have the right to 
object to the other's proposed appointee. Any unresolvable disputes 
about TC membership are decided by the Court, which retains the 
ultimate ability to appoint the members. After the first two members 
are appointed, they will propose a third member; again, the Court will 
decide disputes and approve or reject this member. See RPFJ 
Sec. IV.B.3. Having all parties play a role in selecting the TC ensures 
that it will not have an overall bias for or against one party. 
Furthermore, there remain safeguards against bias even after the TC is 
chosen. If, for example, the TC member nominated by Microsoft fails to

[[Page 12179]]

behave in an unbiased manner or otherwise does not act in accord with 
the purposes of the RPFJ, the United States has the right to insist 
that the member be replaced (RPFJ Sec. IV.B.5); Microsoft, however, has 
no corresponding right.
    390. Further, as noted critically by a few comments,\365\ TC 
members are subject to employment restrictions that preclude them from 
having served as expert witnesses in this or other cases involving 
Microsoft, and impose prohibitions on being employed by Microsoft or 
its competitors for a limited time before, during and after their 
service on the TC. Such limited, ancillary employment restriction 
covenants are also intended to ensure that TC members will not have or 
develop biases, or be able to trade on confidential, competitively 
sensitive business information learned while serving on the TC. In 
appropriate cases, however, these requirements may be waived by the 
agreement of the parties to the RPFJ. RPFJ Sec. IV.B.2.
---------------------------------------------------------------------------

    \365\ Harris 9-10; Gifford 5.
---------------------------------------------------------------------------

    391. Microsoft is responsible for paying all costs of the TC. RPFJ 
Secs. IV.B.6, 7, 8.h. It is wholly reasonable that the defendant in 
this case, rather than the taxpayer, defray the potentially substantial 
cost of supporting the TC. Microsoft will not be able to manipulate the 
activities of the TC through any ``power of the purse,'' however, as it 
will have the burden of demonstrating the unreasonableness of any TC 
expense, and the Court has the authority to compel payment in the event 
of a dispute. RPFJ Sec. IV.B.8.i. The TC will have offices on 
Microsoft's corporate campus, RPFJ Sec. IV.B.7, which will greatly 
enhance its ability to carry out its duties; however, Microsoft cannot 
exercise any control over the TC's activities by virtue of its 
location. The comments expressing concern that Microsoft somehow can 
control the TC, either through funding or geographic proximity, are 
unfounded.\366\
---------------------------------------------------------------------------

    \366\ Nader/Love 5 (suggesting that the TC might be ``playing 
golf'' with Microsoft executives instead of investigating 
anticompetitive activities); Young 3.
---------------------------------------------------------------------------

    392. Most importantly, the TC remains under the express control of 
Plaintiffs, not Microsoft. It is Plaintiffs, not Microsoft, that apply 
to the Court for the appointment of the TC members. RPFJ Sec. IV.B.3.b, 
d. The United States, not Microsoft, contracts with the TC for its 
services, and defines the basic parameters of that agreement. RPFJ 
Sec. IV.B.6. The United States, but not Microsoft, has the right to 
remove any TC member if it determines that the member has failed to act 
diligently and consistently with the purposes of the RPFJ. RPFJ 
Sec. IV.B.4. The TC files its reports with Plaintiffs, not Microsoft. 
RPFJ Sec. IV.B.8.e, f.\367\ The hiring of additional staff or 
consultants by the TC is subject to approval by Plaintiffs; Microsoft 
is entitled only to prior notice of such hiring, and is obligated to 
pay for such hires. RPFJ Sec. IV.B.8.h. Plaintiffs, not Microsoft, 
approve the TC's expenses. If Microsoft brings an objection to the 
Court concerning the TC's expenses, Microsoft bears the burden of 
proving that they are unreasonable, and has to pay all costs and 
attorneys' fees incurred by the TC by virtue of such challenge. RPFJ 
Sec. IV.9.
---------------------------------------------------------------------------

    \367\ One comment (Gifford 6) questions whether, in the event of 
disagreement on the TC as to whether violations have occurred or 
been adequately cured, an individual member could submit dissenting 
views to Plaintiffs. The RPFJ does not require that the TC's reports 
be unanimous or reflect only the majority's views and conclusions. 
Further, there is no bar to an individual TC member communicating 
directly with Plaintiffs at any time.
---------------------------------------------------------------------------

C. Internal Compliance

    393. Several commentors expressed their preference for the 
Litigating States' Proposal regarding internal compliance measures. The 
RPFJ and the Litigating States' Proposal both provide for a Compliance 
Officer (``CO'') inside Microsoft who will be responsible for 
developing and supervising internal programs to ensure Microsoft's 
compliance with the antitrust laws and any final judgment. The 
Litigating States' proposal largely tracks the RPFJ with respect to the 
role that the CO is supposed to play to ensure compliance with the 
terms of the decree. For example, both proposals contemplate that the 
CO will supervise the review of Microsoft's activities during the term 
of the decree and will be responsible for ensuring that the relevant 
company representatives are aware of and have agreed to comply with the 
decree. Both proposals charge the CO with similar briefing and record-
keeping duties.
    394. There are, however, certain differences between the two 
proposals. The RPFJ requires the CO to maintain the procedures for 
submitting complaints on Microsoft's website, whereas the Litigating 
States propose that the Special Master handle this particular 
responsibility. Both approaches achieve the same result. The United 
States, however, believes that it is more efficient for the CO, who 
will be a Microsoft employee and therefore in a better position 
effectively to monitor the website, to handle this task.
    395. The Litigating States' Proposal also includes certain 
provisions that are similar to provisions contained in the IFJ, but 
that the United States believes are either unnecessary or more 
effectively addressed in the manner proposed in the RPFJ. For example, 
the Litigating States' Proposal establishes a Compliance Committee 
(``Committee''), the only responsibility of which appears to be 
appointment and removal of the CO. The United States considered this 
approach but ultimately decided that an independent Technical Committee 
would be more effective than the Committee contemplated by the States.
    396. The Litigating States also propose a confidential reporting 
mechanism that Microsoft employees can use to report potential 
violations of the decree or the antitrust laws. One comment suggests 
that the RPFJ should explicitly permit Microsoft employees to submit 
anonymous information to the TC.\368\ The RPFJ provides the TC with the 
ability to receive and evaluate complaints, including anonymous 
complaints, and the United States believes that the scope of this 
authority is broad enough to protect Microsoft employees in appropriate 
cases.
---------------------------------------------------------------------------

    \368\ Palm 16.
---------------------------------------------------------------------------

    397. Several comments note that the Litigating States' Proposal 
requires the CO to disseminate the decree (and related materials) to 
platform software developers and other Microsoft employees involved in 
working with OEMs, ISVs, IHVs and third-party licensees, whereas the 
RPFJ requires dissemination only to Microsoft's officers and 
directors.\369\ See RPFJ Sec. IV.C.3; Litigating States' Proposal 
Sec. 17. Although a provision similar to the Litigating States' 
Proposal appeared in the IFJ, the United States ultimately decided that 
dissemination to officers and directors--who would then be responsible 
for disseminating additional instructions and advice to lower-level 
employees--would sufficiently ensure that Microsoft's policymakers, who 
are responsible for establishing the strategic and technical direction 
of the company, are on actual notice of the RPFJ's requirements. To 
require such procedures for all employees would be a significant 
additional burden, and is unlikely materially to improve either 
Microsoft's level of compliance or its corporate culpability in the 
event of violations. Although such education and certification 
requirements are not unique in antitrust decrees, many antitrust 
consent decrees entered into by the United States, including the 1994 
Microsoft decree (No. 94-CV-1564), do not impose any continuing 
education

[[Page 12180]]

and certification requirements on the defendant whatsoever.
---------------------------------------------------------------------------

    \369\ SBC 158; Clapes 18.
---------------------------------------------------------------------------

    398. In sum, although the Litigating States' proposal and the RPFJ 
may differ to some degree in the manner in which they define the scope 
of authority and responsibility given to the CO, both proposals achieve 
essentially the same result of vigorous internal compliance that will 
play a crucial role in the effectiveness of the proposed decrees. The 
United States believes, however, that the procedures for the TC set 
forth in the RPFJ, when viewed in conjunction with the responsibilities 
of the TC and the United States' existing enforcement authority, 
provide the most effective approach to enforcement.

D. Voluntary Dispute Resolution

    399. The RPFJ sets up an even more informal, entirely optional, 
voluntary dispute resolution mechanism that permits third parties or 
Plaintiffs to first submit complaints to Microsoft's internal 
Compliance Officer, which Microsoft then can attempt to resolve within 
30 days. RPFJ Sec. IV.D.3. Some comments describe this provision as 
simply a delay mechanism.\370\ In many instances, however, it will be 
in both Microsoft's and the third party's clear interest to resolve 
issues quickly and informally, without the expenditure of time, money, 
and management distraction attendant with more formal investigations 
and enforcement actions. This provision permits Microsoft and third 
parties to do so. Further, no person is required to first submit issues 
to Microsoft's internal Compliance Officer--the process is entirely 
optional. Any person concerned about delay or Microsoft's good faith 
may complain to the TC or directly to Plaintiffs.
---------------------------------------------------------------------------

    \370\ RealNetworks 32.
---------------------------------------------------------------------------

E. Proposals for a Special Master

    400. Some comments argue that the TC should be replaced with a 
special master similar to that proposed in New York.\371\ Compare RPFJ 
Sec. IV.B.8, with Litigating States' Proposal Sec. 18. Specifically, 
the commentors suggest that this type of enforcement regime would 
provide both a more effective means of ensuring Microsoft's compliance 
with the final judgment and a vehicle for the speedy resolution of 
complaints from plaintiffs, state attorneys general, and independent 
third parties. We disagree on both counts.
---------------------------------------------------------------------------

    \371\ SBC 112-13; AOL 51-53; TRAC 9; Novell 30; RealNetworks 32; 
Red Hat 30-31; SBC 157.
---------------------------------------------------------------------------

    401. To some degree, the RPFJ's TC and the States' special master 
would perform the same functions. Significantly, however, the authority 
the States propose giving the special master represents an 
unprecedented, radical, and unwarranted removal of prosecutorial 
discretion from the United States that would weaken the mechanisms for 
compliance with the decree.
    402. Both the special master and the TC would have the power and 
authority to monitor Microsoft's compliance with its obligations under 
the final judgment and would have access to the information, personnel, 
systems, equipment, premises, and facilities necessary to fulfill their 
respective responsibilities. Each would be required to receive 
complaints from a Microsoft Antitrust Compliance Officer, third 
parties, and the plaintiffs; submit reports every six months regarding 
Microsoft's compliance with the final judgment; and report any non-
compliance at any time. In addition, both the special master and TC 
would be paid by Microsoft and would be permitted to hire advisors, and 
such other staff as is necessary, at Microsoft's expense.
    403. But the Litigating States' proposal also calls for the 
appointed special master, with the assistance of an ``advisory 
committee,'' to act as prosecutor, witness, and judge. The scope of the 
special master's authority apparently extends without limitation to all 
``technical, economic, business'' and other aspects of the decree. 
Litigating States' Proposal Secs. 18.d, f. The special master would 
have unfettered discretion to receive complaints, decide whether to 
investigate the complaints, conduct the investigation, hold hearings, 
make factual findings, and issue proposed enforcement orders. 
Litigating States' Proposal Sec. 18.f. Further, the special master 
would be bound to act within extremely tight deadlines, regardless of 
the complexity of the issue, the ability of the parties to marshal 
evidence within an extraordinarily short 14-day deadline, or the 
ability of the special master to evaluate the evidence and reach 
conclusions within a mandatory 15-day post-hearing deadline. Id. The 
special master's findings--and even its recommendations, apparently 
whether accepted by the Court or not--would be admissible in any 
action, and the special master expressly would be permitted to testify 
in any action, including apparently private litigation. Litigating 
States' Proposal Sec. 18.h.
    404. The United States is aware of no previous antitrust decree to 
which it has been a party that appoints a special master for general 
decree enforcement. Rather, in every case in which an action to enforce 
an antitrust final judgment was necessary, the United States has been 
permitted to exercise its traditional role as prosecutor.\372\ 
Likewise, no court has successfully delegated its inherent powers of 
antitrust judgment enforcement as completely as proposed here.\373\ The 
comments supporting this radical deviation from established practice 
cite no compelling reason for such a remarkable course of action.\374\
---------------------------------------------------------------------------

    \372\ See, e.g., United States v. Smith Int'l, 2000-1 Trade Cas. 
(CCH) para. 72,763 (D.D.C. 2000) (criminal and civil contempt); 
United States v. Microsoft Corp., 147 F.3d 935 (D.C. Cir. 1998) 
(``Microsoft II'') (civil contempt and preliminary injunction in 
enforcement of earlier Microsoft decree, inter alia, finding 
nonconsensual referral to special master to be abuse of discretion); 
United States v. NYNEX Corp., 814 F. Supp. 133 (D.D.C.) (criminal 
contempt of AT&T decree) rev'd, 8 F.3d 52 (D.C. Cir. 1993); United 
States v. Twentieth-Century Fox Film Corp. 1990-1 Trade Cas. (CCH) 
para. 69,060 (S.D.N.Y. 1990) (criminal contempt); United States v. 
Western Elec. Co., 1989-1 Trade Cas. (CCH) para. 68,421 (D.D.C. 
1989) (civil enforcement consent order to resolve allegations of 
AT&T decree violations in lieu of contempt).
    \373\ Indeed, it is not clear from the Litigating States' 
Proposal whether the delegation to the special master of fact-
finding powers its sufficiently circumscribed. Cf. Microsoft II, 147 
F.3d at 953-56 (mandamus appropriate for court's overbroad special 
master referral violative of both U.S. Const. Art. III and Fed. R. 
Civ. P. 53(b)).
    \374\ Novell 30; Nader/Love 5; Sen. Kohl 5.
---------------------------------------------------------------------------

    405. Some comments express concern about ``delay'' occasioned by 
the TC dispute resolution process, suggesting that the tight time 
deadlines and apparent binding authority of a special master would 
resolve matters more swiftly.\375\ The TC and other supplemental 
dispute resolution processes, however, are not mandatory; they in no 
way constrain the ability of the United States and the State Plaintiffs 
from proceeding directly to court for interpretative and enforcement 
action when, in their exercise of prosecutorial discretion, it is 
appropriate to do so.
---------------------------------------------------------------------------

    \375\ RealNetworks 32; ProComp 76; Litan 55; AOL 50-53; AAI 40-
41 (generally).
---------------------------------------------------------------------------

    406. Moreover, the special master's findings are neither binding 
nor non-appealable. Thus, although both proposed decrees provide for a 
different review process for complaints of illegal behavior made 
against Microsoft, prompt and effective relief is no more certain under 
one than the other where the parties to the complaint are unwilling to 
reach a resolution in the absence of a court order. In light of this, 
the United States, while reserving for Plaintiffs the right to seek 
court intervention when necessary, believes the model for the 
resolution of complaints contained in the RPFJ best promotes prompt and 
effective relief.

F. Proposed Reporting Requirements

    407. Some commentors argue that the RPFJ should include special 
transaction

[[Page 12181]]

reporting requirements, as the Litigating States' Proposal does. In New 
York, the Litigating States propose to mandate government oversight of 
transactions related to the software industry and other related areas 
by requiring Microsoft to disclose such transactions to the plaintiffs, 
along with the type of transaction-related materials and information 
that is typically required in filings with the federal government under 
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (``HSR''), 
where such transactions would not otherwise be subject to the 
disclosure requirements of the Act.\376\
---------------------------------------------------------------------------

    \376\ Specifically, the Litigating States' Proposal requires 
Microsoft to provide 60-days written notice of direct or indirect 
acquisitions or investments by Microsoft or any of its subsidiaries, 
as well as notice of any exclusive intellectual property licenses 
granted to Microsoft or any of its subsidiaries. The requirement 
applies to transactions involving businesses of which Microsoft did 
not own 33% or more prior to December 1, 2001, and which fall into 
one of several categories related to computer software and 
equipment, computer systems design, telecommunications, and network 
industries. See Litigating States' Proposal Sec. 20.
---------------------------------------------------------------------------

    408. The United States believes that such a provision is not an 
appropriate remedy for the violations found by the District Court and 
sustained by the Court of Appeals. Foremost among the United States' 
considerations when negotiating the RPFJ was the recognition that the 
remedy must be consistent with the liability findings of the case, none 
of which relates to the use of acquisitions by Microsoft as a tool to 
maintain its operating system monopoly.
    409. Furthermore, but no less important, requiring the disclosure 
of transactions that fall below the HSR threshold would require the 
United States to engage in purely regulatory behavior without providing 
any substantial likelihood of assisting in the remedial goal of 
restoring competitive conditions to the market at issue. The United 
States strives to enact enforcement tools that are closely targeted to 
remedying the harm found and restoring competition. The imposition of 
additional reporting obligations on Microsoft--obligations greater than 
those deemed appropriate by Congress--would create burdens on 
Microsoft, the potential acquired parties, and the United States, 
without adding a significant likelihood of achieving any corresponding 
increase in the detection of anticompetitive transactions. Moreover, to 
the extent that the review process unnecessarily delays those 
transactions that pose no competitive concerns, the reporting 
obligation runs the risk of having a negative impact on consumers. The 
United States' standard investigative authority should sufficiently 
ensure that the United States is aware of--and able to seek more 
information about--transactions in which Microsoft is involved that 
might pose a competitive threat.

IX. Termination

    410. A number of comments argue that the five-year term in Section 
V.A (or seven years when including the possible two-year extension 
under Section V.B) is too short for the RPFJ to remedy the competitive 
harm.\377\
---------------------------------------------------------------------------

    \377\ CCC 26; CCIA 83; Giannandrea 6; Litigating States, Ex. A 
18; Nader/Love; Relpromax 15; SBC 157; Thomas 2, 5.
---------------------------------------------------------------------------

    411. The five-year period provides sufficient time for the conduct 
remedies contained in the RPFJ to take effect in this evolving market 
and to restore competitive conditions to the greatest extent 
possible.\378\ As the Court of Appeals noted, the characteristics of 
the market in this case make it conducive to rapid change. See 
Microsoft, 253 F.3d at 79 (``So a company like Netscape founded in 1994 
can be by the middle of 1995 clearly a potentially lethal competitor to 
Windows because it can supplant its position in the market because of 
the characteristics of these markets.'') (quoting counsel for 
Microsoft); id. at 49 (six years is an ``eternity'' in this market). To 
be sure, there is no scientific way to determine the optimal term of a 
consent decree, which is the product of negotiation. The United States' 
position on the term of a decree is a matter of judgment informed by 
experience. Ultimately, the United States concluded that a five-year 
term (extendable by two years) is an appropriate and reasonable 
predictive judgment in this case.
---------------------------------------------------------------------------

    \378\ Some commentors agree with this proposed term. ACT 31; 
Economides 5-6.
---------------------------------------------------------------------------

    412. Some comments take the position that the length of Microsoft's 
anticompetitive conduct should have determined the length of the 
decree,\379\ but that would have provided an unreliable measuring stick 
for evaluating the amount of time necessary to restore competitive 
conditions. Other comments urge the United States merely to adopt the 
term length from prior recent cases, quoting the Antitrust Division 
Manual's general guidance that ``staff should not negotiate any decree 
of less than 10 years'' duration although decrees of longer than 10 
years may be appropriate in certain circumstances.'' \380\ Antitrust 
Division Manual at IV-54 (3d ed. Feb. 1998). But, as the Manual also 
states at the outset of its discussion of negotiating and entering 
consent decrees, ``[t]he theory behind equitable relief is that it 
should be fashioned to fit the particular facts of the case at issue.'' 
Id. at IV-50. The longer a decree's duration, particularly if it no 
longer fits the facts of the case, the more the decree becomes 
regulatory in nature. The United States has imposed five-year terms in 
numerous past decrees,\381\ including in industries, like this one, 
that are characterized by rapid technological change.\382\ In this 
case, in an evolving market, the five-year term, particularly as 
augmented by a potential two-year extension, is long enough.\383\ 
Because Microsoft will be eager to be released from the decree as soon 
as possible, the prospect of an extension should deter any violations 
and provide an extra incentive to comply.\384\ Moreover, wholly apart 
from

[[Page 12182]]

seeking the two-year extension, the United States may seek civil and 
criminal contempt sanctions against Microsoft and its personnel if 
violations of the decree warrant that action.\385\ See RPFJ Sec. IV.A. 
Nothing in the RPFJ undermines or erodes the United States' existing 
and powerful contempt and enforcement authority.\386\ Therefore, in the 
event that additional steps are necessary to secure compliance or to 
punish Microsoft for violations of the decree, the United States will 
not lack the necessary enforcement tools.
---------------------------------------------------------------------------

    \379\ AAI 39; CCIA 83; Nader/Love 5; Pantin 28.
    \380\ CCIA 83 n.17; SBC 157; Young 3; Hammett 1.
    \381\ See, e.g. United States v. Delta Dental Plan of Ariz., 
Inc., 1995-1 Trade Cas. (CCH) para. 71,048, 1995 WL 454769 (D. Ariz. 
1995) (health care); United States v. Topa Equities, ``Public 
Comments and Response on Proposed Final Judgment,'' 60 FR 28,168, 
28,170 (May 30, 1995) (noting that industry characteristics made 
quick entry likely), entered by, 1995-2 Trade Cas. (CCH) para. 
71,061, 1995 WL 481368 (D. V.I. July 14, 1995); Oregon v. Mulkey, 
1997-1 Trade Cas. (CCH) para. 71,859, 1997 WL, 599410 (D. Or. June 
16, 1997) (commercial crab fishing); United States v. Motor Vehicle 
Mfr. Ass'n, 1982 Trade Cas. (CCH) para. 65,175, 1982 WL 1934 (C.D. 
Cal. Oct. 28, 1982) (modifying judgment in decree regarding 
development and installation of motor vehicle emission control 
devices).
    \382\ See, e.g., United States v. Tele-Communications, Inc., 
``Comment and Response on Proposed Final Judgment,'' 59 Fed. Reg. 
39,783, 39,784 (Aug. 4, 1994) (recognizing that the 
telecommunications industry is ``one that has experienced major 
changes in MTSD technologies that are ongoing''); United States v. 
Agri-Mark, Inc., ``Competitive Impact Statements and Proposed 
Consent Judgments,'' 45 Fed. Reg. 79,186, 79,189 (Nov. 28, 1980) 
(arguing that ``the dairy industry is constantly evolving as a 
result of technological changes'').
    \383\ We note that the suggestion of an open-ended decree, 
subject to review after five years (see Gifford 9; Litan 73), or 
contingent upon Microsoft's market share decreasing (see Thomas 6), 
would create undesirable uncertainty in the market and would be 
contrary to the United States' mission to enforce the federal 
antitrust laws and to remedy specific violations thereof.
    \384\ Several comments argue that the two-year extension does 
not provide a meaningful check on Microsoft's behavior. AAI 40; 
Alexander 4; CCC 27; CFA 84; Gifford 9; Harris 11, 14; Litigating 
States, Ex. A 17; Litan 55; Maddux para. 17; ProComp 76; Schneider 
1; RealNetworks 32; TRAC 11. Some argue that the United States 
should have included sanctions for violations similar to those 
contained in the Litigating States' proposed remedy. SBC 157. The 
Litigating States' proposed remedy spells out a series of possible 
penalties that may be imposed if Microsoft violates the decree, 
including source code licensing, additional conduct remedies, and 
civil penalties. See Litigating States' Proposal Sec. 19. The 
Litigating States' proposal also provides that if Microsoft brings 
or threatens to bring a groundless claim of intellectual property 
infringement for the purpose of impairing interoperability of non-
Microsoft products, Microsoft may be enjoined from asserting or 
enforcing any intellectual property rights in related APIs, 
communications interfaces or technical information.
    Contrary to these commentors' assertions, the possibility of the 
two-year extension of the RPFJ's requirements and prohibitions will 
help dissuade Microsoft from violating its terms and conditions. The 
United States believes that this potential sanction, which is 
supplemented by its traditional enforcement and contempt authority, 
will provide a significant incentive for Microsoft to comply.
    \385\ In addition, the RPFJ requires an independent, full-time, 
on-site compliance team that will monitor compliance with the 
decree, report violations, and attempt to resolve technical disputes 
under the disclosure provisions. This ongoing supervision provides 
added assurance that Microsoft will comply with the obligations and 
restrictions imposed by the decree and that competitive conditions 
will be restored to the greatest extent possible during the five-
year term of the proposed RPFJ.
    \386\ Waldman 6-7.
---------------------------------------------------------------------------

    413. Some of the comments regarding this issue also express concern 
that certain key disclosure requirements may not be triggered until as 
late as one year into the term of the decree, which renders those 
provisions effective for only four years.\387\ At least one commentor 
complains that Microsoft has relied upon this provision as the basis 
for not yet disclosing certain APIs.\388\ We note foremost that 
Microsoft's obligations under the disclosure provisions are triggered 
from the date of submission of the RPFJ to the Court on November 6, 
2001, not its entry by the Court. See RPFJ Secs. III.D-E. The RPFJ will 
be in place for five years from the date of entry; as such, those 
commentors who claim that the disclosure provisions will be in effect 
only for four years have ignored the fact that the clock is already 
running for Microsoft to implement its disclosure obligations. 
Moreover, although certain disclosure provisions may not become 
effective until up to one year after the submission of the decree to 
the Court (see, e.g., RPFJ Sec. III.H), absent the decree, Microsoft 
would be under no obligation to provide such information. Giving 
Microsoft a limited amount of time to implement its duties under these 
provisions is necessary to ensure that they are properly implemented, 
and it is the overall impact of the various decree provisions working 
together over the course of the five-year term that will restore 
competitive conditions in the market.
---------------------------------------------------------------------------

    \387\ CCIA 83; Elhauge 13; Sen. Kohl 5; RealNetworks 29-30.
    \388\ RealNetworks 30.
---------------------------------------------------------------------------

X. Comparing the RPFJ to the IFJ

A. Structural Relief vs. Conduct Restrictions

    414. A number of commentors suggest that the United States should 
have pursued a restructuring of Microsoft into separate companies,\389\ 
arguing that ``divestiture remains the most effective remedy for 
Microsoft's wide-ranging unlawful practices.'' \390\
---------------------------------------------------------------------------

    \389\ PFF 24-29; Litan 65-69; ProComp 77-78.
    \390\ ProComp 77.
---------------------------------------------------------------------------

    415. Shortly after remand, plaintiffs (the United States and all of 
the plaintiff States) informed Microsoft and the Court that, in light 
of the Court of Appeals' decision, they no longer would seek to break 
up Microsoft. Joint Status Report 2 (Sept. 20, 2001). Thus, even if the 
United States had litigated a remedy, it would not have sought 
structural relief, just as the Non-Settling States do not seek it in 
their litigated case.
    416. This unanimity among the government parties not to seek 
divestiture reflects a sound view of the legal landscape created by the 
Court of Appeals, which viewed structural relief in this case 
skeptically, at best. The Court of Appeals questioned whether 
plaintiffs had ``established a sufficient causal connection between 
Microsoft's anticompetitive conduct and its dominant position in the 
[operating system] market'' to justify divestiture. Microsoft, 253 F.3d 
at 106. The Court of Appeals continued that ``[a]bsent such causation, 
the antitrust defendant's unlawful behavior should be remedied by `an 
injunction against continuation of that conduct.' '' Id. (quoting 3 
Antitrust Law para. 650a, at 67). The Court of Appeals also suggested 
that the necessary causation might be lacking here, noting that even 
the District Court ``expressly did not adopt the position that 
Microsoft would have lost its position in the [operating system] market 
but for its anticompetitive behavior.'' Id. at 107 (quoting Findings of 
Fact, para. 411) (emphasis added). Moreover, the Court of Appeals 
observed that divestiture by and large has been directed at ``entities 
formed by mergers and acquisitions,'' and told the District Court to 
``reconsider'' whether ``divestiture is appropriate with respect to 
Microsoft, which argues that it is a unitary company.'' Id. at 105. And 
the Court of Appeals emphasized that, when fashioning a new remedy, the 
District Court should bear in mind that the Court of Appeals had 
``drastically'' altered the basis of liability (Id. at 105, 107) and 
that the new remedy should reflect the ``limited ground of liability'' 
upheld on appeal. Id. at 107.
    417. Second, if plaintiffs had pursued structural relief on remand, 
Microsoft would have been entitled to present evidence challenging a 
``wide range of plaintiffs'' factual representations, including the 
feasibility of dividing Microsoft, the likely impact on consumers, and 
the effect of divestiture on shareholders.'' Id. at 101. This process 
not only would have been time consuming--both in the District Court and 
then, assuming the District Court actually ordered structural relief 
anew, again in the Court of Appeals--but also would have permitted 
Microsoft to introduce a plethora of new evidence. Foregoing a 
structural remedy permitted plaintiffs to speed along the remand 
proceedings and obtain relief (1) sooner and (2) that more likely would 
be affirmed on appeal.

B. Anti-Tying Provisions

    418. The Court of Appeals vacated and remanded the District Court's 
judgment that Microsoft's contractual tying of its Internet Explorer 
web browser with its Windows operating system was per se unlawful under 
Section 1 of the Sherman Act. See U.S. Memorandum at 6-7, 64-66. Given 
the Court of Appeals' imposition of a more rigorous legal standard on 
this claim, including additional and difficult factual proof 
requirements, and given the plaintiffs' interest in achieving 
expeditious relief in this case, plaintiffs (including the Litigating 
States) made a judgment that they would not litigate the Section 1 
tying claim on remand and so informed Microsoft on September 6, 2001. 
At that point, the tying claim disappeared from the case. And so, 
although two commentors \391\ and the Litigating States urge that the 
Court impose a remedy directed toward banning contractual tying, there 
is no legal basis for a remedy on an issue where Microsoft was not 
found liable and where the plaintiffs had valid grounds for choosing 
not to pursue the claim.
---------------------------------------------------------------------------

    \391\ SIIA 22-25; AOL 24-31; Matthewson & Winter 25-26.
---------------------------------------------------------------------------

C. Intentionally Disabling Rival Software

    419. Some comments complain that the RPFJ does not ``prohibit 
Microsoft from intentionally disabling or

[[Page 12183]]

adversely affecting the operation of competing products.'' \392\ They 
argue that such a restriction is necessary to prevent Microsoft from 
thwarting ``the effectiveness of the disclosure requirements by 
altering the interfaces or other information on which non-Microsoft 
products rely.'' \393\ And they correctly observe that the IFJ 
contained an interim provision expressly prohibiting Microsoft from 
``tak[ing] any action it knows will interfere with or degrade the 
performance of any non-Microsoft Middleware when interoperating with 
any Windows Operating System Product'' without notifying the supplier 
ahead of time that it intends to take such action and any ways known by 
Microsoft to avoid or reduce the interference with the performance of 
the rival software.\394\ One comment also criticizes the RPFJ for 
omitting a provision similar (or identical) to Provision 5 of the 
Litigating States' Proposal (``Notification of Knowing Interference 
with Performance'').\395\
---------------------------------------------------------------------------

    \392\ SIIA 8, 64.
    \393\ Palm 14.
    \394\ IFJ Sec. 3.c.
    \395\ SIIA 64-65; SBC 45-46.
---------------------------------------------------------------------------

    420. The United States, upon re-evaluation, chose not to include a 
provision modeled on Section 3.c of the IFJ because that provision 
could have been read to allow Microsoft to take steps to change its 
operating system in order to interfere with the ability of rival 
middleware to interoperate as long as Microsoft informed the third 
party of the change and what, if anything, could be done to fix the 
problem. This effectively would have given Microsoft a license to 
interfere with competing middleware as long as it simply notified the 
competing developer. In addition, this provision would have been 
difficult for the United States to enforce because of the constant 
changes that Microsoft makes to its operating system, which while 
potentially procompetitive, may have the unintentional consequence of 
affecting a competing product's interoperability. The result would have 
been unnecessary compliance disputes.
    421. Provision 5 of the Litigating States' Proposal is similar to, 
though substantially broader than, Section 3.c of the IFJ. Provision 5 
is overbroad and sweeps in conduct that should not reasonably be 
considered anticompetitive. Thus, for example, in the normal course of 
the development of its software, Microsoft may take actions that have 
the unintended, but nevertheless known, consequence of interfering with 
or degrading the performance or compatibility of some non-Microsoft 
middleware. The United States does not believe that such actions either 
should be prohibited or subject Microsoft to any additional notice or 
disclosure requirements. In addition, determining when Microsoft, as a 
corporate entity, has, or reasonably should have, such knowledge is 
exceedingly difficult to determine.
    422. Moreover, the type of conduct at issue (e.g., actions 
undertaken for the express purpose of degrading the software of a 
developer of software that competes with Microsoft Platform Software or 
software that runs on software that competes with Microsoft Platform 
Software) would be prohibited by Section III.F of the RPFJ and/or 
likely would expose Microsoft to statutory, tort, or other legal 
sanctions apart from the RPFJ.
    423. Instead of including a provision similar to Section Sec. 3.c 
of the IFJ or Section 5 of the Litigating States' Proposal, the RPFJ 
restrictions and requirements ensure ease in third-party 
interoperability. Thus, the RPFJ requires Microsoft to disclose those 
APIs that its middleware products use to interoperate with the 
operating system. See RPFJ Sec. III.D. This disclosure will make it 
harder for Microsoft to interfere with competing middleware. Further, 
to the extent that computer industry standards are implemented in 
communications protocols, Microsoft must license these protocols (see 
RPFJ Sec. III.E), including any modifications or alterations to 
industry-standard protocols. When the industry standard is implemented 
between a Microsoft middleware product, such as its Java Virtual 
Machine, and the operating system, Microsoft must disclose that 
interface.

D. Agreements Limiting Competition

    424. Section 3.h of the IFJ included a provision relating to 
agreements entered into by Microsoft that have the effect of limiting 
competition.\396\ The United States initially proposed this provision 
in the IFJ based on Findings of Fact, Paras. 80-132, which described 
five different incidents in which Microsoft attempted to use agreements 
to limit support for competing middleware: (1) Microsoft's attempt to 
dissuade Netscape from developing a browser for Windows that could 
serve as an independent applications platform; (2) Microsoft's attempt 
to dissuade Intel from developing NSP (video) software for Windows 95; 
(3) Microsoft's attempt to dissuade Apple from developing multimedia 
QuickTime playback capability for Windows; (4) Microsoft's agreement 
with RealNetworks to have RealNetworks abandon the media playback 
business on the Windows desktop; and (5) Microsoft's offer of 
incentives to IBM to abandon promotion of OS/2 and Lotus Smartsuite.
---------------------------------------------------------------------------

    \396\ The Litigating States proposes a very-similar provision. 
Section 11 of the Litigating States' Proposal provides: ``Microsoft 
shall not offer, agree to provide, or provide any consideration to 
any actual or potential platform software competitor in exchange for 
such competitor's agreeing to refrain or refraining in whole or in 
part from developing, licensing, promoting or distributing any 
Operating System Software Product or any Middleware produce 
competitive with any Windows Operating System Product or Microsoft 
Middleware Product.''
---------------------------------------------------------------------------

    425. The primary goal of Section 3.h was to ``prohibit naked 
bargains to not compete'' in the platform space.\397\ The RPFJ seeks 
this same goal, but also expressly recognizes that under settled 
antitrust law, agreements that limit competition sometimes are properly 
ancillary to: (1) Pro-competitive joint development agreements; (2) 
discussions relating to the coordination of the development of 
complementary products; or (3) Microsoft contracting with third parties 
to develop technologies for use and distribution with its Windows 
operating system. Rather than using broad language that could be 
construed to prohibit all agreements that place limits on competition--
and risk prohibiting even those agreements that have procompetitive 
justification--the United States therefore opted for a more targeted 
approach in the RPFJ. Sections III.F.2 and III.G of the RPFJ thus are 
designed to prevent Microsoft from entering into any contract relating 
to the Windows operating system that conditions consideration on an ISV 
not supporting software that competes with a Microsoft platform 
product, requiring any firm to promote exclusively a Microsoft Platform 
Software, or conditioning placement of an IAP or ICP on the Windows 
desktop on that firm refraining from supporting any product that 
competes with a Microsoft Middleware Product.\398\
---------------------------------------------------------------------------

    \397\ See Plaintiffs' Reply Memorandum in Support of Proposed 
Final Judgment at 64 (May 17, 2000).
    \398\ At least two comments express concern that the RPFJ does 
not contain language similar to that of Section 3.h of the IFJ. 
RealNetwork 30-31; SBC 98-99. For a complete discussion of how 
Sections III.F and III.G address this concern, see Sections V and 
VI, above.
---------------------------------------------------------------------------

XI. Other Proposed Remedies

A. Restrictions On Software Development Tools

    426. At least two comments express concern that the RPFJ does not 
address Microsoft's alleged market power with respect to its line of 
software development tools. One commentor apparently seeks to compel 
Microsoft to grant the commentor access to a

[[Page 12184]]

Microsoft partnership program that would more easily allow the 
commentor to incorporate development tools for its alternate platform 
with Microsoft's Visual Studio development environment. The comment 
alleges that Microsoft could apply discriminatory criteria, denying 
alternate platform vendors posing a potential threat to Microsoft's 
monopoly the ability to integrate their platform development tools with 
Microsoft's Visual Studio development suite, while allowing other 
vendors who do not pose a threat to have that access. According to the 
comment, without a software development environment common to the one 
used for the dominant Microsoft platform, ISVs and others would be much 
less likely to write software for alternate platforms, a circumstance 
that would help preserve Microsoft's applications barrier to 
entry.\399\
---------------------------------------------------------------------------

    \399\ Palm 11-12.
---------------------------------------------------------------------------

    427. The second comment alleges that Microsoft's license 
restrictions require ISVs that write software applications that take 
advantage of the ``redistributable components'' found in Microsoft's 
Visual Studio development suite to use such ``redistributable'' code 
only on applications written for Microsoft operating system products. 
This comment argues that this restriction prohibits, as a practical 
matter, the porting of such applications to other platforms, thereby 
increasing the applications barrier to entry protecting Microsoft's 
operating system monopoly. This commentor seeks elimination of this 
license restriction from Microsoft's Visual Studio license.\400\
---------------------------------------------------------------------------

    \400\ Kegel 9-10.
---------------------------------------------------------------------------

    428. The relief sought by these commentors would go well beyond the 
scope of this case. The evidence that related to Microsoft's misuse of 
development tools involved specific deceptive practices regarding 
Microsoft's own development tools for the Java platform. Microsoft in 
essence failed adequately to disclose that its version of Java 
development tools contained various Windows-specific features that made 
it difficult to use or port Java programs written with Microsoft tools 
to other Java virtual machines or operating systems. See Microsoft, 253 
F.3d at 76-77. There is nothing in either the allegations made in these 
comments or in the trial record to suggest that Microsoft's refusal to 
allow any competing platform vendor to integrate its development tools 
with Microsoft's Visual Studio development suite, or its license 
restrictions that prohibit ISVs from porting applications containing 
Microsoft redistributable code to other platforms, somehow will deceive 
ISVs into developing applications that run only on a Microsoft 
platform.
    429. Further, the remedy suggested by these comments could have the 
effect of retarding innovation, to the detriment of consumers. 
Requiring Microsoft affirmatively to support allowing competing 
platform vendors to use Microsoft's Visual Studio development suite to 
host competing development tools or create applications for non-
Microsoft platforms using Microsoft-developed redistributable code may 
create a significant disincentive for Microsoft to continue to invest 
heavily in further development of its tools suites or redistributable 
code, because that investment would redound at least in part to the 
benefit of Microsoft's competitors. Moreover, software tool developers 
would lose their incentive to innovate if they were permitted simply to 
free-ride on Microsoft. That result would not benefit either ISVs or, 
ultimately, their customers.

B. Java Must-Carry

    430. In New York, the Litigating States propose to require 
Microsoft to include a free copy of Sun Microsystems' Java technology 
with all copies of its Windows Operating System Products and Internet 
Browser for a period of ten (10) years. See Litigating States' Proposal 
Sec. 13. Several comments echo this type of ``must-carry'' proposal. 
\401\ The commentors correctly note that the Court of Appeals upheld 
Microsoft's liability under Section 2 of the Sherman Act for 
exclusionary conduct aimed at extinguishing the ``middleware threat'' 
posed by Java and other middleware. See Microsoft, 253 F.3d at 75-77. 
The comments suggest that requiring Microsoft to distribute Non-
Microsoft Middleware such as Java would not only deny Microsoft the 
fruits of its violation, but also would begin to erode the applications 
barrier to entry.
---------------------------------------------------------------------------

    \401\ SIIA 49; Nader/Love 6.
---------------------------------------------------------------------------

    431. The United States considered a ``must-carry'' provision but 
rejected it for at least two reasons: (1) it is not the proper role of 
the government to bless one competitor over others, or one potential 
middleware platform over others, nor is the government in the best 
position to do so; and (2) mandatory distribution of a particular 
product likely would lead to a decrease in innovation and improvement 
in that product because its developer will have no incentive to make it 
better. The United States thus believes that the promotion of consumer 
choice and the product innovation that comes along with that choice, 
i.e., the promotion of competition and not specific competitors, is the 
goal of the antitrust laws and this antitrust remedy, while mandatory 
distribution of a particular product is the antithesis of this goal. 
Unlike the ``must-carry'' provision proposed by the Litigating States, 
the affirmative requirements imposed on Microsoft and the prohibitions 
against anticompetitive conduct contained in the RPFJ, and the 
subsequent freedom this structure promotes among ISVs, IHVs, IAPs, 
ICPs, and OEMs, will give all middleware technologies, including but 
not limited to Java, an equal opportunity to succeed in the market.

C. Porting Microsoft Office

    432. Several comments suggest that Microsoft should be required to 
port or continue to port its Office Suite of software applications to 
competing operating systems, including but not limited to the Macintosh 
OS, as a means to erode the applications barrier to entry. \402\ The 
Litigating States also have advanced this proposal, \403\ but the 
proposal is unwarranted.
---------------------------------------------------------------------------

    \402\ CCC 13-17; SIIA 49-51; ProComp 30; ProComp, Arrow 20-21; 
PFF 30-31; SBC 135; Hargraves 9; CCIA 38; CFA 11; Ltan 71-72.
    \403\ Litigating States' Proposal Sec. 14, see also Litigating 
States, Ex. A 14-15.
---------------------------------------------------------------------------

    433. First, the United States did not allege that Microsoft 
monopolized or attempted to monopolize a software market in which 
Office competes, or that Microsoft engaged in anticompetitive conduct 
intended to encourage the use of Office rather than rival software 
applications that compete with Office. \404\ Second, the imposition of 
such a porting requirement is substantially outside the scope of the 
underlying case. \405\ Any remedy must be tailored to the violations 
found. See Microsoft, 253 F.3d at 104-07. The only claim sustained by 
the Court of Appeals was that Microsoft illegally maintained its PC 
operating system monopoly by taking specific acts that impeded 
middleware products that had the potential to erode the applications 
barrier to entry. The Court of Appeals did not find that Microsoft's 
unlawful actions created the barrier to entry. The United States 
crafted the RPFJ to restore the competitive conditions in the market 
that were impeded by Microsoft's actions, allowing

[[Page 12185]]

consumers, software developers, OEMs, and others to make decisions 
based on the competitive merit of their options. In this way, the 
market will determine whether particular products will erode the 
applications barrier to entry. The commentors' and Litigating States' 
proposal, however, goes far beyond the violations found by imposing on 
the market a porting requirement for Office that substitutes for 
competition on the merits and preordains the market outcome.
---------------------------------------------------------------------------

    \404\ Indeed, the plaintiff States originally alleged that 
Microsoft engaged in unlawful monopolization, the violation of 
Section 2, with respect to Microsoft Office. However, the States 
dropped this claim prior to the trial.
    \405\ CompTIA 19 (porting Office would interfere with natural 
market forces); ACT 24 (porting Office requirement beyond the scope 
of the case).
---------------------------------------------------------------------------

D. Licensing of Predecessor Versions of Windows

    434. A few commentors propose that the United States adopt the 
Litigating States' remedy proposal requiring Microsoft to continue to 
license and support immediately prior versions of the Windows Operating 
System Product. \406\ Others object to this proposal, arguing that it 
would impose unnecessary costs on Microsoft that would be passed on to 
consumers, that it would fragment the Windows standard, and reduce 
incentives for Microsoft to innovate. \407\ The Litigating States' 
Proposal mandates support and licensing of predecessor versions for 
five years after release of a major Windows Operating System Product on 
the same terms and conditions as previously offered. In addition, 
Microsoft must license and support Windows 98SE for three years after 
entry of the Final Judgment.
---------------------------------------------------------------------------

    \406\ PFF 30; SBC 143; CCIA, Stiglitz & Furman 40-41.
    \407\ ACT 29; CompTIA 16.
---------------------------------------------------------------------------

    435. The Litigating States cite the District Court's findings on 
discriminatory and restrictive licensing as support for this provision. 
The provision purports to cure these practices by permitting 
customization of Windows (including earlier versions) to incorporate 
Microsoft or competitive middleware. Commentors assert that requiring 
licensing of predecessor versions would provide a lower-priced 
operating system alternative; \408\ offer a version of Windows that has 
less Microsoft middleware and greater reliance on industry standards; 
\409\ and provide greater incentives for Microsoft to innovate, because 
it would have to offer a substantially better operating system in order 
to sell new releases. \410\ Commentors also argue that requiring 
Microsoft to license predecessor versions would permit customization of 
Windows (including earlier versions) to incorporate Microsoft or 
competitive middleware.
---------------------------------------------------------------------------

    \408\ PFF 30; SBC 143.
    \409\ SBC 143.
    \410\ CCIA, Stiglitz & Furman 40-41.
---------------------------------------------------------------------------

    436. The United States believes that the RPFJ adequately addresses 
the restrictive and discriminatory licensing practices engaged in by 
Microsoft and found unlawful by the Court of Appeals. Thus, under the 
RPFJ, OEMs and end users are free to replace Microsoft middleware, 
choose between competing middleware, and, with minimal limitations, 
configure the desktop. \411\ OEMs also are able to make decisions about 
distributing and supporting non-Microsoft software products without 
fear of reprisal. \412\ A provision mandating the licensing of 
predecessor versions of Windows is therefore unnecessary and would do 
little or nothing to enhance these goals.
---------------------------------------------------------------------------

    \411\ See discussion of RPFJ Sec. III.C at Section IV(D), above.
    \412\ See discussion of Section III.A (Section IV(B), above); 
see also Sections III.D. and VI.U, which require Microsoft to 
provide actual and potential competitiors with full access to the 
same APIs and related information as Microsoft middleware has to 
interoperate with the current, and future Windows operating systems, 
offering the potential of a seamless fit and greater possibility for 
incorporation of competing middleware.
---------------------------------------------------------------------------

 E. Industry Standards

    437. Several commentors express concern that the RPFJ imposes no 
requirement on Microsoft to support industry standards for 
interoperability. \413\ By industry standards, the commentors generally 
mean industry-wide technical specifications for communication between 
pieces of software. Such standards often are approved and supervised by 
international standards-setting organizations (e.g., the World Wide Web 
Consortium (W3C), which oversees HTML, the language used to create Web 
pages). In addition to these de jure standards, some specifications for 
interaction remain under the control of the firms that invent them, but 
obtain sufficiently wide usage to be considered standards in a less 
formal sense. An example of this less official category of standards is 
Sun's Java programming language.
---------------------------------------------------------------------------

    \413\ SIIA 61; Novell 5; Sun 23-24.
---------------------------------------------------------------------------

    438. Several commentors propose provisions that would constrain 
Microsoft's behavior with respect to industry standards. Generally, 
these commentors argue the importance of prohibiting Microsoft from 
corrupting or ``polluting'' open standards by extending or altering 
them with proprietary code to cause them to interoperate better, or 
solely, with Microsoft software than with rival software. \414\ The 
commentors correctly point out that the Court of Appeals found that 
Microsoft undermined the threat posed by Sun's Java middleware by 
deceiving ISVs into believing that software written with Microsoft's 
Java developer tools would run on platforms other than Windows 
(Microsoft, 253 F.3d at 75-77), and they argue that Microsoft continues 
to adopt but subvert public standards by inserting proprietary elements 
into the implementation of the Kerberos standard that is built into 
Microsoft products.
---------------------------------------------------------------------------

    \414\ AAI 25; Novell 25; SBC 146; ProComp 35, 74.
---------------------------------------------------------------------------

    439. One commentor proposes that Microsoft be enjoined from 
modifying, altering, sub-setting, or super-setting any industry-
standard communications interface or security protocol in any way that 
is not approved by an international industry standards-setting body. 
\415\ The United States believes this proposal is likely to be 
ineffective at promoting interoperability and unlikely to benefit 
consumers. It would not prevent Microsoft from inserting proprietary 
elements into industry standards that are designed to allow such 
extensions (for instance, the Kerberos security standard). \416\ Nor 
would it constrain in any way Microsoft's actions with respect to 
industry standards like Java that are not under the supervision of an 
international standards body. It would simply deter Microsoft from 
introducing potentially beneficial extensions to industry standards, 
since Microsoft would have to work through the approval process at a 
standards body before it could introduce its innovation.
---------------------------------------------------------------------------

    \415\ SIIA 61-62.
    \416\ SIIA 61-62 (Kerberos); Johnson 5 (Kerberos).
---------------------------------------------------------------------------

    440. The Litigating States propose a range of provisions to 
encourage Microsoft to adhere to industry standards. \417\ Litigating 
States Provision 16.a (``Compliance with Standards'') would require 
Microsoft to comply with any standard that has been approved by or 
submitted to ``any organization or group that sets standards,'' if 
Microsoft publicly claims that it is compliant with the standard. If 
Microsoft extends or modifies that standard, it must continue also to 
implement the standard in its unextended or unmodified version, until 
either Microsoft disclaims that it implements the standard or the 
standard goes out of force at the industry body. Microsoft may not 
require third parties to use or adopt Microsoft's version of the 
standard and must support the nonproprietary industry version in its 
operating systems. The United States considered a provision 
substantially similar to Litigating States Provision

[[Page 12186]]

16.a for the RPFJ, but ultimately decided it was likely to be both 
unwieldy and ineffective. \418\
---------------------------------------------------------------------------

    \417\ Litigating States' Proposal Sec. 16; ProComp 35 (referring 
to Litigating States' Proposal).
    \418\ CIS at 62.
---------------------------------------------------------------------------

    441. This type of standards requirement likely would prove unwieldy 
because of the complexity of the institutions, technologies, and 
behavior being regulated here. Which among the multitude of existing 
standards-setting bodies, or bodies that might be established after, 
and possibly because of, this decree, would be considered legitimate 
under Provision 16.a? (What if Microsoft sponsors a new standards body, 
for instance?) Is it even technically possible or desirable, in all 
covered circumstances, for Microsoft to meet the requirements of the 
provision by supporting the industry standard of a technology at the 
same time it supports its own extended version?
    442. The Litigating States' provision also is likely to be 
ineffective. It substantially regulates Microsoft's speech rather than 
its actions. If Microsoft publicly claims to be supporting its own 
implementation of a standard (e.g., ``Microsoft Technology A'') and 
does not publicly claim to be supporting the standard itself (e.g., 
``Technology A''), it would be in full compliance with the provision 
and yet would not have any obligation to adhere to the ``Technology A'' 
standard. It is difficult to see a provision that operates in this 
manner as imposing a competitively meaningful constraint. Moreover, to 
the extent that the provision regulates actions, it appears to be 
internally contradictory. It requires Microsoft, as a condition of 
being permitted to introduce a proprietary version of the standard, to 
implement the industry version until either Microsoft disclaims support 
for it or until the standard is rescinded by the governing body. But it 
also explicitly requires Microsoft's operating systems to continue to 
support the industry standard, apparently without time limit, as a 
condition of being permitted to introduce Microsoft's own proprietary 
version.
    443. Litigating States' Provision 16.b (``Compliance with De Facto 
Standards'') modifies Provision 16.a to permit Microsoft, upon 
notification and consent of the States' enforcement authorities, to 
meet its compliance obligations by implementing a variant of the 
standard ``to the extent that industry custom and practice recognizes 
compliance with the Standard to include variations from the formal 
definition.'' The need for this provision highlights the unwieldiness 
of Provision 16.a: what is truly ``standard'' in the industry is not 
necessarily what a standards body formally has adopted. Further, and 
fatally for those who justify the Litigating States' Provision 16 as a 
response to Microsoft's illegal Java deception, no part of that section 
actually would have prohibited Microsoft from pursuing its illegal 
acts. \419\ Throughout most of its history, Sun's Java has neither been 
a technical standard approved by, submitted to, or under consideration 
by a standard-setting body (the criterion for protection under 
Provision 16.a) nor a ``variation'' from such a standard (the criterion 
under Provision 16.b), but rather a widely-used proprietary technology 
under the control of its owner, Sun.
---------------------------------------------------------------------------

    \419\ Litigating States, Ex. A 15.
---------------------------------------------------------------------------

F. Protection for Large End Users

    444. A few commentors lament the lack of special protection in the 
RPFJ for large end user purchasers of Microsoft products. \420\ These 
commentors express several concerns regarding large corporations, 
universities, or federal, state, or local government purchasers: (1) 
Microsoft may retaliate against end users purchasing competing 
middleware; \421\ (2) Microsoft continues to charge license fees to 
these purchasers for all machines capable of running a Microsoft 
operating system (a ``per processor fee''), thereby removing incentives 
to purchase competing operating systems; \422\ (3) Microsoft imposes 
other coercive licenses directed at end users; \423\ and (4) Microsoft, 
without some restraint, can undo all of the RPFJ provisions applying to 
OEMs upon the first license renewal with an end user. \424\
---------------------------------------------------------------------------

    \420\ CCIA 59 n.12; Kegel 27-28; KDE 13; Novell 26-29; CFA 90.
    \421\ KDE 13.
    \422\ Kegel 27-28.
    \423\ Novell 26-29.
    \424\ CCIA 59 n.12.
---------------------------------------------------------------------------

    445. The commentors' proposed relief is outside the scope of the 
underlying case. The United States did not allege, or prove, that 
Microsoft engaged in anticompetitive conduct involving its large end 
user customers. Although the United States proved that Microsoft 
illegally maintained its PC operating system monopoly through actions 
directed at eliminating the middleware threat, it presented no 
evidence--and the District Court made no finding--that purchasers large 
and sophisticated enough to deal directly with Microsoft were in need 
of special protection.
    446. Nevertheless, certain provisions of the RPFJ do apply to end 
users. Pursuant to Section III.H.1-2, end users are able (1) to 
configure the desktop to enable or remove access to each Microsoft 
Middleware Product as described, and (2) to designate a Non-Microsoft 
Middleware Product to be invoked in place of a Microsoft Middleware 
Product as described. And, pursuant to Section III.H.3, Microsoft 
cannot alter those configurations without permission from the end user.

G. Non-Retaliation for Participation in Litigation

    447. At least one comment \425\ has advocated inclusion of the 
Litigating States' proposal specifically to prohibit retaliation by 
Microsoft against those who participated in litigation in either of the 
now de-consolidated actions.\426\ Such a provision is unnecessary 
because the Court retains ample authority, regardless of whether such a 
provision is included in the RPFJ, to sanction such conduct if and when 
it arises.
---------------------------------------------------------------------------

    \425\ SBC 99.
    \426\ Litigating States' Proposal Sec. 9.
---------------------------------------------------------------------------

    448. Thus, should retaliation of the sort described by the comment 
arise, the United States may petition the Court to exercise its 
continuing jurisdiction to issue ``further orders as may be necessary 
or appropriate to carry out or construe this Final Judgment . . . to 
modify . . . any of its provisions, to enforce compliance, and to 
punish violations thereof.'' RPFJ Sec. VII. Under both its inherent 
powers and Section VII of the RPFJ, the Court could take whatever 
action is necessary to prevent, halt, and remedy any such retaliation 
against participants in this litigation. Further, depending on the 
facts of any such retaliation, Microsoft also could face criminal 
liability under a number of statutes. See, e.g., 18 U.S.C. 1503 
(``whoever . . . corruptly or by threats or force, or by any 
threatening letter or communication, influences, obstructs, or impedes, 
or endeavors to influence, obstruct, or impede the due administration 
of justice . . .''); 18 U.S.C. 1512 (witness tampering, generally). A 
specific anti-retaliation provision of the sort proposed here is 
therefore unnecessary and unwarranted.

XII. Miscellaneous Comments

A. Microsoft's ``.Net'' Initiative

    449. Some comments \427\ argue that the RPFJ fails effectively to 
constrain Microsoft's diverse set of announced and emerging web 
services initiatives, grouped generally under the ``.Net'' 
trademark.\428\ The comments claim that Microsoft, having vanquished 
the nascent cross-platform distributed

[[Page 12187]]

computing threat posed by the Java architecture, is now implementing 
its own closed system that will require Microsoft operating system 
products on both the server side of the network and on the client side 
(i.e., Windows Operating System Products). Under such a scenario, argue 
the commentors, neither server nor client software competitors of 
Microsoft will be able to interoperate with the .Net technologies. The 
suggested remedies for this situation, according to the comments, range 
from mandatory transparency of all Microsoft APIs, Communications 
Interfaces, and other technical information, regardless of whether the 
disclosures touch on either Microsoft's desktop operating system 
monopoly or middleware, to mandatory porting of the basic .Net 
architecture (the ``.Net Framework'') to several alternate server and 
client platforms. These criticisms are not well taken.
---------------------------------------------------------------------------

    \427\ SIIA 41-44; CFA 55-65; Palm 7-8; Catavault 3-11; KDE 9-10.
    \428\ See generally [http://www.microsoft.com/net/]; Huwalt 3.
---------------------------------------------------------------------------

    450. First, whether .Net is, in fact, likely to have an 
anticompetitive effect, or what its competitive significance might be 
in general, is not yet clear. The very concept of ``web services'' is 
still evolving as new ways to use networking and the Internet are 
discovered. Many parts of .Net, and even some of the detailed plans for 
.Net, have not yet been released, and therefore cannot fully be 
evaluated. Similarly, announced (but not yet released) alternate web 
services frameworks, such as the multi-vendor ``Liberty Alliance'' 
\429\ founded by Sun Microsystems, are not fully developed and do not 
have actual products in the market. It would be difficult, if not 
impossible, to draw conclusions about the competitive impact of such 
pre-nascent initiatives that have sufficient reliability to warrant 
additional remedies or restrictions.
---------------------------------------------------------------------------

    \429\ See generally http://www.sun.com/software/sunone/liberty/.
---------------------------------------------------------------------------

    451. Second, the remedies proposed by the commentors, including 
mandatory transparency of Microsoft technical information, regardless 
to whether such disclosures relate to middleware or Microsoft's 
operating system, reach beyond the scope of the case as sustained by 
the Court of Appeals. Any remedy must focus on addressing the specific 
conduct by Microsoft to impede the nascent middleware threat to its 
operating system.
    452. Third, to the extent .Net might implicate middleware or 
Microsoft's platform monopoly as developed in this case, it can, of 
course, fully be evaluated within the context of the RPFJ and this 
case. Thus, availability of Communications Protocols as provided for in 
Section III.E of the RPFJ provides a continuing obligation for 
Microsoft to make available, through licensing on reasonable and non-
discriminatory terms, the Communications Protocols utilized by the .Net 
Framework to the extent these Communications Protocols are used by a 
Microsoft server operating system product to interoperate with the 
Windows Operating System Product. See discussion at Section 
III(B)(1)(d)-(2)(e), above. The practical effect of this provision is 
that, if Microsoft puts client/server interfaces for the .Net framework 
in its monopoly Windows Operating System Product, these interfaces will 
be available for use by third parties. Indeed, the United States 
understands that various Microsoft technologies, including the Active 
Directory services model, the Kerberos security model, and the Common 
Language Runtime analog to Java virtual machines, are core components 
of the .Net Framework that the comments complain about and are already 
covered by the RPFJ. See CIS at 37-39.

B. Course of Conduct

    453. A commentor criticizes the United States for taking the 
position that the Court of Appeals failed to uphold Microsoft's course 
of conduct as an independent violation of Sherman Act Sec. 2.\430\ Yet, 
it is difficult to see how the Court of Appeals could have made its 
position any clearer:

    \430\ CCIA 39-41.
---------------------------------------------------------------------------

the District Court did not point to any series of acts, each of 
which harms competition only slightly but the cumulative effect of 
which is significant enough to form an independent basis for 
liability. The ``course of conduct'' section of the District Court's 
opinion contains, with one exception, only broad, summarizing 
conclusions. See, e.g., Conclusions of Law, at 44 (``Microsoft 
placed an oppressive thumb on the scale of competitive fortune. . . 
.''). The only specific acts to which the court refers are 
Microsoft's expenditures in promoting its browser, see id. 
(``Microsoft has expended wealth and foresworn opportunities to 
realize more. . . .''), which we have explained are not in 
themselves unlawful. Because the District Court identifies no other 
specific acts as a basis for ``course of conduct'' liability, we 
reverse its conclusion that Microsoft's course of conduct separately 
violates Sec. 2 of the Sherman Act.

Microsoft, 253 F.3d at 78.

    454. The comment disagrees that the net effect of the Court of 
Appeals's substantial narrowing of the findings of liability, including 
its rejection of the District Court's ``course of conduct'' finding, 
was to curtail the available remedies. Again, the Court of Appeals made 
clear that ``[w]hile we do not undertake to dictate to the District 
Court the precise form that relief should take on remand, we note again 
that it should be tailored to fit the wrong creating the occasion for 
the remedy.'' Id. at 107; see also id. (``we have drastically altered 
the scope of Microsoft's liability, and it is for the District Court in 
the first instance to determine the propriety of a specific remedy for 
the limited ground of liability which we have upheld''). In light of 
the Court of Appeals' decision, the wrong creating the occasion for 
remedy--the limited ground of liability upheld--is Microsoft's specific 
practices, and not any alleged course of conduct undertaken to protect 
the operating system monopoly.

C. Restoring Java/Netscape Threats

    455. Several commentors \431\ suggest that the RPFJ does nothing to 
restore Netscape Navigator and Java as competitive threats to 
Microsoft. This criticism ignores what the RPFJ does do: it restores 
the ability of middleware, including browsers like Navigator and other 
middleware like Java, to threaten the applications barrier to entry 
protecting Microsoft's operating system monopoly. The RPFJ not only 
enjoins Microsoft from continuing the anticompetitive conduct that it 
directed against Netscape and Java but also, as detailed elsewhere, 
imposes affirmative obligations on Microsoft that will give middleware 
providers the opportunity to develop as threats to Microsoft's 
operating system monopoly. The United States believes that this 
restoration of the opportunity for middleware of all types, present and 
future--and not limited to Web browsers and Java--to erode Microsoft's 
operating system monopoly is the appropriate goal for a remedy in this 
case.
---------------------------------------------------------------------------

    \431\ ProComp 26-29; ProComp, Arrow Paras. 4, 32-34; AOL 45; 
Elhauge 4, 10; SIIA 44-51; Litan 58-59; Henderson 4, 10; Litigating 
States, Ex. A 13-14; CCIA 10, 35-36, 42-44; Gifford 8; Pantin 37.
---------------------------------------------------------------------------

    456. As an initial matter, some comments presuppose that, had 
Microsoft not engaged in its unlawful conduct, both Netscape and Java 
would have succeeded in eroding Microsoft's operating system monopoly. 
In fact, however, even the District Court concluded that ``there is 
insufficient evidence to find that, absent Microsoft's actions, 
Navigator and Java already would have ignited genuine competition'' in 
the PC operating system market. Findings of Fact, para. 411; see also 
id., para. 69 (threat posed by Netscape was only a ``potential'' 
threat); id., para. 77 (Netscape and Java had ``a long way to go before 
they might imperil the

[[Page 12188]]

applications barrier to entry''). And similarly, the Court of Appeals 
did not adopt the view that Microsoft ``would have lost its position in 
the OS market but for its anticompetitive behavior.'' Microsoft, 253 
F.3d at 107. Thus, the emphasis that these comments place on the 
restoration of Java and Netscape as ``threats'' is misplaced.
    457. The United States believes that the relief contained in the 
RPFJ, which applies to a broad range of middleware functionality and 
not just to Web browsers and Java, achieves the overriding goal that 
these comments also desire: the restoration of competitive conditions 
so that consumers have choices and collectively can determine 
competitors' respective fates. The relief will allow for Navigator, 
Java, and other current middleware products to fulfill whatever 
capability they have as threats to Microsoft's operating system 
monopoly and for other new and as-of-yet unanticipated forms of 
middleware to evolve as potential threats to Microsoft's monopoly.

D. Microsoft's Responses to the Litigating States' RFAs

1. Meeting of the Minds
    458. Two commentors say that Microsoft's responses to Requests for 
Admission (RFAs) in New York show that the United States and Microsoft 
failed to reach a meeting of the minds on the essential terms of the 
RPFJ.;\432\ Because these commentors mischaracterize Microsoft's 
responses, however, they mistakenly see disagreement where agreement 
exists.
---------------------------------------------------------------------------

    \432\ Sun 7; Litigating Sates, Ex. C at 1.
---------------------------------------------------------------------------

    459. The Litigating States in New York propounded 51 RFAs, pursuant 
to Fed. R. Civ. P. 36(a), some of which sought Microsoft's 
interpretation of the terms of the RPFJ and cited or quoted (and on 
occasion mis-quoted) the CIS.\433\ In response, Microsoft objected to 
these and other RFAs on the basis that they call for a legal 
conclusion. The mere fact that Microsoft asserted legal objections to 
this discovery carries no significance in this case, because it does 
not constitute evidence of anything at all about the meeting of the 
minds of the parties to the settlement.
---------------------------------------------------------------------------

    \433\ See, e.g., Litigating States, Ex. C at RFAs 2, 5, 10, 12-
13, 23, 28-35, 39-45.
---------------------------------------------------------------------------

    460. In response to a limited number of RFAs, however, Microsoft 
did deny that it shares the opinion of the United States as set forth 
in the CIS.\434\ But none of the selected portions of the CIS quoted 
addresses an interpretation of the terms of the RPFJ. Rather, the cited 
portions of the CIS contain expressions of the United States' views 
regarding the competitive significance of the RPFJ: ``the key to the 
proper remedy in this case'' (RFA No. 2); that OEMs are a crucial 
distribution channel (RFA No. 3); that it is critical that OEMs are 
free to distribute and promote non-Microsoft middleware (RFA No. 4); 
that Windows license royalties and terms are complex and easy for 
Microsoft to use to affect OEMs' behavior (RFA No. 10), and that the 
competitive significance of middleware is highly dependent on certain 
factors (RFA No. 32). Microsoft's disagreement with the United States' 
opinion in these matters has no bearing on the parties' interpretation 
of essential terms of the RPFJ.
---------------------------------------------------------------------------

    \434\ RFAs 2-4, 10, 32.
---------------------------------------------------------------------------

2. Objections to Language in the CIS As ``Vague and Ambiguous''
    461. In response to other RFAs, Microsoft identifies certain terms 
(all used by the United States in the CIS) as ``vague and ambiguous'' 
and objects to the RFAs on that basis.\435\ Microsoft also identifies 
as ``vague and ambiguous'' a sentence in the RFA referring to Section 
III.J.1.a (RFA No. 45 (quoting terms from CIS at 39 (discussing RPFJ 
Section III.J.1.a))).
---------------------------------------------------------------------------

    \435\ Litigating States, Ex. C at RFAs 34, 39, 40, 41, 42, 43, 
45.
---------------------------------------------------------------------------

    462. In response to concerns raised by commentors regarding the 
interpretation of Section III.E, the United States and Microsoft have 
agreed to the modification of the language of Section III.E described 
in Section VII(B) above. For a discussion of the terms of Section 
III.J, see Section VII(D) above.

E. ``Open Source'' Community

    463. Commentors raise a variety of concerns about how the RPFJ may 
affect the ``open source'' community. Generally, ``open source'' 
software is distinguished from traditional, proprietary software by who 
writes it, how (or whether) they are compensated, and the terms under 
which it is licensed to users and other developers. Open source 
software often is written by collections of individuals not affiliated 
within the framework of a firm, who may or may not be compensated for 
their work, and generally is distributed under licenses that grant 
greater rights to create and distribute derivative works than is 
typical of licenses for traditional, proprietary software.\436\ The 
Linux operating system, for example, is open source software.
---------------------------------------------------------------------------

    \436\ Red Hat 3-4.
---------------------------------------------------------------------------

    464. Several commentors express concern that Microsoft somehow may 
claim that an open source developer, or a network of open source 
developers, or a marketer of open source software, should not be 
considered to meet Section VI.I's definition of an ``ISV'' and so 
should not receive the benefits and protections given to ISVs by the 
RPFJ.\437\ The United States believes this concern is groundless. See 
the discussion in Section III(A), above.
---------------------------------------------------------------------------

    \437\ Red Hat 24; AAI 37-38; CCIA 77-82; Waldman 5.
---------------------------------------------------------------------------

    465. A number of commentors are concerned that Microsoft will deny 
disclosure of APIs and Documentation (as required by Section III.D), or 
licensing of Communications Protocols (as required by Section III.E), 
to open source developers on the grounds that the developers do not 
meet the ``reasonable business need'' or ``authenticity and viability 
of [ ] business'' criteria of Section III.J.2.\438\ The United States 
believes that the requirements in Section III.J.2 are no broader than 
is necessary to prevent misuse or misappropriation of intellectual 
property. See the discussion at Section VII(D), above.
---------------------------------------------------------------------------

    \438\ Red Hat 28-29; Henderson 7-8; Alexander 3-4; Carroll 2-3; 
Harris 9; Moglen 3, 5; Waldman 6; Litan 52; Pantin 24-25; AAI 23; 
Waldman 6.
---------------------------------------------------------------------------

    466. One commentor in the open source community contends that the 
RPFJ fails to restore competitive conditions because the RPFJ does not 
prohibit Microsoft from bringing infringement suits to protect its 
extensive patent portfolio. The commentor recommends requiring 
Microsoft to license all of its intellectual property that would 
otherwise potentially be infringed by products that threaten 
Microsoft's operating system monopoly, including competing operating 
systems, middleware, or other software and hardware.\439\ The United 
States believes that preventing Microsoft from protecting its 
intellectual property is unwarranted and inappropriate. Section III.I 
requires Microsoft to license to OEMs, ISVs, IAPs, and others ``any 
intellectual property rights'' necessary for those entities to exercise 
any of their options or alternatives under the RPFJ. But allowing 
rivals otherwise to expropriate Microsoft's intellectual property in 
order to compete with Microsoft would deter Microsoft from investing in 
innovation and simultaneously deter rival developers from inventing 
different, new, potentially better technologies to build into their own 
products. Nothing in this ``solution'' would benefit consumers.
---------------------------------------------------------------------------

    \439\ Red Hat 7-21.
---------------------------------------------------------------------------

    467. In a similar but less extreme vein, another commentor suggests 
that the RPFJ should require Microsoft to list which software patents 
protect

[[Page 12189]]

Windows APIs, so that vendors of other operating systems can avoid 
infringing Microsoft's patents accidentally and reassure users that 
those operating systems are not infringing.\440\ While avoiding 
infringement is a laudable goal, it is not the purpose of the RPFJ to 
reduce the legal and technical efforts necessary for competitors to 
build products that they may lawfully market.
---------------------------------------------------------------------------

    \440\ Kegel 8-9.
---------------------------------------------------------------------------

    468. Several commentors complain that the RPFJ does not eliminate 
license terms that prohibit open source and other developers from 
finding ways to make Windows applications run on non-Windows operating 
systems. The issues these commentors raise appear to concern both terms 
in the licenses for Microsoft Office and terms in the licenses for 
Windows APIs and tools.\441\ The Litigating States' Provision 6.b 
addresses the same point; it would prohibit agreements that ``restrict 
Microsoft redistributable code from use with non-Microsoft Platform 
Software.'' Such provisions are far outside the scope of this case, and 
in any event are unlikely to benefit consumers. If Microsoft could not 
prevent people from expropriating and modifying its applications or 
middleware products--that is, its ``redistributable code''--to turn 
them into complements to non-Microsoft operating systems, Microsoft 
would have a significantly reduced incentive to invest in developing 
and marketing attractive applications and middleware for Windows users.
---------------------------------------------------------------------------

    \441\ Kegel 11; Koppe 1; Tilwalli 1; Kasten 5; Carroll 3; 
Johnson 2.
---------------------------------------------------------------------------

    469. One comment contends that Microsoft should be prohibited from 
retaliating against an OEM that ships computers loaded with only a non-
Microsoft operating system, rather than (as in Section III.A.2) 
prohibited only from retaliating against an OEM that ships a computer 
with Microsoft and non-Microsoft operating systems or one that ships a 
computer that will ``dual-boot'' with more than one operating 
system.\442\ Neither the District Court nor the Court of Appeals held 
Microsoft liable because it prevented OEMs from producing PCs with non-
Microsoft operating systems; thus, there is no basis for redressing 
such conduct. The absence of such a provision, however, is not 
problematic. If the OEM ships no machines with Windows, then presumably 
it ships no machines with Windows applications, either; thus, Microsoft 
would have few ways to ``retaliate'' against that OEM for its decision 
not to ship Windows.
---------------------------------------------------------------------------

    \442\ Kegel 9; CompTIA 5 (pro-settlement); Pantin 5-6.
---------------------------------------------------------------------------

F. ``Reasonableness'' Standard

    470. A handful of comments express concerns about the use of a 
``reasonableness'' standard in various provisions of the RPFJ.\443\ The 
commentors assert that use of a reasonableness standard for measuring 
certain of Microsoft's conduct offers little practical guidance, and 
injects ambiguity into the decree, rendering it virtually 
unenforceable.\444\ Commentors also assert that the adoption of a 
reasonableness standard turns the RPFJ into nothing more than an 
admonition to Microsoft to comply with the law.\445\
---------------------------------------------------------------------------

    \443\ See CCIA 41-42; AOL 1, Klain 8-9; Litan 47-49; WLF 6; 
Waldman 4; ProComp 74-77; Sun 36-37. The RPFJ measures Microsfoft's 
conduct against this standard in, for example, Section III.B.2 
(``reasonable volume discounts''), Section III.C.5 (``reasonable 
technical specifications''), Section III.E (``reasonable and non-
discriminatory terms''), Section III.F.2 (``limitations reasonably 
necessary to and of reasonable scope and duration''), and Section 
III.G (``reasonable period of time'').
    \444\ CCIA 41-42; ProComp 74-77; Litan 49; AOL, Klain 8-9.
    \445\ AOL 1; Litan 47.
---------------------------------------------------------------------------

    471. Contrary to these comments' assertions, measuring a 
defendant's conduct against a reasonableness standard does not render 
the RPFJ impermissibly vague. Inclusion of the term ``reasonable'' is 
common in antitrust decrees. See, e.g., United States v. Enova Corp., 
107 F. Supp.2d 10, 21, 27 (D.D.C. 2000) (defendant required to use 
``reasonable best efforts'' to obtain approvals and ``all reasonable 
efforts'' to maintain assets in a decree entered by the Court); United 
States v. 3D Sys. Corp., 66 FR 49200-01 (D.D.C. 2001) (defendant to 
provide ``reasonable access to personnel,'' ``reasonable efforts'' by 
trustee to sell assets); United States v. Premdor, Inc., 66 FR 45326-01 
(D.D.C. 2001) (defendant to use ``reasonable efforts'' to maintain 
assets, provide ``reasonable levels of transitional support,'' provide 
``reasonable access'' to personnel, trustee to receive ``reasonable 
compensation''); United States v. Electronic Payment Servs., Inc., 
1994-2 Trade Cas. (CCH) para. 70,796, 1994 WL 730003 at *4 (D. Del. 
1994) (third-party processor is qualified if it meets ``reasonable and 
nondiscriminatory technical, financial and operating criteria''; 
defendant may charge ``reasonable set-up fees''); United States v. 
Pilkington PLC, 1994-2 Trade Cas. (CCH) para. 70,842 1994, WL 750645 at 
* 4 (D. Ariz. 1994) (permitting charges of ``commercially reasonable 
and non-discriminatory Fees for the use or sublicensing of Float 
Technology . . .'').\446\
---------------------------------------------------------------------------

    \446\ Thus, for example, the defendant in United States v. First 
Multiple Listing Service, Inc., 1998 WL 417, at *1-*2 (N.D. Ga. 
1984), was enjoined from refusing to provide services to any person 
who agrees to pay ``reasonable set-up costs,'' a ``reasonable 
security deposit,'' and ``reasonable and non-discriminatory fees . . 
. reflecting reasonable expenses . . . provid[ing] for a reasonable 
minimum annual fee . . . [and] reflecting a reasonable approximation 
of the cost[s].'' The final judgment there further provided that 
``[n]othing in this final judgment shall prohibit Defendant from (i) 
imposing delivery or service charges . . . reflecting reasonable 
approximations of actual costs, including reasonable deposits for 
keys or books . . ..'' Id. at *2.
---------------------------------------------------------------------------

    472. Certain commentors urge that the RPFJ reject the 
reasonableness standard and, instead, adopt bright-line prohibitions 
against Microsoft engaging in various activities.\447\ Such absolute 
prohibitions might benefit Microsoft's rivals, but they also would 
reduce choice and thus not be in the interest of competition and 
consumers overall.\448\ Moreover, bright-line rules tend to require 
elaborate definitions that can render an agreement unduly complex. The 
inclusion of the reasonableness standard represents a recognition of 
the necessity for terms to be sufficiently flexible to allow for a 
multitude of future possibilities without requiring excess 
verbiage.\449\
---------------------------------------------------------------------------

    \447\ See, e.g., Litan 47-49; CCIA 41-42.
    \448\ See, e.g., Response to Comments on Sections III.B.2, 
III.F.2, III.G.2.
    \449\ An order need not list the components of a term which is 
understood by common parlance, particularly when considering the 
persons to whom the order is directed. United States v. PATCO, 678 
F.2d 1, 3 (1st Cir. 1982), citing Village of Hoffman Estates v. 
Flipside, 455 U.S. 489, 495 n.7 (1982) (``[t]he rationale is 
evident: to sustain such a challenge, the complainant must prove 
that the enactment is vague `not in the sense that it requires a 
person to conform his conduct to an imprecise but comprehensible 
normative standard, but rather in the sense that no standard of 
conduct is specified at all'' ' (quoting Coates v. City of 
Cincinnati, 402 U.S. 611, 614 (1971)).
---------------------------------------------------------------------------

    473. Commentors are also incorrect in their insistence that 
including a reasonableness standard simply engrafts the rule of reason 
into the RPFJ,\450\ turning it into an instruction to Microsoft to 
comply with the law--effectively to ``go forth and sin no more.'' In 
fact, the RPFJ goes beyond eliminating illegal practices and preventing 
recurrence of the same or similar practices in the future. The RPFJ 
also takes affirmative steps to restore the competitive threat that 
middleware posed prior to Microsoft's unlawful undertakings. So, for 
example, Microsoft is required to disclose and license its proprietary 
technology--although the Court of Appeals did not sustain any 
allegation that a failure to do so constituted monopoly maintenance.

[[Page 12190]]

Similarly, the RPFJ ensures access to, and use of, Microsoft's 
proprietary server-related protocols, even though the word ``server'' 
does not appear in the complaint and appears only in passing in the 
Findings of Fact. An instruction simply to obey the law would have 
taken the form of a decree saying only that Microsoft is enjoined 
``from future violations of the antitrust laws,'' in stark contrast to 
the detailed and specific prohibitions in the RPFJ.
---------------------------------------------------------------------------

    \450\ Litan 47-49.
---------------------------------------------------------------------------

    474. Finally, commentors suggest that the inclusion of a 
reasonableness standard will require a court to interpret the RPFJ, 
with an attendant delay in enforcement. That a decree may require 
interpretation is not and cannot be a basis for rejection; otherwise, 
no decree would remain.

G. Computers for Schools

    475. Many comments refer to or discuss the proposed settlement in 
the private, class actions against Microsoft, whereby Microsoft would 
donate $1 billion worth of computer hardware and software to needy 
schools. See In re Microsoft Corp. Antitrust Litig., 2002 WL 99709 (D. 
Md. Jan. 11, 2002) (proposed settlement in MDL No. 1332).
    476. There is no relationship between the settlement of the United 
States' antitrust lawsuit against Microsoft and the settlement of the 
private, class action against the company. Because these comments 
relate to the settlement of an entirely different proceeding, in which 
the United States played no role, we do not believe these comments can 
be appropriately construed as comments on the RPFJ and therefore do not 
respond to them.
    477. To the extent that comments mean that the RPFJ is deficient 
because it does not require Microsoft to make charitable donations, 
that cannot be a legal basis for rejecting a consent decree. Requiring 
charitable donations is not a proper remedy in a government civil 
antitrust case.

Respectfully submitted,
Charles A. James
Assistant Attorney General
Deborah P. Majoras
Deputy Assistant Attorney General
Phillip R. Malone
Renata B. Hesse
David Blake-Thomas
Paula L. Blizzard
Kenneth W. Gaul
Adam D. Hirsh
Jacqueline S. Kelley
Steven J. Mintz
Barbara Nelson
David Seidman
David P. Wales
Attorneys U.S. Department of Justice, Antitrust Division, 601 D 
Street N.W., Suite 1200, Washington, D.C. 20530-0001, (202) 514-
8276.
Philip S. Beck,
Special Trial Counsel.

February 27, 2002.

Appendix A

Comments Cited in the Response

1. Allen Akin (``Akin'')--MTC-00002904
2. Mark Alexander (``Alexander'')--MTC-00002572
3. America Online/Time Warner (``AOL'')--MTC-00030615
4. The American Antitrust Institute (``AAI'')--MTC-0030600
5. Declaration of Kenneth J. Arrow, submitted as Attachment to 
ProComp (``ProComp, Arrow'')--MTC-00030608
6. Association for Competitive Technology (``ACT'')--MTC-00027806
7. Joseph L. Bast (``Bast'')--MTC-00013362
7. John Becker (``Becker'')--MTC-00031674
8. Jim Bode (``Bode'')--MTC-00003974
9. Kris Brinkerhoff (``Brinkerhoff'')--MTC-00013542
9. Matthew M. Burke (``Burke'')--MTC-00024360
10. John A. Carroll (``Carroll'')--MTC-00008557
11. Catavault--MTC-00033650
12. Center for the Moral Defense of Capitalism (``CMDC'')--MTC-
00028833
13. Robert Cheetham (``Cheetham'')--MTC-00004982
14. Jerry Clabaugh (``Clabaugh'')--MTC-00004870
15. Tony Clapes (``Clapes'')--MTC-00004159
16. Computer & Communications Industry Association (``CCIA'')--MTC-
00030610
17. Computing Technology Industry Association (``CompTIA'')--MTC-
00028726
18. Consumer Federation of America (``CFA'')--MTC-00028565
19. Consumers for Computing Choice and Open Platform Working Group 
(``CCC'') --
MTC-00033613
20. Tim Daly (``Daly'')--MTC-00000307
21. Jerry Davis (``Davis'')--MTC-00004860
22. David Demland (``Demland'')--MTC-00007735
23. Sean Drew (``Drew'')--MTC-00014368
24. Nicholas S. Economides (``Economides'')--MTC-00022465
25. Einer Elhauge (``Elhauge'')--MTC-00027209
26. Scott Francis (``Francis'')--MTC-00021847
27. Sean Gallagher (``Gallagher'')--MTC-00012695
28. John Giannandrea (``Giannandrea'')--MTC-00030193
29. Tom Giebel (``Giebel'')--MTC-00018241
30. Jonathan Gifford (``Gifford'')--MTC-00028546
31. David Godshall (``Godshall'')--MTC-00002260
32. Eberhard Hafermalz (``Hafermalz'')--MTC-00009260
33. Wayne Hammett (``Hammett'')--MTC-00002009
34. Derek Harkess (``Harkess'')--MTC-00022874
35. Norman Harman (``Harman'')--MTC-00022721
36. Jeffrey E. Harris (``Harris'')--MTC-00027387
37. Rebecca Henderson (``Henderson'')--MTC-00030602
38. Jim Herrmann (``Herrmann'')--MTC-00010686
39. Phillip Hofmeister (``Hofmeister'')--MTC-00004548
40. Art Holland (``Holland''--MTC-00000643
41. Joe Huwaldt (``Huwaldt'')--MTC-00004162
42. Paul Johnson (``Johnson'')--MTC-00012543
43. KDE League, Inc. (``KDE'')--MTC-00028788
44. Dan Kegel (``Kegel'')--MTC-00028571
45. Ronald A. Klain, Benjamin G. Bradshaw, Jessica Davidson Miller, 
A Detailed Critique of the Proposed Final Judgment in U.S. v. 
Microsoft, submitted as Attachment B to AOL (AOL, Klain)--MTC-
00030615
46. The Honorable Herb Kohl, U.S. Senator (``Sen. Kohl'')--MTC-
00030603
47. Brian Koppe (``Koppe'')--MTC-00018682
48. Robert Levy (``Levy'')--MTC-00004804
49. Scott Lewis (``Lewis'')--MTC-00026511
50. Robert E. Litan, Roger D. Noll, and William D. Nordhaus (``Litan 
et al.'')--MTC-00013366
51. Litigating States--MTC-00030607
52. Chris M. Lloyd (``Lloyd'')--MTC-00011255
53. Mike Lococo (``Lococo'')--MTC-00004717
54. Kevin Lowe (``Lowe'')--MTC-00017163
55. Daniel Maddux (``Maddux'')--MTC-00021587
56. Frank Mathewson and Ralph A. Winter, Microsoft's Tying 
Strategies to Maintain Monopoly Power in its Operating System, 
submitted as Attachment A to AOL (``AOL, Mathewson & Winter'')--MTC-
00030615
57. John McBride (``McBride'')--MTC-00004731
58. Garrett McWilliams (``McWilliams'')--MTC-00019950
59. Andrig T. Miller (``Miller'')--MTC-00003096
60. David Mitchell (``Mitchell'')--MTC-00017643
61. Eben Moglen (``Moglen'')--MTC-00027626
62. David Morrissey (``Morrissey'')--MTC-00004525
63. Ralph Nader and James Love (``Nader/Love'')--MTC-00028313
64. NetAction and Computer Professionals for Social Responsibility 
(``NetAction'')--MTC-00030604
65. The New York Times (``NYT'')--MTC-00029783
66. Novell, Inc. (``Novell'')--MTC-00029523
67. Palm, Inc. (``Palm'')--MTC-0030613
68. Ramon G. Pantin (``Pantin'')--MTC-00029685
69. Theresa Peterson (``Peterson'')--MTC-00019410
70. Larry Poindexter (``Poindexter'')--MTC-00000493
71. R.D. Porcher (``Porcher'')--MTC-00015938
72. Vince Pratt (``Pratt'')--MTC-00004691
73. The Progress & Freedom Foundation (``PFF'')--MTC-00030606
74. Project to Promote Competition & Innovation in the Digital Age 
(``ProComp'')--MTC-00030608
75. RealNetworks, Inc. (``RealNetworks'')--MTC-00029305

[[Page 12191]]

76. Red Hat, Inc. (``Red Hat'')--MTC-00030616
77. Ray Reid (``Reid'')--MTC-00022393
78. Relpromax Antitrust, Inc. (``Relpromax'')--MTC-00030631
79. Declaration of Edward Roeder, submitted as Attachment to CCIA 
(``CCIA, Roeder'')--MTC-00030610
80. P.J. Rovero (``Rovero'')--MTC-00002180
81. SBC Communications, Inc. (``SBC'')--MTC-00029411
82. Robert L. Scala (``Scala'')--MTC-00016177
83. Joel Schneider (``Schneider'')--MTC-00022882
84. Bion Schulken (``Schulken'')--MTC-00002254
85. Bob Schulze (``Schulze'')--MTC-00018164
86. David Skinn (``Skinn'')--MTC-00031409
87. Software and Information Industry Association (``SIIA'')--MTC-
00030614
88. Sony Corporation (``Sony'')--MTC-00030605
89. Robert Spotswood (``Spotswood'')--MTC-00000604
90. Declaration of Joseph E. Stiglitz and Jason Furman, submitted as 
Attachment to CCIA (``CCIA, Stiglitz & Furman'')--MTC-00030610
91. Sun Microsystems, Inc. (``Sun'')--MTC-00030609
92. The Telecommunications Research and Action Center, National 
Black Chamber of Commerce, and National Native Americans Chamber of 
Commerce (``TRAC'')--MTC-00028893
93. Stuart Thiel (``Thiel'')--MTC-00012095
94. Mason Thomas (``Thomas'')--MTC-00030468
95. Nikkil Tilwalli (``Tilwalli'')--MTC-00016984
96. Robert Timlin (``Timlin'')--MTC-00011156
97. The Honorable John V. Tunney, Former U.S. Senator (``Sen. 
Tunney'')--MTC-00032065
98. Nicholas Turk (``Turk'')--MTC-00016312
99. U.S. Senate--MTC-00033734
100. Lee Wagstaff (``Wagstaff'')--MTC-00014376
101. Steven Waldman (``Waldman'')--MTC-00025808
102. Michael Wang (``Wang'')--MTC-00003256
103. Washington Legal Foundation (``WLF'')--MTC-00030601
104. Robert Weiler (``Weiler'')--MTC-00017967
105. Tim Williams (``Williams'')--MTC-00000491
106. Chris Young (``Young'')--MTC-00014037
107. Anthony W. Youngman (``Youngman'')--MTC-00010202

Stipulation and Second Revised Proposed Final Judgment

In the United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Microsoft Corporation, 
Defendant; Stipulation.

[Civil Action No. 98-1232 (CKK)]

Next Court Deadline: March 6, 2002; Tunney Act Hearing
    Plaintiff United States of America (``United States''), the States 
of New York, Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, 
North Carolina and Wisconsin (collectively, the ``Settling States'') 
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 (``second revised 
proposed Final Judgment'') may be filed and entered by the Court in 
this action and as to the Settling States only in State of New York, et 
al. v. Microsoft (Civil Action No. 98-1233(CKK)), 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 second 
revised proposed Final Judgment by serving notice thereof on Microsoft 
and by filing that notice with the Court.
    2. Microsoft's prior obligations to comply with the revised 
proposed Final Judgment, submitted to the Court on November 6, 2001, 
shall continue uninterrupted under this Stipulation and the second 
revised proposed Final Judgment (except as modified by the second 
revised proposed Final Judgment) as if the second revised proposed 
Final Judgment was in full force and effect. Unless otherwise provided 
in the second revised proposed Final Judgment, Microsoft shall 
immediately begin complying with the second revised proposed Final 
Judgment as if it was in full force and effect. Where the second 
revised proposed Final Judgment provides that the timing of Microsoft's 
obligations are calculated from the date of submission to the Court of 
the second revised proposed Final Judgment, the time shall be 
calculated from November 6, 2001, the date of submission to the Court 
of the revised proposed Final Judgment. Subject to the foregoing, 
Microsoft agrees to be bound by the provisions of the second revised 
proposed Final Judgment pending its entry by the Court. If the United 
States withdraws its consent, or if (a) the second 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 second revised proposed Final Judgment, and (c) the Court 
has not otherwise ordered continued compliance with the terms and 
provisions of the second 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 
prejudice to any party in this or any other proceeding.
    3. Once the requirements for compliance with 15 U.S.C. 16, as set 
forth in the Stipulation filed by the parties on November 6, 2001, have 
been satisfied, the United States will file with the Court a 
certificate of compliance and a Motion for Entry of Second Revised 
Proposed Final Judgment, unless it withdraws its consent to entry of 
the second 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 second revised proposed Final Judgment, provided 
that the Court determines that entry of the second revised proposed 
Final Judgment will serve the public interest.

    Dated this 27th day of February, 2002.

For Plaintiff the United States of America:
Deborah P. Majoras,
Deputy 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:
Jay L. Himes,
Chief, Antitrust Bureau, Office of the Attorney General of New York, 
120 Broadway, New York, New York 10271, (212) 416-8282.
For Defendant Microsoft Corporation:
Charles F. Rule,
Fried, Frank, Harris, Shriver & Jacobson, 1001 Pennsylvania Avenue, 
NW., Suite 800, Washington, DC 20004, (202) 639-7300.

Second 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

[[Page 12192]]

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:
    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 OEMs; 
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 dis playing 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 Middleware 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 1 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 Middleware to interoperate with a Windows Operating System 
Product. For purposes of this Section III.D, the term APIs means the 
interfaces, including any associated

[[Page 12193]]

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. 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 inter operating or communicating 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, or communicate, 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 com mercially 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 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 Middle ware 
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 an unbiased 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 in 
an unbiased manner) 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.
    Notwithstanding the foregoing Section III.H.2, the Windows 
Operating System Product may invoke a Microsoft Middleware Product in 
any instance in which:
    (a) 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
    (b) that designated Non-Microsoft Middleware Product fails to 
implement a reasonable technical requirement (e.g., a requirement to be 
able to host a particular ActiveX control) that is

[[Page 12194]]

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.
    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. Any such 
automatic alteration and confirmation shall be unbiased with respect to 
Microsoft Middleware Products and Non-Microsoft Middleware. 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.
    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; and
    4. the terms of any license granted under this section are in all 
respects con sistent with the express terms of this Final Judgment.
    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) any API, 
interface or other information related to any Microsoft product if 
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 product to any person 
or entity on the requirement that the licensee: (a) Has no history of 
software counterfeiting or piracy 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 Com munication 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

[[Page 12195]]

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 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

[[Page 12196]]

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 meet 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 attorneys' 
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 course 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 treated 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 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 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 website, in a manner acceptable to the Plaintiffs, the 
procedures for submitting complaints. To encourage whenever possible 
the informal resolution of complaints and inquiries, the website shall 
provide a mechanism for

[[Page 12197]]

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 complaint 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 complainant 
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. ``API'' means application programming interface, including any 
interface that Microsoft is obligated to disclose pursuant to III.D.
    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 ordinary 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.
    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 or is marketed by Microsoft as a major version of 
any Microsoft Middleware Product defined in section VI.K.1; and
    3. provides the same or substantially similar functionality as a 
Microsoft Middleware Product.
    Microsoft Middleware shall include 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 messaging 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

[[Page 12198]]

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 of 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 made 
available via an MSDN subscription offering or of which 150,000 or more 
beta copies are distributed.
    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 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 Memorandum Regarding Modifications Contained in 
Second Revised Proposed Final Judgment

In the United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Microsoft Corporation, 
Defendant;
    United States' Memorandum Regarding Modifications Contained in 
Second Revised Proposed Final Judgment

[Civil Action No. 98-1232 (CKK)]

Next Court Deadline: March 6, 2002; Tunney Act Hearing.

    Plaintiff United States of America submits the following memorandum 
regarding modifications to the Revised Proposed Final Judgment 
(``RPFJ''). These modifications are reflected in the new, Second 
Revised Proposed Final Judgment (``SRPFJ''), which is being filed 
concurrently with this memorandum,\1\ along with a new stipulation 
signed by representatives of the United States, the States of New York, 
Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina 
and Wisconsin (collectively the ``Settling States'') and Microsoft 
Corporation (``Microsoft'').\2\
---------------------------------------------------------------------------

    \1\ For the Court's convenience, the United States also submits 
a red-lined version of the SRPFJ, attached hereto as Exhibit A, 
which compares the SRPFJ to the RPFJ.
    \2\ The Settling States also agreed to the RPFJ. Following the 
submission of the RPFJ to the Court on November 6, 2001, the Court 
deconsolidated United States v. Microsoft Corp. from New York, et 
al. v. Microsoft Corp., in which the Settling States, nine other 
states and the District of Columbia are parties.
---------------------------------------------------------------------------

Introduction

    On November 6, 2001, the United States, the Settling States and 
Microsoft submitted the RPFJ to the Court. Pursuant to Secs. 16(b) and 
(d) of the Tunney Act, 15 U.S.C. Secs. 16(b)-(h), the United States 
received public comments submitted on the RPFJ between November 5, 
2001, and January 28, 2002.\3\ The United States received over 30,000 
comments during that period, which it has reviewed and considered as 
required by 15 U.S.C. Sec. 16(d). Concurrently with this Memorandum, 
the United States is filing the Response of the United States to Public 
Comments on the Revised Proposed Final Judgment and a Memorandum in 
Support of Entry of the Proposed Final Judgment. The United States will 
also file the public comments themselves (on CD-ROM only).
---------------------------------------------------------------------------

    \3\ The public comment period officially ran from November 28, 
2001, the date that the RPFJ and the United States' Competitive 
Impact Statement (``CIS'') were published in the Federal Register. 
66 F.R. 59,452 (Nov. 28, 2001). Out of an abundance of caution, the 
United States also chose to accept and treat as Tunney Act comments 
various communications from members of the public commenting on the 
proposed settlement that were received by the DOJ beginning on 
November 5 2001, the first business day following submission of the 
initial Proposed Final Judgment to the Court.
---------------------------------------------------------------------------

Discussion

    The Tunney Act contemplates that the United States should evaluate 
the public comments that it receives and, if appropriate, consider 
modifications of the proposed consent decree in response to the issues 
raised by those comments. See 15 U.S.C. 16(b) and (d).\4\ On a

[[Page 12199]]

number of past occasions, the United States has modified proposed 
consent decrees as a result of public comments.\5\ In response to the 
Court's Order dated January 30, 2002, \6\ the parties reported in their 
Joint Status Report (``JSR'') filed February 7, 2002, that they were 
``considering whether, in response to the public comments, to submit to 
the Court proposed modifications to the RPFJ.'' JSR at 7.
---------------------------------------------------------------------------

    \4\ Of course, the United States retains the right to withdraw 
its consent to the proposed decree at any time prior to entry, based 
on the public comments or otherwise. Stipulation, November 6, 2001, 
at 1; Stipulation, February 27, 2002, at 1.
    \5\ See, e.g., United States v. Allied Waste Indus., Response to 
Public Comments on Antitrust Consent Decree and Joint Motion for 
Entry of a Modified Judgment, 65 F.R. 36,224 (June 7, 2000) (parties 
modified divestiture requirements as a result of objections raised 
in comments); United States v. Thomson Corp., 949 F. Supp. 907, 915 
(D.D.C. 1996) (parties proposed modifications to final judgment in 
response to public comment, among other things); see also Antitrust 
Procedures and Penalties Act: Hearings on S. 782 and S. 1088 Before 
the Subcomm. on Antitrust and Monopoly of the Senate Comm. on the 
Judiciary, 93rd Cong., 1st Sess. 146 (1973) (Testimony of the Hon. 
J. Skelly Wright) (``The Department itself has modified consent 
decrees on a number of occasions as a result of public comment'').
    \6\ The Order stated, inter alia, that ``the parties shall 
address . . . whether, in response to the comments received by the 
Department of Justice in accordance with 15 U.S.C. section 16(b), 
the United States and Microsoft are considering any modifications'' 
to the RPFJ. Order at 1.
---------------------------------------------------------------------------

I. In Response to Public Comments, the Parties Have Agreed on Certain 
Modifications to the Terms of the RPFJ

    Having fully reviewed and considered all public comments it 
received regarding the RPFJ, the United States proposed several 
modifications to the RPFJ. Microsoft and the Settling States have 
agreed to the modifications that are reflected in the SRPFJ. While the 
United States believes that the RPFJ as originally filed with the Court 
effectively remedied the violations sustained by the Court of Appeals 
and would be in the public interest, it believes that the modifications 
contained in the SRPFJ effectively respond to specific concerns raised 
in the public comments and that entry of the SRPFJ is in the public 
interest.
    Each modification clarifies the language of the RPFJ in provisions 
about which public commentors have indicated concerns regarding the 
precise meaning of the language. Each modification is an outgrowth of 
specific concerns raised in the public comments and does not 
fundamentally change the RPFJ. With one exception,\7\ these 
modifications refine the language in the RPFJ, and are intended to 
clarify the parties' shared intentions in drafting the RPFJ. The 
following sections explain the modifications, as well as the rationale 
for making these refinements.
---------------------------------------------------------------------------

    \7\ See Section II.E., infra at 8-9, discussing Section III.I.5. 
of the RPFJ.
---------------------------------------------------------------------------

A. Section III.D and Definition VI.A--API
    Section III.D. requires the disclosure of APIs (application 
programming interfaces) and other documentation for the purpose of 
ensuring interoperability between competing middleware and Windows 
Operating System Products. At least one commentor noted that in the 
RPFJ, the definition of API (Definition VI.A) includes only Microsoft 
APIs, thus rendering the other definitions that use the term API in the 
context of Non-Microsoft software potentially meaningless. 
Specifically, the definitions of Non-Microsoft Middleware, Non-
Microsoft Middleware Product and Operating System arguably fail to 
function as intended if the definition of APIs is limited solely to 
Microsoft APIs. This definition of API, as originally drafted, was 
intended to apply only to Section III.D, but this limitation was not 
reflected in the text of the RPFJ. To correct this problem, the 
original definition of API has, in the SRPFJ, been inserted directly 
into Section III.D, so that Section III.D of the SRPFJ now reads:

    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 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 Middleware to interoperate with a Windows 
Operating System Product. For purposes of this Section III.D, the 
term 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. 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. (New language in bold).

A generic definition of API that is not tied to Microsoft products has 
been inserted as Definition VI.A to apply throughout the SRPFJ except 
in Section III.D:
    ``API'' means application programming interface, including any 
interface that Microsoft is obligated to disclose pursuant to III.D.
    The meaning of API in the definitions of Non-Microsoft Middleware, 
Non-Microsoft Middleware Product and Operating System is now defined, 
as intended, according to this generic definition, thereby resolving 
any potential concerns regarding their reliance on a definition of API 
that is specifically tied to Microsoft products. The modification does 
not change Microsoft's obligations under Section III.D.
B. Section III.E
    Section III.E requires Microsoft to disclose all Communications 
Protocols that a Windows Operating System Product uses to interoperate 
natively with a Microsoft server operating system product. It ensures 
that non-Microsoft servers will be able to interoperate with a Windows 
Operating System Product using the same protocols the Microsoft server 
operating system product uses. Several commentors argued, however, that 
because the word ``interoperate'' in Section III.E is not defined, its 
meaning is unclear, potentially making it possible for Microsoft to 
evade this provision. The United States believes that, as interoperate 
is used in this Section III.E, its meaning clearly reflects the 
parties' intention that this provision presents the opportunity for 
seamless interoperability between Windows Operating System Products and 
non-Microsoft servers. Although the United States believes that the 
meaning of interoperate as included in Section III.E of the RPFJ is 
clear, in response to the public comments, the United States proposed, 
and Microsoft and the Settling States agreed, to supplement the term 
``interoperate'' with ``or communicate,'' so that Section III.E of the 
SRPFJ now reads:

    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 or 
communicating 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, or communicate, natively (i.e., without the 
addition of software code to the client operating system product) 
with a Microsoft server operating system product. (New language in 
bold).

The addition of the phrase ``or communicate'' after ``interoperate'' 
brings further clarity to this provision. This revision clarifies the 
parties' intent in drafting Section III.E and thus removes any 
potential for confusion or ambiguity regarding the scope of the

[[Page 12200]]

provision based on the meaning of interoperate.
C. Section III.H.2
    Section III.H.2 requires Microsoft to provide points in its Windows 
Operating System Products for automatically launching competing 
middleware, commonly referred to as default settings, in certain 
circumstances. Although Section III.H.1 states that Microsoft must give 
end users ``a separate and unbiased choice'' with respect to altering 
default invocations in Section III.H.2, there was a concern that the 
requirement that Microsoft implement Section III.H.2 in a wholly 
unbiased manner was not entirely clear. To clarify that Microsoft must 
be unbiased with respect to Microsoft and Non-Microsoft products under 
Section III.H.2, this provision was revised to expressly state that 
such mechanisms and confirmation messages must be unbiased. The revised 
language of Section III.H.2 in the SPRFJ provides:

    Allow end users (via an unbiased 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 in an unbiased manner) to designate a Non-
Microsoft Middleware Product to be invoked in place of that 
Microsoft Middleware Product (or vice versa) . . . (New language in 
bold).

This modification makes clear the parties' intention that the mechanism 
available to end users, as well as any confirmation messages to the end 
user, must be unbiased with respect to Microsoft and Non-Microsoft 
products.
    This modification also addresses any concern that the phrase ``at 
Microsoft's option'' in Section III.H.2 could be read to allow 
Microsoft to take biased action against competing products. It also 
addresses concerns that Microsoft's presentation of the confirmation 
message could include derogatory comments about competing products.
    In addition, the two exceptions (Sections III.H.2(a) and (b)) that 
previously followed Section III.H.3, but by their plain language 
modified III.H.2 (``Notwithstanding the foregoing Section III.H.2 . . 
.''), have been moved, so that they now follow Section III.H.2, and 
renumbered accordingly for clarification.
D. Section III.H.3
    Section III.H.3 prohibits Microsoft from designing its Windows 
Operating System Products to alter automatically an OEM's configuration 
choices without seeking user confirmation and without waiting 14 days 
from the initial boot. In response to concerns raised regarding 
Microsoft's ability to change configurations pursuant to Section 
III.H.3, the following sentence has been added:

    Any such automatic alteration and confirmation shall be unbiased 
with respect to Microsoft Middleware Products and Non-Microsoft 
Middleware.

    This sentence clarifies the parties' intention in drafting the RPFJ 
that Microsoft may not alter a configuration based on whether the 
middleware products are Microsoft or Non-Microsoft products. Similarly, 
Microsoft may not present a biased confirmation message (such as a 
message that is derogatory with respect to Non-Microsoft products). Nor 
may automatic alterations take actions based on a trigger or rule that 
is biased against Non-Microsoft Middleware or in favor of Microsoft 
Middleware Products. This modification makes clear, as intended by the 
parties in the RPFJ, that any action taken under Section III.H.3 must 
therefore be independent of whether the affected products are Microsoft 
or Non-Microsoft products.
E. Section III.I.5
    Several commentors raised concerns regarding Section III.I.5, under 
which an ISV, IHV, IAP, ICP, or OEM could be required to grant 
Microsoft a license, on reasonable and nondiscriminatory terms, to any 
intellectual property relating to that ISV's, IHV's, IAP's, ICP's or 
OEM's exercise of the options or alternatives provided by the RPFJ, if 
such a cross-license were necessary for Microsoft to provide the 
options or alternatives set forth in the RPFJ and exercised by the 
particular ISV, IHV, IAP, ICP or OEM. These concerns ranged from the 
general concern that the imposition of a cross-licensing requirement 
was inappropriate to more specific concerns, such as hypothesizing that 
the cross-licensing provision would reduce the likelihood that persons 
or entities would take advantage of the RPFJ's disclosure provisions.
    As the United States pointed out in its CIS, Section III.I.5 was an 
extremely narrow provision designed to ensure that Microsoft would be 
able fully to comply with the terms of the RPFJ without creating 
greater indirect infringement liability for itself than it would 
otherwise have. See CIS at 50. In response to the concerns about this 
provision raised in the public comments, however, the United States 
proposed, and Microsoft and the Settling States agreed, that the 
provision should be deleted. Accordingly, Section III.I.5 does not 
appear in the SRPFJ. This modification does not alter Microsoft's 
existing obligations to comply fully with the terms of the SRPFJ.
F. Definition VI.J--Microsoft Middleware
    Many commentors suggested that Definition VI.J, Microsoft 
Middleware, which required that software code be Trademarked, as that 
term is defined, could potentially exclude current products such as 
Internet Explorer, Windows Media Player, Microsoft's Java Virtual 
Machine, and Window Messenger because at least some such products, the 
commentors claimed, did not satisfy the definition of Trademarked. To 
clarify any issues surrounding the status of the software code 
associated with these products, the Microsoft Middleware definition has 
been modified to include explicitly the software code that is marketed 
by Microsoft as a major version of any of the named Microsoft 
Middleware Products listed in Section VI.K.1. With this change, 
software code can qualify as Microsoft Middleware in part by being 
either (1) Trademarked or (2) marketed as a major version of any of the 
named Microsoft Middleware Products (i.e., Internet Explorer, etc.), 
even if it does not satisfy the definition for Trademarked. The 
limitation to a major version of a Microsoft Middleware Product is 
simply a restatement of the limitation in the last paragraph of the 
Microsoft Middleware definition, which limits the covered software code 
to that identified as a major version of a Microsoft Middleware 
Product.
    In addition, the previous subsection (4) now modifies the entire 
definition and has been revised to read:

    Microsoft Middleware shall include at least the software code that 
controls most or all of the user interface elements of the Microsoft 
Middleware.

    This change is intended to clarify that this provision of the 
definition is not a required element and therefore somehow intended to 
narrow or limit the definition; rather, the first three requirements 
are sufficient to define Microsoft Middleware. The purpose of this last 
provision is essentially to specify a minimum size or ``floor'' as to 
the collection of software code that is included in a particular piece 
of Microsoft Middleware, preventing the situation in which Microsoft 
could arbitrarily break up into separate pieces the software code of 
what would otherwise be Microsoft Middleware, thereby omitting from the 
Microsoft

[[Page 12201]]

Middleware definition certain critical or significant pieces of code 
that constitute that Microsoft Middleware. This modification does not 
substantively change this definition but instead makes clear that this 
provision governs the scope of what code must be included in Microsoft 
Middleware.
B. Definition VI.R--Timely Manner
    A number of commentors question Section VI.R's definition of Timely 
Manner, the term that defines when Microsoft must meet its disclosure 
obligations under Section III.D. Several commentors contend that 
150,000 beta testers is too high a threshold to trigger Section III.D's 
disclosure requirement, arguing that for past Windows Operating System 
Products, Microsoft may have distributed 150,000 beta copies but may 
not have distributed them to 150,000 individual beta testers. These 
commentors are concerned that the threshold will never be reached, 
resulting in no required disclosure before a new Windows Operating 
System Product is released. Similarly, a number of commentors contend 
that Microsoft may in the future choose to distribute to fewer beta 
testers and thereby evade its disclosure obligations.
    The parties' intention in drafting this definition was not to 
distinguish between beta copies and beta testers with respect to the 
150,000 requirement. The parties originally chose the 150,000 beta 
tester distribution level based on the approximate current Microsoft 
Developer Network (``MSDN'') subscription base. In response to the 
foregoing concerns about the definition of Timely Manner, however, the 
United States proposed, and Microsoft and the Settling States agreed, 
to modify the definition to read:

    Timely Manner'' means at the time Microsoft first releases a 
beta test version of a Windows Operating System Product that is made 
available via an MSDN subscription offering or of which 150,000 or 
more beta copies are distributed.

This modification clarifies the parties' intention that Timely Manner 
should be triggered by the distribution of 150,000 or more beta copies, 
regardless of whether those copies are distributed to individuals who 
are considered to be ``beta testers.'' The modification adds a 
provision such that Timely Manner can also be triggered by distribution 
via an MSDN subscription offering. The inclusion of distribution via an 
MSDN subscription offering as a trigger for this definition ensures 
that, even in the event that the level of MSDN subscribers decreases 
substantially, Microsoft's disclosure obligations under Section III.D 
will still be triggered. Therefore, while this modification clarifies, 
and in fact may slightly broaden, Microsoft's disclosure obligations, 
it does not substantively differ from the original definition of Timely 
Manner in the RPFJ.

II. A New Round of Publication and Comment Is Not Warranted Because the 
Proposed Modifications Are a Logical Outgrowth of the RPFJ.

    The foregoing modifications directly respond to concerns raised in 
the public comments and are the result of the United States' review and 
consideration, as part of its compliance with the Tunney Act, of the 
public comments submitted on the RPFJ. The Tunney Act does not require 
a new round of publication and comment as a result of the modifications 
contained in the SRPFJ. The publication and comment provisions of the 
Act serve ``to enable the district court to make'' its public interest 
determination. HyperLaw, Inc. v. United States, 1998 WL 388807, at *3, 
159 F.3d 636 (D.C. Cir. 1998) (unpublished table decision). 
Accordingly, a ``court should treat notice and comment under the Tunney 
Act as analogous to agency rulemaking notice and comment.'' Id. 
(quotation marks omitted). Applying that analogy, ``there is no need 
for successive rounds of notice and comment on each revision,'' 
provided the final decree ``is a ``logical outgrowth'' of the proposed 
consent decree. . . .. Further notice and comment should be required 
only if it ``would provide the first opportunity for interested parties 
to offer comments that could persuade the agency to modify its 
[proposal].''' Id. (quoting Am. Water Works Ass'n v. EPA, 40 F.3d 1266, 
1274 (D.C. Cir. 1994)).
    The proposed decree as modified is a logical outgrowth of the RPFJ 
and requires no further notice and comment. As explained above, each 
modification responds to public comments on the RPFJ and clarifies 
language based upon those comments. Without question, each is a natural 
and logical outgrowth of the notice and comment process. Taken 
separately or together, the modifications do not fundamentally change 
the RPFJ. All contribute to benefitting the public interest (and 
certainly have no adverse effect on the public interest). The purpose 
of the notice and comment has thus been well-satisfied, and further 
notice and comment would merely delay the Court's public interest 
determination without good cause.\8\
---------------------------------------------------------------------------

    \8\ Entry of a decree following modification without a new round 
of notice and comment is conventional in Tunney Act practice. For 
example, After notice and comment in AT&T, the court said it would 
enter the decree as in the public interest if the parties agreed to 
a number of modifications, and the Court entered the modified decree 
without a new round of notice and comment once the parties did so. 
United States v. AT&T, 552 F. Supp. 131, 225-26 (D.D.C. 1982); see 
also Mass. Sch. of Law v. United States, 118 F.3d 776, 778 (D.C. 
Cir. 1997).
---------------------------------------------------------------------------

Conclusion

    For the reasons described herein, the United States hereby submits 
the SRPFJ to the Court. In our separate Memorandum in Support of Entry 
of the Proposed Final Judgment and Response of the United States to 
Public Comments on the Revised Proposed Final Judgment, both of which 
are also being filed today, we set forth the reasons why the SRPFJ is 
in the public interest. Upon completion of the Tunney Act requirements, 
we will respectfully move the Court to enter the judgment.

    Dated: February 27, 2002.
Respectfully submitted,
Charles A. James
Assistant Attorney General
Deborah P. Majoras
Deputy Assistant Attorney General
Phillip R. Malone
Renata B. Hesse
David Blake-Thomas
Paula L. Blizzard
Kenneth W. Gaul
Adam D. Hirsh
Jacqueline S. Kelley
Steven J. Mintz
Barbara Nelson
David Seidman
David P. Wales
Attorneys

U.S. Department of Justice, Antitrust Division, 601 D Street NW., 
Suite 1200, Washington, DC 20530, (202) 514-8276.

Philip S. Beck,
Special Trial Counsel.
    (Editorial Note: Certain conventions have been used by the Office 
of the Federal Register to highlight changes in the Second Revised 
Proposed Final Judgment. New language is shown in boldface, while 
language that was removed is set off with brackets.)

Exhibit A

Second Revised Proposed Final Judgment (Red-Lined Version)

    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;

[[Page 12202]]

    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:
    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 OEMs; 
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 Middleware 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 1 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 Middleware to interoperate with a Windows Operating System 
Product. For purposes of this Section III.D, the term APIs means the 
interfaces, including any associated

[[Page 12203]]

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. 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 or communicating 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, or communicate, 
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 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] an unbiased 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 in 
an unbiased manner) 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.
    Notwithstanding the foregoing Section III.H.2, the Windows 
Operating System Product may invoke a Microsoft Middleware Product in 
any instance in which:
    (a) 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
    (b) that designated Non-Microsoft Middleware Product fails to 
implement a reasonable technical requirement (e.g., a requirement to be 
able to host a particular ActiveX control) that is

[[Page 12204]]

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.
    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. Any such 
automatic alteration and confirmation shall be unbiased with respect to 
Microsoft Middleware Products and Non-Microsoft Middleware. 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 ActiveX 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; and
    4. the terms of any license granted under this section are in all 
respects con sistent 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) any API, 
interface or other information related to any Microsoft product if 
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 product to any person 
or entity on the requirement that the licensee: (a) Has no history of 
software counterfeiting or piracy 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

[[Page 12205]]

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 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

[[Page 12206]]

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 meet 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 attorneys' 
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 course 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 treated 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 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 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

[[Page 12207]]

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 website, in a manner acceptable to the Plaintiffs, the 
procedures for submitting complaints. To encourage whenever possible 
the informal resolution of complaints and inquiries, the website 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 complaint 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 complainant 
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)''] ``API'' means 
[the interfaces] application programming interface, including any 
[associated callback interfaces,] interface 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] is obligated to disclose 
pursuant to III.D.
    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 ordinary 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.
    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; or is marketed by Microsoft as a major version 
of any Microsoft Middleware Product defined in section VI.K.1; and
    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.]
    Microsoft Middleware shall include 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 messaging software or
    b. functionality provided by Microsoft software that--

[[Page 12208]]

    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 of 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] made available via an MSDN subscription offering or of 
which 150,000 or more beta [testers]copies are distributed.
    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 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.

     
Dorothy Fountain,
Deputy Director of Operations.
[FR Doc. 02-5354 Filed 3-15-02; 8:45 am]
BILLING CODE 4410-11-P